When Fixing HBD, It's A Good Idea To Tread Carefully
hive-167922·@reonarudo·
0.000 HBDWhen Fixing HBD, It's A Good Idea To Tread Carefully
 <a href="https://hive.blog/art/@skapaneas/stylized-hive-banner-and-token-logen-cyrcle-by-skapaneas">Image Source</a> #### Reverse conversion to peg HBD from the upside A reverse conversion where HIVE can be converted into HBD based on the assumption that HBD is worth exactly $1 worth of HIVE will be introduced in Hard Fork 25 within a couple of months from now. That's a great thing because in itself, the reverse conversion functionality should go a long way in pegging HBD to USD also from the upside. That's because the reverse conversion has potential to rapidly increase the number of HBD in circulation in case HBD falls victim to a pump scheme like it recently has, allowing anyone to dump new newly converted HBD to the markets with a great deal of profit initially. #### Great care is required when deciding on the interest rate paid on HBD in savings accounts What others have written about and what concerns me too is setting the interest paid on HBD savings too high. The interest is yet another source of inflation. If the interest rate is set too high, that could lead to runaway inflation of HBD because if each HBD held in the savings account earns a fixed percentage interest, the number of HBD in circulation could quickly escalate enough to raise the market cap of HBD far above the 10% after which the both conversion functions would stop working. That would threaten to tank the price of HBD. What an excess of HBD would once again do is keep the price of HIVE at a very low level for many years. #### Use the proven DeFi model I think it is prudent to keep the interest paid on HBD at a modest level - or alternatively - set up a limited pool from which it is allocated evenly to every HBD in a savings account. That would make the yield dynamic and dependent on the amount of HBD in savings accounts. There would be a negative feedback in the form of decreasing APY if the savings account proves popular, which in turn would limit the overall inflation of HBD. What do you think? Posted Using [LeoFinance <sup>Beta</sup>](https://leofinance.io/@reonarudo/when-fixing-hbd-it-s-a-good-idea-to-tread-carefully)