Conversions play a major role in the Hive ecosystem. In the past two years there was a multiple adjustment and improvement on the process. This resulted in conversions enabled in both directions. On top of the two ways conversions we now have the @hbdstabilizer that is buying and selling HBD, providing liquidity and incentives on the internal market.
Was more HIVE added or removed trough conversions?
Where did the major conversions come from?
Types Of Conversions
First let’s take a look at all the possible ways to convert HIVE to HBD and the opposite.
1.HBD to HIVE Conversions
The HBD to HIVE conversions have been around since the beginning of the chain and they are quite simple to track. There is only one way to create HIVE from HBD and that is when HBD is converted to HIVE via the 3.5 days process. This mechanic has been in place since the creation of the chain. What it does is providing a support for HBD on the downside, preventing it to drop bellow $1 as long as the debt limit is not reached.
2.HIVE to HBD Conversions
The HIVE to HBD conversions are a bit more complicated. They come later in development and some things were added on top of another.
There are three ways in which HIVE is converted to HBD:
- 1.Regular HIVE to HBD conversions
- 2.HIVE to HBD conversions from HIVE transfers to the DHF
- 3.HIVE to HBD conversions in the DHF from the ninja mine
The regular conversions would be the standard way for converting HIVE to HBD. When the price of HBD is above $1, users can convert HIVE to HBD at a fixed price of 1.05, that the blockchain guaranties for this type of conversions. When these types of conversions are made, half of the HIVE is instantly converted to HBD, while the other half is locked as collateral and it is released after 3.5 days. The amount of HIVE that is given back depends on the price of HIVE in the 3.5 days period when the HIVE was locked as collateral.
This feature was added with the HardFrok at the end of June 2021. What it does is preventing HBD to increasing in price, giving stability on the upside. Because this feature was introduced later, we can see in the past there were high prices for HBD, formerly SBD.
The second type of HIVE to HBD conversions is when HIVE is transferred to the DHF (Decentralized Hive Fund). Because the DHF works with HBD, payouts to proposal workers are made in HBD, the HIVE needs to be converted to HBD for these funds to be usable. Unlike the standardconversions that have collateral locked for 3.5 days, these conversions are instant. As soon as HIVE is sent to the DHF it is converted to HBD at the blockchain median price. These conversions were added with the HF in October 2020. Most of the transfers to the DHF are made by the @hbdstabilizer, that works in both directions to provide instant liquidity for HBD.
The third type of HIVE to HBD conversions are the conversions for the ninja mine in the DHF. These are the funds that were transferred to the DHF when the Hive creation HardFork happened. Most of them were Steemit Inc funds and some other accounts that supported the hostile takeover. Around 83M HIVE were put in the DHF in March 2020. Later with the HardFork in October 2020 these funds were put in a slow conversion mode where 0.05% per day are converted to HBD to avoid price volatility. These conversions should last five years, two of which almost passed.
@hbdstabilizer
The stabilizer has been a major player in the Hive ecosystem and the tokenomics. Up to recently it had around 200k HBD daily budget to work with. Because of this we will be looking at it separately here. The main goal for the stabilizer is to try and keep HBD around the dollar. For this the stabilizer receives HBD from the DHF, and if the price of HBD is higher than $1 it sells HBD on the internal market. If the price of HBD is lower than $1 it converts the HBD to HIVE and then uses that HIVE to buy HBD on the internal market, giving support for HBD on the downside.
The period that we will be looking at is 2022 - 2023.
HBD to HIVE Conversions
This is the one type of conversions for creating HIVE. Here is the chart.
The red columns are conversions made by the regular users, and the white is the @hbdstabilizer. We can notice that the stabilizer is dominant now. The majority of the volume for HBD to HIVE conversions comes from it.
In 2022 the stabilizer has increased the volume, mostly because of the growing funds in the DHF and the increased funding for it.
Conversions from HBD to HIVE from users are quite small and mostly happens when there is a drop in the HBD price on the external markets, so users take advantage of this via arbitrage.
We can notice a few small spikes in 2023.
Note that these are not NET conversions. Most of the HIVE created above is converted back again to HBD. We will see details about this bellow.
HIVE to HBD Conversions
Now with the HIVE to HBD conversion. As we have seen above, these are bit more specific and there are multiple types of conversions.
Here is the chart.
As we can see the @hbdstabilizer is dominant here as well, the white columns. For the stabilizer the HIVE to HBD conversions are counted including the HIVE that is sent back to the DHF. These are unused funds that the stabilizer don’t need at the moment and it sends them back to the DHF as HIVE where they are converted back to HBD. The stabilizer is mostly recycling funds, receiving and sending them back, and only uses them if there is a need to support the HBD price.
The conversions that are happening in the DHF from the ninja mine HIVE to HBD (red) are also presented on the chart, and we can see that they are constant as coded in the blockchain 0.05% from the HIVE per day. At the moment there is left around 50M HIVE in the DHF, from the initial 83M. On a daily level the HIVE amount converted to HBD decreases as the funds in the DHF drops. At the start in October 2020 there was around 42k HIVE per day converted to HBD, and now there is around 25k.
The blue columns are conversions from users, and we can see that these are happening occasionally when there is a sharp increase in the HBD price on the external markets, users convert HIVE to HBD and make arbitrage.
Net HIVE Created/Burned From Conversions
When we combine all the ways HIVE is converted to HBD, and the opposite we get the final net numbers from conversions.
When we net the created and removed HIVE from conversions we get the chart above.
We can see that the daily volume here is actually quite low, with most of the days under 50k HIVE. This is much lower than the volume from the first two charts when we have more than 500k per day. But this is mostly because of the stabilizer, who is mostly recycling funds and most of it is zeroed out.
The volume for the net conversions increases when there is a deppeg in the HBD price, on the upside or on the downside. The sharp spikes in burning HIVE usually comes when the HBD price on the external markets is trading above $1.
We can notice the recent spikes in February and April 2023, on the downside when HBD was trading above $1 and HIVE was converted to HBD.
On a monthly basis the chart looks like this:
A bit more clearer picture here.
We can see the big negative column in February 2023, when almost 7M HIVE was burned and converted to HBD. April was also negative with 1.7M HIVE burned.
Some ups and downs here, with July being the month with the most HIVE converted to HBD, more than 3M HIVE. There was an increase in the price of HBD in July and a lot of HIVE went to conversions.
November is in the opposite direction with the most HIVE created from HBD, around 2M. In November the overall market dropped a lot and with it the price of HBD on the external market, causing HBD conversion to HIVE.
On a yearly basis we have this:
We can clearly notice a trend here.
In the last three years, starting from 2021 more HIVE is being burned then created from HBD.
This is because the HIVE to HBD conversions were not even technically possible prior to 2021. Since the introduction of these types of conversions more HIVE is now converted to HBD.
Most of the burning came in 2021, when we had a bull market. More than 15M HIVE was burned back then with conversions. In 2022 even with the bad market conditions, the conversions were barley positive. In 2023 we have more HIVE burned, a total of -5M burned with conversions.
Cumulative HIVE Created From Conversions 2022 – 2023
When we plot the amount of HIVE created from conversions in 2022 and 2023 we have this:
We can see that cumulative for the last year and the half conversions are net negative when it comes to the HIVE supply. This is especially true in 2023. Cumulative for the two years 2022 – 2023, a total of 3M HIVE was removed from circulation from conversions.
Conversions in 2023 By Category
When add the numbers above by category we get this chart:
These are net results.
As we can see the only positive are the conversions from the @hbdstabilizer with 2M HIVE created in this way. This HIVE went to supporting the HBD peg on the internal market.
The conversions from the regular users are negative with -3M HIVE. This is in the period when the HBD price increased.
The ninja mined HIVE in the DHF has dropped for almost 4M in 2023.
Summury
The conversions are positive for the Hive tokenomics and ecosystem. After 2021, when we had an extraordinary results, with HIVE deflationary, we are now in the second year of the bear market and the HBD is still burning HIVE. The rate is smaller then what has been in 2021, but we can see some bigger numbers happening in 2023. A lot will depend on the overall crypto market conditions in 2023, but we can see that this is shaping up to be another year when we have more HIVE removed thanks to conversions.
Another interesting thing to observe this year will be the performance of the @hbdstabilizer and the HBD peg, because since recently the funds has been decreased there, opening the gate from other users to participate and maybe create even better bots.
The amount of HBD in circulation has been hovering around the 11M to 12M mark in the last period, but the majority of it is now locked in the HBD savings, that are almost at 7M and growing. More demand for HBD will mean more HIVE burned.
All the best
@dalz
Posted Using LeoFinance Alpha