In my last post I explored the logical fallacy created by Bitcoin & the FED that states that inflation is a bad thing.

As we should know by now, inflation is great, IF YOU CONTROL IT, which you do if you are a DPOS investor.

In my eyes, the problem with Hive inflation is much more nuanced.

• If you want to be an investor on Hive you must power up.
• If you power up you must vote on content.
• Therefore all investors are being forced to curate.

It should go without saying, this is dumb.

Hive is supposed to be a platform that gets people to come and build things on it, yet all of the inflation and investment side of things is based on the blogging frontend. Pretty dumb.

Solution:

The solution to this problem is obvious, has been staring us in the face this entire time, and is already more than halfway implemented (fully implemented by HiveEngine). I'm speaking of course about our bank account smart-contracts.

When you put money into the bank account contract it becomes locked for three days, we can think of this as a mini-staking scenario compared to the 13 week vesting schedule for powerups.

The problem with bank accounts?

We added no monetary incentive to use them. They offer 0% APR. They are dumb (so far). The obvious solution is to pump some APR into them so investors have an incentive to dump their money into the bank and earn passive rewards. This gets rid of the need to curate content if you want to be an investor on hive and simply earn passive income.

I explain this in detail in my Can I Get a Witness post

Millions of Hive	APR
5M	89.0%
10M	44.5%
15M	29.7%
20M	22.3%
25M	17.8%
30M	14.8%
35M	12.7%
40M	11.1%
45M	9.9%
50M	8.9%
55M	8.1%
60M	7.4%
65M	6.8%
70M	6.3%
75M	5.9%
80M	5.6%
90M	4.9%
100M	4.5%

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This chart shows just how much APR the bank accounts would earn assuming that many coins were transferred into them. It also assumes that we transfer the 15% inflation we allocate to the vest holders and put it into the bank accounts. Considering the vest holders earn less than 2% APR per year from that 15% inflation allocation, these numbers are staggering.

But why stop there?

Something occurred to me. Why would we only allocate 15% inflation to the bank accounts? Why not more? We are all suckers for unit bias. Lets reduce the reward pool to an even 50% of total inflation.

New proposed Hive inflation schedule:

• 10% to the witnesses.
• 10% to the Decentralized Hive Fund.
• 30% to the bank accounts.
• 50% to the reward pool.

Doesn't that look nice?

Maybe you're thinking:

That's bullshit! I don't want to lose my author rewards!

And that is the beauty of this system!

Your author rewards will actually go up!

Don't believe me?

HiveEngine has already shown us how much people like passive rewards! They implemented this exact solution in a slightly different way via "virtual mining". Spoiler alert: virtual mining isn't mining at all, it is simply allocating inflation to passive rewards, just like I am suggesting we do. Except with HiveEngine mining tokens, you can't turn those tokens back into liquid coins like you would be able to with the 3 day powerdown on the bank accounts. Bank accounts are better and they are already built into the system.

Okay, so people love passive rewards

They sure do. So imagine we are now allocating 30% of our inflation to the bank accounts. Take the numbers from the chart above and double them. That means if there were 80M coins allocated to the bank accounts after this change that money would be earning a passive return of 11.2% APR. That's a really good APR and I think we can assume we would get to this level, because again people love passive rewards without having to do anything.

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It gives all investors the ability to opt out of the curation/content system.

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But how do I get bigger upvotes after the reward pool gets reduced?

Again, this is the magic of this new system. Where did that 80M coins in the bank accounts come from that are now earning 11.2% APR? We have to assume they came from the investors. We have to assume that people powered down their money and lost their power to control the reward pool and pumped that money into the bank accounts to earn a passive reward.

We have 137.5M coins powered up right now. 80M is more than half of our powered up supply. By reducing the reward pool and allocating those resources to the bank accounts, we actually get rid of most of the people trying to exploit the curation/author system we have going. We lose 15% on the reward pool and 15% on interest for vest holders, but we gain more than double the ability to control the reward pool, because at least half the coins have powered down and moved to the bank accounts.

What happens if those 80M coins come from the exchanges?

Certainly not all the money dumped into the passive reward bank accounts will be from users powering down. Some will also be liquidity that becomes locked. We all know what happens when liquidity is drained from the market; the price of coins spikes up relative to USD. It doesn't matter where the money comes from, we win either way, and both are guaranteed to happen.

Now imagine what happens when we add CDPs to the mix!

We can probably get 80M coins into the bank accounts if we allocate 30% of our inflation there, but how much more can we get if bank accounts also double as collateral accounts for CDP loans? It's almost too hard to speculate, because DeFi is so popular. People love giving themselves these loans and creating stable-coins out of thin air.

The key, as I've detailed in previous posts, is to charge 0% interest rates to take these loans, and to counteract low HBD value simply spike of the required collateral percentage. If we offer 0% interest rates, everyone on ETHEREUM is going to be like:

Wait... I can dump my bags into Hive... Get 0% collateralized loans... with 0 fees... and 3 second blocks... what in the actual fuck am I doing on Ethereum?

Seriously we can corner out and scoop this entire market. All we have to do is stop charging these absolutely ridiculous interest rates on loans that are already over-collaterlized by 100%+. A loan is not a loan when the collateral is worth more than the loan. Interest rates are predatory and foolishly greedy, and MAKERDAO has given this network a free opportunity to scoop their entire community.

Final product

Please try to imagine the full & finished product I'm going for here. We'd lose 30% of our inflation that get's allocated to vest holders, but we gain so much more than that.

Example Scenario:

You have $10000 powered up in vesting. These bank accounts come out in a hardfork and you decide to power down half your stake to earn passive rewards. You know have $5000 powered up for voting content and $5000 in the bank accounts earning passive rewards. This is nice because the $5000 in the bank account can be liquefied in 3 days instead of 13 weeks. You're also earning 10% APR on the bank account. That's $500 a year at these prices. However, we have to assume that the value of coins will go up when we add this much value to the network.

Enter CDP loans. You don't have to do anything, your bank account smart contract is now automatically collateral for HBD loans, should you choose to generate them. Imagine using your $5000 collateral to create 1000 HBD out of thin air. You're still making 10% APR on the $5000, even though you're using the money as collateral for an HBD loan. AMAZING!

What will do you with the 1000 HBD?

Whatever you want.

• You could liquidate it for $1000 worth of Hive if HBD is trading for less than $1.
• You could buy Hive straight up off the market if HBD is trading for higher than $1.
• You could simply hold it, especially if HBD is trading for less than $1 and there is a haircut active and you expect a bounce up.
• You could cash it out to Bitcoin/ETH and use it for literally any other function.
• You could buy a new computer.
• Whatever is clever!

My point here is that the value generated by this move would be massive.

With 0% interest loans and 3 second blocks with no transaction fee, Hive could become the goto option for DeFi loans on the blockchain. Not only does it add a ton of value for the entire network, it adds even extra value to vest holders (even though they lost inflation to the reward pool) and it allows people who want passive rewards to get them.

Most importantly, this change would stabilize HBD by a factor of something crazy like x1000. It would be near impossible for HBD to fluctuate in value by much more than 5 cents. Considering we've all seen $13 SBD and 60 cent SBD, this is a huge deal. I'm making the claim that the new range would be in the $0.95-$1.05 boundaries, meaning we can take our near-worthless stable coin and turn it into one that could become the standard for the entire cryptosphere (due to the 0% interest fee loans and zero transactions luring everyone in).

I'm pretty sure Hive would spike up into the top 10 market cap.

Think about it!