RE: The HBD Factor

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Good afternoon @edicted , what did you mean by the part that:

The debt-ratio haircut may eventually be raised higher than 30% if Hive can prove that our demand for debt is stable and will not initiate a bank-run during bear markets.

Do I need to pay any debt to HBD?

hive-167922
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You do not need to pay anything. In order for HBD to be valued at 1 USD the network has to back up the value of HBD. If the price of HBD goes below one dollar the holders of Hive Dollars can convert them to a dollar's worth of Hive. In other words, the network owes HBD holders the value of one dollar...that is where the debt comes from.

The system has a limit on how many Hive tokens it can use to back up the value of HBD (to avoid a scenario where it prints too many of them...that would be bad for Hive). The limit is 30% of the virtual supply. The virtual supply is the sum of the current hive supply and the circulating HBD supply (expressed in Hive).

If the current Hive supply is 392 million tokens the potential virtual supply is 560 million. The amount of hive set aside at this moment is 168 million (which is 30% of 560 million) In theory, at the current prices Hive can sustain a circulating HBD supply of 70 million.

Right now, even if the price of Hive goes to 7.4 cents the value of HBD would still be guaranteed to be converted to one dollar's worth of Hive. All these figures are not written in stone and they can change with the price and supply of Hive and also with how much HBD is in circulation.

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