HBD interest rate was set to 20% APR by many witnesses but recently there has been a small change where many witnesses have started signaling a little lower HBD interest. I think I already wrote an article on this topic when discussions happened long back. One of the biggest reasons why people try and invest in Hive is the APR given by HBD. None of the other decentralized blockchains provide a 20% APR for on-chain savings with 3 days cooldown. This is one of the competitive phenomena we have in Hive.
The HBD percentage is currently the median percentage of the top 21 witnesses. That's the reason why the price keeps dipping to 19 and sometimes back to 20%. When many top 20 witnesses start entering an APR value less than 20 percent, then that will be taken into consideration and that will be set as the APR percentage.
Onboarding is a big challenge in Hive. We can somehow talk and bring people inside Hive. But they all ask why they should stay invested. When we explain the benefits Hive blockchain is providing, we also explain the 20% APR that Hive is providing. This is a very good selling point. I think that having a 20% APR has not affected the stats or how HBD issuing works.
At the time of writing this article, the Debt ratio was 7%. To stay at 1$, the ratio should be below 30% but it looks like 7% is a very nice number to have. I don't know much about the other technical details of how it is calculated and things like that. (Maybe something for me to explore later) but from what I heard, I think we have a lot more time for 20% APR to become dangerous for us. I felt if it was good, it was not bad to continue as it is and have a 20% APR instead of anything lesser.
Returns from 20% APR
I would like to take India as an example. We have a 30% tax on crypto gains. So, let's say we have 20% APR for our HBD in savings, the returns will be taxed at 30% and ultimately we will be getting only 14% as the return. For conversion and transactions, there would be some fees for which let's say we lose 2% more. Ultimately when we cash out the interest, the value would be only 12%. These days there are a few real-world investments that already provide close to 15% APR. Maybe the banks are not providing that much APR but there are some other investment opportunities and mutual funds that provide a decent APR sometimes even more than 15% and the need for investing in a crypto-stable coin doesn't matter.
The above reason is one thing that I think should be considered when the witnesses are thinking about reducing the APR percentage. If anyone wants to support my thoughts and continue to have 20% APR, they have to vote on witnesses that are signaling 20% APR. There are a few witnesses who have set a low APR which I think I might shuffle my vote to. I would like to choose witnesses who have set 20% APR which I think is fair and competitive and good to sell to newbies. I have been running my witness node with 20% as the value for HBD APR.
If you like what I'm doing on Hive, you can vote me as a witness with the links below.
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Posted Using InLeo Alpha
