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, as well as an incentivized internal market trough the @hbdstabilizer.

Here we will be looking at HIVE to HBD conversions and the opposite HBD to HIVE conversions in 2022. 
Did more HIVE was added or removed by conversions? Where did the major conversions come from?

 
![01.png](https://images.hive.blog/DQmSbQok7QjaLj5F7yKrpNwG6ZGVzvAjoPNHpUx1wbEHqpM/01.png)




## Types Of Conversions

First let’s take a look at all the possible way 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 mechanics 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.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 first type** 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 type of conversions are made, half of the HIVE is instantly converted to HBD, while the other half is locked as collateral and it is been realized 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 is 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 this funds to be usable. Unlike the *standard*conversions that have collateral locked for 3.5 days, these conversions are instant. As soon as HIVE is sent to the DHF it is being 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 is now a major player in the Hive ecosystem and the tokenomics. At the moment it has 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.**


## HBD to HIVE Conversions

This is the one type of conversions for creating HIVE. Here is the chart. 

 
![image001.png](https://images.hive.blog/DQmTesnroA9pxEKPY8o24ZqUzJi2PvwDiHP83YcfefRUyMb/image001.png)

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 this happened recently in November when the market had a sharp drop because of the FTX collapse.

*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.

 
![image007.png](https://images.hive.blog/DQmZNTkJrH4NyJKuJPtDjT5HQ7mq899L2pbj3Dhh6waj5jc/image007.png)




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 (orange) 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 55M 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 27k.

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. 


 
![image009.png](https://images.hive.blog/DQmcz8vgRWXUjQx6UVqF8EgQcUPdkkmieZB7efTeH3Sa9qD/image009.png)

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 that in this period 2021 and 2022, there is more HIVE converted to HBD then the opposite. More HIVE is basically removed from circulation and locked into HBD.
The big spikes are in September 2021 and now again at the end of July and August 2022. 

### On a monthly basis the chart looks like this:

 
![image011.png](https://images.hive.blog/DQma8DGEyHBuC7tcbFQiDJwqLXTm9RSBEj6aPjUjn52azyT/image011.png)

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.

## Cumulative HIVE Created From Conversions in 2022 By Category

When add the numbers above by category we get this chart:

 
![image015.png](https://images.hive.blog/DQmUBHzHjzLcmk8GQQdSwTQhYFr8stG1aadiu2rq6ZADTS1/image015.png)

These are net results.
As we can see **the conversions from the @hbdstabilizer in 2022** (light white on the chart) are in the positive, with more HIVE created then removed from conversions. The year ended with **12M more HIVE added to the supply from the stabilizer**. This is somewhat understandable because this HIVE went to removing HBD from circulation that has contracted in 2022 from 14M to 9M. The stabilizer alone removed more than 7M HBD. 		

The **conversions from the regular users** are almost neutral with around 800k HIVE added to the supply in 2022.

The **conversions in the DHF from the ninja mine HIVE to HBD** are the ones that are negative and are happening as coded in with 0.05% daily. These are negative conversions and they have offseted the new HIVE put in circulation from the other two, stabilizer and users. 

When we sum it up the above three categories the final chart for the conversions in 2022 looks like this.
 

![image017.png](https://images.hive.blog/DQmXXkWjnwE1QC6nqyH26QquhE7fYFWgXQYTCrq9DaXvA4d/image017.png)


The year ended with around 2M more HIVE added to circulation from conversions. Having in mind that this was quite the bear market year, this is overall positive, as the *regular inflation* so to speak is around 25M. We should note that the ninja mine conversions are the ones that have mostly counter the conversions, otherwise they would be around 13M HIVE.

----

### Conclusion
This was a bear year with HBD contracting in the year and expanding the HIVE supply. The @hbdstabilizer has taken the weight of this task and absorbed all the excess HBD, adding more HIVE in the process. The conversions from users are almost neutral for the year. The HIVE in the DHF conversions have countered the overall conversions removing the ninja mined HIVE in the DHF. 
The excess HBD that was taken out of circulation was mostly on Upbit, where at the beginning of 2022 there was around 7M HBD and now there is just 1M. This is mostly the speculative share of the HBD. On the other side the HBD in the savings has increased from 2M to 5M HBD, further contracting the freely circulating HBD. 
We can say that we are entering 2023 with a healthy amount of HBD in circulation and with the HBD in the savings growing there is a now a probability for the opposite process to happen in 2023, with HBD expanding and HIVE contracting. 
Having in mind this is crypto things can be volatile and unpredicted so it remains to be seen how will things play out in 2023.



All the best
@dalz

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