There is a fair bit of discussion of late about the Hive Backed Dollar (HBD).  This is a currency that caused a great deal of confusion to people.  In fact, it was so overlooked throughout the years that many feel it should be done away with.

What is the HBD?

Basically, it is an attempt at providing Hive with a stablecoin.  The idea is that 1 HBD is always worth $1 worth of HIVE.  That is how it is programmed into the blockchain.

However, the markets seem to tell a different story.  The peg simply has not worked over the years.  Even now, 1 HBD is worth a great deal more than $1 on the open markets.  This can tilt things in an entirely new direction.

Because of this, efforts are being made to fix this.  One of the key moves is to put a "cap" on the price in the next Hard Fork.  While this could end up covering the high side, there is still the opening for a downside move.

Either way, HBD is now getting a lot of attention. 

The benefits of having a stablecoin on Hive are enormous.  One of the first things that comes to mind is the ability to engage in commerce.  Merchants do not want to deal with a currency that is fluctuating all over the place.  Imagine selling an item online, while you were asleep, only to realize the price of the token crashed 20%.  There went your entire profit margin. 

*If one want to learn more about this, in greater detail, @edicted and @blocktrades wrote a number of posts that offer insight.*

A pegged HBD would be a game changer for Hive.  It would provide an essential element to the DeFi on the Hive ecosystem at the base level.  This would be a big step forward, not only in cryptocurrency but also finance in general.

Why is this such a game changer?

If we look in the wallet, we see something very interesting.

<center>![hivebackeddollar.png](https://images.hive.blog/DQmQoPib5HoAUJ6VtGcBpX2beVHaBqNamDLEiQQpV15BMxC/hivebackeddollar.png)</center>

Hive Backed Dollar now earns 3% interest on any that are held.  This is an important point.

Of course, for it to be effective, the peg has to hold.  Receiving 3% if the price is going to collapse 40% is not a very good deal.  We need to be able to switch from speculation to income earning.

Turning HBD into a fixed income asset would really alter things a great deal.  

Looking at the present rates for Treasuries from [Bloomberg](https://www.bloomberg.com/markets/rates-bonds/government-bonds/us), this is what we see.

<center>![treasuryyields.png](https://images.hive.blog/DQmUab6PuorhftSBfg2gMf8AU27ZUAr9rhcWH33jkLwo6Dv/treasuryyields.png)</center>

Even the 3% that HBD generates, in terms of return, is significantly better than what Treasuries are offering.  We will not even look up what local banks are paying on CDs.  It will be a lot lower.

Naturally, for all this to work, the price of HBD has to be pegged.  However, if that is pulled off, an entirely new world opens to Hive.

The 3% rate is set by the witnesses.  We know that yield farming is the trend right now with some insane returns.  Let's ignore the mania for a moment to deal with some realistic numbers.

If the rate for HBD can be set to be competitive with traditional markets, then we could start to see a transition from the absurd to sensible.

We know that the low-interest rate environment established by the central banks is absurd.  Equally so are the yields some many DeFi platforms are putting out there. Hence, we should look somewhere in the middle.

According to [Investopedia](https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp), we see this:

>The S&P 500 Index originally began in 1926 as the "composite index" comprised of only 90 stocks. According to historical records, the average annual return since its inception in 1926 through 2018 is approximately 10%–11%. The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8%.

Here we can see how it can be established.  If the payout on HBD matches the historical return of the S&P, between 8%-10%, then we will rival one of the largest markets in the world.  And this is something determined by the witnesses.

Again, we need to forget about Lambos, McMansions, and mooning.  When dealing with the traditional world of finance, offering something that they can comprehend, with little risk, is appealing.

If this was the return, in addition to being able to engage in commerce with products and services prices in HBD, we could also see a lot of people holding their savings in this currency.  Why would someone put money in a bank paying near nothing when one can match the historical returns of the stock market without the risk?  Outside of liquid funds to pay current obligations, it would make little sense.

Consider all the money in bonds, certificates of deposit, and interest bearing savings accounts that is earning next to nothing.  The hunt for yield is on.  Forgetting the insanity of present DeFi, this is a step towards a more reserved approach.

Will this be a long-term hold for most people?  Probably not.  HBD will basically become a parking spot for money.  If one sells out of a particular asset, the money might be moved into HBD until it finds another home.  This is what people are doing with stablecoins like Tether.  

The latest discussion, as shown in [this post](https://peakd.com/hive-102930/@blocktrades/proposal-to-make-hbd-interest-payable-only-to-savings-accounts) by Blocktrades, centers around the idea of paying a return to HBD put in the savings account.  This makes a lot of sense since then it would negate all the HBD held by exchanges.  If one wants to be liquid for instantaneous moves, then he or she simply forgoes the return.  However, if one is going to "park" for a while, put it in the saving account and earn some on it.

With the savings account, the unstake time is 3 days.

People are looking to cryptocurrency to fix real world problems.  One of the biggest problems in the financial arena is the fixed income markets went to crap.  The moves by the central banks destroyed the returns.  This is causing people to hunt for yield, taking on more risk than they probably should.  It is a situation that will likely not end well for many.

A pegged HBD paying a return of around 10% can go a long way to providing a solution to this problem.  It will give people the opportunity to earn a steady return without having to deal with junk bonds (or worse, non-rated bonds) to get the payout.

This would certainly be a big step to positioning Hive in a much different place.  



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