This is a follow  up to our previous article about [HBD and building an economy](https://leofinance.io/@taskmaster4450/what-is-hbd-and-building-an-economy).

In that we covered some important points:

* an [economy](https://leofinance.io/@leoglossary/leoglossary-economy) is fueled by the [money](https://leofinance.io/@leoglossary/leoglossary-money) that is available  
* increasing the [money supply](https://leofinance.io/@leoglossary/leoglossary-money-supply) will increase economic productivity as long as the country has the resources available to do so
* currencies other than [USD](https://leofinance.io/@leoglossary/leoglossary-usd) and [EUR](https://leofinance.io/@leoglossary/leoglossary-eur-currency) are basically national currencies, with these making up the majority of reserves and [transactions](https://leofinance.io/@leoglossary/leoglossary-transaction)
* The [Hive Backed Dollar(HBD)](https://leofinance.io/@leoglossary/leoglossary-hive-backed-dollar-hbd) is global in nature

There is roughly 81 billion [Tether](https://leofinance.io/@leoglossary/leoglossary-tether) on the market and around $2.3 trillion US dollars in [banknotes](https://leofinance.io/@leoglossary/leoglossary-banknote).  Both of these points will be important.

![image.png](https://images.hive.blog/DQmWfstkJa2mwjBbXDBWRGLLyaqwjXMTKqBNAwo4ziGDP5d/image.png)
@doze

## HBD Transactions

Every HBD transaction requires some [$HIVE](https://leofinance.io/@leoglossary/leoglossary-usdhive) staked.  This is a vital point to consider.  

Unlike other [blockchains](https://leofinance.io/@leoglossary/blockchain), where [transaction fees](https://leofinance.io/@leoglossary/leoglossary-transaction-fee) are charged on an individual basis, Hive operates off its [resource credit](https://leofinance.io/@leoglossary/leoglossary-resource-credits-rc) system.  This is a non-tradeable [token](https://leofinance.io/@leoglossary/leoglossary-token) that is assigned when $HIVE is [powered up](https://leofinance.io/@leoglossary/leoglossary-power-up-hive).  Each written activity to the chain has a "cost" to it, which is charged against the holdings in the wallet.  This does recharge on a daily basis, making interacting with Hive an [investment](https://leofinance.io/@leoglossary/leoglossary-investment) as opposed to a [cost](https://leofinance.io/@leoglossary/leoglossary-cost).  The [Hive Power](https://leofinance.io/@leoglossary/leoglossary-hive-power-hp) is still held by the individual.

This system means that when utilizing HBD, the sender will need a small amount of $HIVE staked.  It means demand is being driven to the backing agent as transactions grow.  Basically, the more HBD that is circulating *and being utilized*, the more $HIVE that has to be staked.

In other words, transactions are "paid" for on Hive with staked [coins](https://leofinance.io/@leoglossary/leoglossary-coins) as opposed to blockchains like [Bitcoin](https://leofinance.io/@leoglossary/leoglossary-bitcoin) which utilizes liquid ones.

## Tether

What is Tether used for?  This is a legitimate question considering that it has the largest [market capitalization](https://leofinance.io/@leoglossary/leoglossary-market-capitalization) in the [stablecoin](https://leofinance.io/@leoglossary/leoglossary-stablecoin) market, by a wide margin.

How many [websites](https://leofinance.io/@leoglossary/leoglossary-website) can you use it on?  What real world stores accept it?  Can someone buy lunch with Tether?

Obviously there might be a few places where this was integrated.  The same could be true for [USDC](https://leofinance.io/@leoglossary/leoglossary-usd-coin).  However, the reality is most activity tied to these coins is financial.  In fact, it is a very specific purpose: to store money so as to remove [volatility](https://leofinance.io/@leoglossary/leoglossary-volatility).

The overwhelming majority of stablecoin use case is as a parking spot.  When the [cryptocurrency](https://leofinance.io/@leoglossary/cryptocurrency) markets get to volatile, people sell whatever coin or token and move it into Tether.

Bear in mind, this provided enormous utility.  It is a crucial that a "safe haven" exist when speculators (or anyone really) take [risk](https://leofinance.io/@leoglossary/leoglossary-risk) off.  

The distribution of Tether and USDC amounts to 111 billion, most as a [store of value](https://leofinance.io/@leoglossary/leoglossary-store-of-value) offered from the [price stability](https://leofinance.io/@leoglossary/leoglossary-price-stability) of the coins.

At Tether's current total, this is how long it would take HBD to reach simply based upon the 20% [APR](https://leofinance.io/@leoglossary/leoglossary-annual-percentage-return-apr) paid out of [savings](https://leofinance.io/@leoglossary/leoglossary-savings-account-hive).

<center>![image.png](https://images.hive.blog/DQmNzbaBXtWvtruVUEMMfjK3Hi6DQAmDEsK8NdqmShjcNu3/image.png)</center>

## Economic Building Blocks

Here is where we see a massive opportunity.

Hive has the potential to implement the economic building blocks tied to its currency.  HBD can be the foundation of the [ecosystem](https://leofinance.io/@leoglossary/leoglossary-ecosystem-digital) that is all tied together.  The fact the coin is [base layer](https://leofinance.io/@leoglossary/leoglossary-base-layer-blockchain) means there is no third party involvement.  Everyone involved with Hive has a vested interest in the utilization and expansion of HBD.

So what are the economic building blocks that apply to the [currency](https://leofinance.io/@leoglossary/leoglossary-currency).

They are:

* [payment](https://leofinance.io/@leoglossary/leoglossary-payment) system (commerce)
* [collateralization](https://leofinance.io/@leoglossary/leoglossary-collateral)
* funding and investing
* [derivatives](https://leofinance.io/@leoglossary/leoglossary-derivative)

We covered each of these in the past so no need to dive deep in this article.

The important point here is we see, as these are built out, value shifted to the currency itself.  No longer is it the backing agent that is where the value comes from.  The utility that results in economic productivity is what provides value to currency.  

Consider the idea of a project tied to [real estate](https://leofinance.io/@leoglossary/leoglossary-real-estate).

Imagine being able to bond HBD (derivative) that is used as collateral on a [loan](https://leofinance.io/@leoglossary/leoglossary-loans) to purchase real estate.  The bond is put up against the loan to secure funding for the property.  It is all tied to a stablecoin meaning the volatility will be reduced as compared to using the [value capture tokens](https://leofinance.io/@leoglossary/leoglossary-value-capture-token).

Do you think 80 billion HBD could be needed in that instance?

Considering the global real estate market was [estimated to be worth $326.5 trillion in 2020](https://www.savills.com/impacts/market-trends/the-total-value-of-global-real-estate.html), we can see how big the numbers are.

This, of course, is just one use case.  What about the funding of [businesses](https://leofinance.io/@leoglossary/leoglossary-business)?  [Venture capital](https://leofinance.io/@leoglossary/leoglossary-venture-capital-vc) firms reportedly dumped $30 billion in funding in cryptocurrency companies in 2021.  There is a natural market for us to fund ourselves and cut the VCs out.  

The point is we see the opportunities for hundreds of billions in economic activity that can be tied to stablecoins.

There is no reason why HBD, which has no [counterparty risk](https://leofinance.io/@leoglossary/leoglossary-counterparty-risk) and resides at the base layer, cannot be a large part of that.

## Central Bank Digital Currencies

[Central Bank Digital Currencies (CBDC)](https://leofinance.io/@leoglossary/leoglossary-central-bank-digital-currency-cbdc) are getting a lot of attention in the cryptocurrency world.  However, few are talking about the main focus of them.

The concentration of these projects is based upon two areas, at least to start.  They are:

* interbank payments/funding
* [cash](https://leofinance.io/@leoglossary/leoglossary-cash)

We will leave the first aside since it isn't relevant.  The second, however, is where we already see progress with HBD.  

CBDCs are designed to digitalize cash.  They want to remove it from the system, mostly for tax purposes in my opinion, and get people utilizing digital [wallets](https://leofinance.io/@leoglossary/leoglossary-wallet).  The issue they have is HBD already offers this.

The US dollar has $2.3 trillion in banknotes circulating.  More than 70% of them reside outside the U.S.  Why is that?  This is the currency that people in many countries use as a defense against their own [governments](https://leofinance.io/@leoglossary/leoglossary-government) and the destruction of the native currency.  There are many places in the world where there is a black [market](https://leofinance.io/@leoglossary/leoglossary-market) for US dollar banknotes.

It is also interesting that the majority of the world's population lives in countries who have this need.  Move passed the USD, EUR, GBP, CNY, AUD and JPY to enter the real rat race.  The remaining currencies can be a nightmare.

Unfortunately, these people do not have access to the dollar.  If they go to the bank, it will not provide them with USD.  Any physical notes that come into the country are likely picked up by the power brokers.  The general public has to fight for the scraps.

HBD provides the equivalent to FedCoin without [the Fed](https://leofinance.io/@leoglossary/leoglossary-federal-reserve-bank-the-fed).  It is a USD denominated [asset](https://leofinance.io/@leoglossary/leoglossary-asset), fully [digital](https://leofinance.io/@leoglossary/leoglossary-digital) and can be acquired by anyone with a wallet.  Notice what is happening in Sucre, Venezuela.  Those people much prefer HBD over the Bolivar.  It is only a matter of time before more activity occurs using this currency.  It is to the benefit of the customer along with the [merchant](https://leofinance.io/@leoglossary/leoglossary-merchant).

Again, if we focus upon the US Dollars (cash), in circulation, this is how long it would take for HBD to achieve that level?

<center>![image.png](https://images.hive.blog/DQmcTvQqNgPv3Do1txyk58JxcWjMiS6XkYC8JramQUKQJ51/image.png)</center>

This, of course, does not include the physical notes for other currencies.  There are more than a trillion in EUR outstanding.  

Does this mean trillions of HBD are required?  We are not asserting that.  However, it is clear that a couple hundred billion HBD will be required to facilitate global economic activity based upon the construction of some basic [financial services](https://leofinance.io/@leoglossary/leoglossary-financial-services).

We will have a 3 section in this series since there was an announcement regarding [infrastructure](https://leofinance.io/@leoglossary/leoglossary-infrastructure-computer).  Also, we will also show how the other components of HBD are incorporated into this.

___
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