HBD And The Eurodollar System

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2 years ago

In community: Cryptocurrency and Blockchain(7b7f)

The Hive Backed Dollar (HBD) can be a game changer for Hive. We discussed this on a number of occasions. There is a reason for that. It is one of the areas that we see within the cryptocurrency market that is getting stronger.

Stablecoins are only growing. This appears to be where we will see the medium of exchange taking place. Much of cryptocurrency is viewed as stock, causing people to speculate. This means another option is likely required as a payment system.

Most are aware that the stablecoin market is getting a lot of attention from regulators. This is something that is probably going to result in the companies behind these projects falling under the banking regulations. Governments want to be in control and this is an area where they can do it.

What is at issue is the fact that Tether and USDC are backed by $! USD, or so they claim. Many express doubt that there is actually cash backing these tokens. Hence, why the banking regulations along with audits are likely to happen.

For that reason, another alternative is going to crop up: algorithmic based stablecoins.

The True Global Reserve Currency

What is the reserve currency? Most will say the US Dollar. After all, since the end of World War II, this was the agreed upon currency. However, that is not exactly true.

The Eurodollar system started in the 1950s based upon USD that was in banks outside the US. This was more than just a currency. Instead, it was an entire system of lending, borrowing, collateralization, and cross border payments that was outside the reach of any government or central bank.

As a side note, this is what cryptocurrency is truly looking at replacing.

It is a system that was developed by the international banking cartel. For half a century it worked rather well. Nevertheless, due to the US sucking dollars out of the global economy, it is starting to suffer.

For us to see how this operates, let's use an example.

A company in Britain owes $1 million to a supply in Japan. This entity obviously has Pounds in its account. Thus, it goes to its bank to send $1 million to the supplier's bank in Japan.

You would think that the British bank simply converts the Pounds to USD, sends it to the Japanese bank, which then converts the USD to YEN and places it in the supplier's account.

Yet that does not happen in this instance.

Instead, the British banks calls the Japanese counterpart and offers $1 million in 3 month LIBOR futures that it has on its balance sheet. The Japanese bank has no problem with that and accepts that as transfer.

Upon receipt, the bank takes $1 million worth of YEN and places it in the supplier's account.

Notice how there was no USD involved in the transaction. Here we see a cross-border settlement payment that was handled in something other than USD. This is what is known as balance sheet (or shadow) banking.

In other words, the USD was nothing more than a unit of measure.

Hive Backed Dollar

The Hive Backed Dollar is backed by $1 worth of Hive. Many read this to mean that Hive is backed by a USD. It is not.

Much like the above example, the USD is just a unit of measure (account). It is not the medium of exchange. That is a different currency altogether.

HBD is backed by HIVE. In this instance, it is using a denomination that much of the world is familiar with. Here we see the similarity with the Eurodollar system. Familiarity is built in.

When one utilizes HBD, there is no USD involved in the transaction. Thus it is operating outside the scope of the regulators. There is no claim that HBD is backed by USD. In fact, we are emphatically stating that it is not. Instead, the claim on HBD is against HIVE. Every USD in the world could disappear and HBD would still be convertible to HIVE.

Realizing this shows how we have the ability to construct an entirely new financial system. Just like the international banking cartel did that, resulting in the Eurodollar system, we have the ability to create an entire global system following a similar playbook.

The key is that HBD is an algorithmic stablecoin meaning that it brings important properties to the table. We will cover them in another article.

Of Course, as other algorithmic-based stablecoins show up, we can see how this system can evolve and develop. Like most complex systems, it is done in a decentralized manner, going in many directions simultaneously.

Commerce In The Digital Realm

Crytpocurrency is truly Internet money. It was designed to operate in this world exclusively. Since there is no physical counterpart, it is truly the money for the digital age.

This goes, however, far beyond just currency. Instead, we are looking to recreate the entire global financial system. The comparison to the Eurodollar platform is meant to show how expansive and integrated this really is. It is a lot more than just looking at national currencies.

Also, it shows how much growth is required in the stablecoin market. If we are going to maximize the expansion of the digital realm, a lot more money is required. After all, we are dealing with a near infinite environment which is going to need a great deal of collaboration to build out. In short, this requires money (people expect to get paid).

As we spend the next couple decades heading towards the Metaverse, we are going to see exponential impacts occurring regularly. This is going to create areas of productivity that dwarf what the Eurodollar system created. That funded, for the most part, the physical realm.

In the digital world, everything gets larger. The numbers that we see are going to be completely mind blowing. Simply extrapolate out what we saw the last 20 years and move it forward on an accelerating basis.

Ultimately, the monetary system is going to have to keep pace. This is where a coin like HBD can enter the picture. It is up to us to build upon it.