Liquid Staking Comes to VSC. Let's Understand Some Things Before That Happens.
VSC announced HBD liquid staking on their platform.
Note this is not fully operational. For now, someone can deposit and stake HBD on VSC, much like it would on the layer 1, meaning with a 3-day delay if you want to withdraw it. It earns the same interest as on Hive.
The actual functionality that makes this HBD liquid staking instead of normal staking is not activated yet.
For that, the sHBD smart contract needs to be active. That will be the "liquid" part of the mechanism.
How Will HBD Liquid Staking Work on VSC?
I don't know the exact process on VSC, but I will infer based on how others implemented liquid staking.
Step 1. You deposit HBD on VSC (or swap something else to HBD, if available)
Step 2. You stake HBD on VSC. For that, you receive a number of sHBD (which is usually lower than the HBD you stake, since the more time it goes the more interest accrues and adds up to the value of sHBD)
Step 3. You trade sHBD or use it in defi (when they will be available on VSC). sHBD will trade hands from you to someone else or to a defi smart contract. If it's defi, you can take it back once you're done with it.
Step 4. The holder of sHBD redeems it for HBD, whenever they want. There is a 3-day waiting period, since that's for HBD in savings, and that's where HBD is staked for interest on VSC. Interest goes to the redeemer of the sHBD. Everyone else along the way got to use the sHBD when they needed.
What Will the Price of sHBD Be? How Will It Evolve?
In a way, the VSC team made things easier to implement liquid staking for HBD first, since it is a stablecoin, with a relatively clear value.
But the same principle applies for volatile tokens. A well-known liquid staking token (LST) is stETH, with its underlying token ETH, highly used in the Ethereum ecosystem.
Who knows? Maybe we would have sHIVE next as well on VSC? That could increase the amount of powered-up HIVE we have on Hive (since we would have sHIVE as liquid HIVE, matching powered up HIVE through VSC), but maybe there are some other things to consider. I haven't given enough thought to say either way.
Let's get back to the price.
Since the interest of the staked HBD is collected by the end-holder of the sHBD (who redeems them), it makes sense the price would reflect that.
So, while the price of HBD would remain relatively constant around 1$, the price of sHBD will go up in time relative to the price of HBD, to account for the interest that is accrued.
In a perfect world, at an APR of 15%, and the price of HBD of 1$, the price of sHBD would be 1.15$ after a year of staking.
Markets may add a premium or discount to that price, based on the risks involved (slashing, protocol risk, smart contract risk) or the temporary illiquidity of the market at an increased demand for sHBD.
Final Comparison
For people who are used to bonds, a liquid staking token (LST)—in our case sHBD—is like a perpetual zero-coupon bond (no maturity, no coupons paid regularly).
It will be interesting to see how HIVE Power will be used if there was a liquid form of it. I think @splinterlands is doing a great job with the way they are voting.
Maybe. There are some risks of centralization on the L1 - i.e. the witnesses of VSC where HIVE would be staked to receive the sHIVE would become quite powerful on L1 Hive, depending on the amount of HIVE being staked and the number of VSC witnesses participating. Their collateral would need to be significant too, since they need 2x the collateral of the amount they are allowed to process (I suppose that includes staking too).
You mean their proposals? They at least seem to be moving, DHF seems mostly frozen.
I meant the way they are using their HIVE Power to vote on authors that promote the game in various ways. Curation is a powerful tool to incentivize content creation and sharing them across social media to bring more exposure to DAPPs. We are seriously lagging behind on our presence in traditional social media. The silo is slowly getting breached, but this is not enough.
It is in their own best interest too. Curation rewards + incentivizing content about Splinterlands, which makes it likely to have more of the same being produced.
There are initiatives to reward other Hive-related activities. Some of them have the backing of the stake of a few large stakeholders, so... it's being used.
Maybe more can be done. But it's not easy to get everyone excited about various initiatives in a decentralized blockchain.
This is somewhere we can definitely learn from other projects that made it to the mainstream. Some Memecoins have reached tremendous success without even strong reward structure for the community. Games with their character designs could become one of the things to blow up. We should look more towards merchandise/toys if possible.
Someone proposed that (again) for Splinterlands. Gave details too. Let's see if the team (or someone else with the team's go ahead) takes that road.
I know they did a small run with few stuffed toys. I personally think it would be fine to give license to any large company to put merchandise on shelves or even make an animated series that is lore accurate. If the potential audience is large enough, license could be given for free + tiny percentage of revenue. Going mainstream is the most important task at hand.
Yes, I remember those fluffy toys in the early Splinterlands history.
Here the thing about this kind of deals. They'd better be kept on a negotiated-bases. If someone is interested, they will get in touch with them to see how much it'll cost them to use the Splinterlands IP for other media types or products like stuffed toys. If nobody contacts them, it is likely nobody serious is interested, and there's no reason to offer IP at low cost to anyone, with limited resources to keep track of how everyone is using it.
This is a very good idea. We still have the problem of letting other businesses know about Splinterlands IP and what it can offer. I guess this falls under business development.
it's a little bit different for Hive assets so there is no strict collateral requirement for Hive and HBD.
So... we don't have as much of a risk of VSC witnesses running away with Hive assets staked on their nodes, or the system itself prevents any wrongdoing from their part? It's true, if they are well-known on Hive, they have reputation to lose if they do something wrong, but depending on the amount, at some point the cookie jar may be too appealing. Plus, we had good people on Hive who left without looking back at various times.
This is a promising step forward for HBD utility, liquid staking via sHBD could open the door for deeper DeFi integration and greater demand, especially once the smart contract goes live.
Absolutely! sHBD being live is the important step in this direction, from the usability standpoint, plus having the apps where to use sHBD.
This is really some great progress towards opening the Hive ecosystem and developing it to be on par with other ecosystems. It may seem like an obvious answer but would the traditional HBD savings become less used when this finally launches? Apart from the added risks with this new staking mechanism, I don't see why a user wouldn't want to repurpose their funds into DeFi or for other uses.
Many will still prefer lower risk and won't touch defi (or even short term trading) in their wildest dreams/nightmares. For them, HBD in savings remains the best option. It may be simpler to understand too, for some.
On the same principle, the majority of people keep money in the bank for interest, instead of using secondary markets to trade bonds. Maybe that trend with keeping money in the bank will finally change...
Right, better to play it safe or just keep it simple. I'm definitely leaning into this category but I can't be fully into it. It's kind of not that practical when you're playing an offensive game, financially. Perhaps, a split of focus between them could be a route to take.
I think it could change, in part, when people understand more how secondary markets work and also interest from just keeping money in the bank doesn't help much on beating inflation.
i have read a reply from them stating that sHive can't be done, not sure why, so we will just have sHBD... i hope it won't be too complicated for not expert users
Ok... It may be because "yield" on HP is based on active curation. So they can't guarantee yield without messing with curation, and they probably don't want to mess with that.
It may be. As I said in another reply, that's why more people keep money in the bank for interest, rather than trading bonds on secondary markets.
This right here folks.
It won't be done anytime soon. It might become part of VSC's consensus staking in the longterm future, but it is questionable whether it is implemented as a full asset. This is TBD. It's not out of the realm of possibilities, but I can't commit to it either.
Oh ok so technically it could be done... Well one thing at a time, eventually you will see if it's worth it or not
For sure. We are moving forward into the future regardless.
It sounds like an interesting model. I am guessing they stake the HBD and collect interest. When someone cashes out, they remove it from savings and pass how much interest it would have earned?
Yes, they claim the interest every 30 days (they said every month, but I assume every 30 days). The interest will only be passed to the holder of sHBD when these tokens are redeemed for HBD, along with the HBD staked, after 3 days. Until then, the accrued HBD from interest remains in the VSC network, probably at the witness where the HBD staking happened.
To be clear it is NOT a smart contract. This is a protocol level feature baked into VSC software. That way, any contract can directly handle sHBD without special modifications. It's the same as holding hive or regular hbd in a contract or user wallet.
Much better! Thanks for the clarification!
Thanks for supporting and sharing!
Sure! Will do it again. VSC will eventually turn out to be a major piece in the Hive ecosystem.
no doubt about it
sHive is a very tricky thing. You could theoretically even apply curation APR to it via autovoting and delegation aspect. Example: Stake Hive on VSC, HP delegated to VSC account, VSC account follows the vote of the person staking 1:1. Problem is what functionality do you want to give sHive. What can you do with it? If you sell, does it transfer the vote follow?
What will be the price of sHive? Liquidity comes into play. It could sky rocket. It could follow the price of liquid Hive. It obviously would be more valuable in functionality than liquid Hive as it would provide HP APR while being able to generate more returns in DEFI, so it could have a higher price.
It opens up a lot of things. The way I see it is that its still early to go this route. Not until VSC gets enough liquidity into its pools and volume starts climbing do i think its a good route to go in.
On the other hand I absolutely hate the HP 3 month powerdown time so getting Hive liquid this way would definitely be refreshing.
Having sHive much more valuable than Hive wouldn't be a great potential side effect. Unless it brings in more desire for HIVE too, so it actually pulls HIVE up too while it goes up in value. That might happen, since HP is needed to get more sHive (other than buying from existing holders).
Hmm, that opens the door to some abuses. On the other side, if you don't transfer the curation APR when selling, what incentive does the buyer have to buy?
A tricky one, indeed.
Yes, enough times the 3-months powerdown can be a deterrent to find new investors, or to keep existing ones long term. We are talking about a space that is mainly moving away from unstaking delays, or making them minimum. We have our limitations, but an sHive would solve the liquidity thing in a major way, if we can figure out the other aspects in a reasonable way.
I also agree that VSC should be well-established and the pools well-funded before thinking to add sHive.