RE: HBD: The Ultimate Stable Coin
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Modification fix or ditch: (1) stop HBD creation altogether and focus solely on HIVE (2) decrease the HBD 10% HIVE market cap rule (haircut rule) to 1-2% to avoid excessive debt (3) implement modifications above or ditch HBD, either fix or ditch
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If we have CPD loans that allow users to create HBD with Hive collateral we'll find that even the haircut level of 10% is far too low. The collateral requirement for the CDP would have to be at least 1000% to account for the 10% haircut limit. Truth be told, this might be a good level to start it at while testing it for the first time.
However, I think 300% is already a super safe level because it largely prevents (mitigates) users from dumping their loans back into Hive to increase collateral to make more HBD (multiple risky stacked leverage trades). This 300% level would imply we need to raise the haircut at least x3 to 30%.
This is not a scary level if we actually have the demand to maintain it (which we would because CPD loans are much more stable than the way we are doing it now). We wouldn't ever be in a situation where HBD is $13 and isn't getting converted for a year. As soon as Hive started crashing the conversions would begin immediately and users would also buy back cheaper to pay off their loans.