LeoGlossary: Hive Power (HP)

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[How to get a Hive Account](https://leofinance.io/@leoglossary/leoglossary-how-to-create-a-hive-account)
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The Hive blockchain is unique compared to many others that were built. Unlike Bitcoin, which utilized distributed ledger technology (DLT) to create a financial ledger similar to a bank, Hive was created facilitate social media. This means the database is more than just a registry of balance changes. It is an immutable text database.

With the focus being upon social media activities, transaction fees are an issue. In the world of finance, people are accustomed to paying these fees. This was common when buying stocks, bonds, or commodities. It is also something people do with currency transfer through the likes of PayPal or Western Union. With social media, people tend not to want to pay a fee to vote or leave a comment.

Hive went live in March of 2020. This was a fork of the Steem blockchain after the money attack by Justin Sun. The community decided it was best to start their own ecosystem rather than deal with someone who was centralizing the network due to his acquisition of the pre-mine stake. This means he is able to vote in all block producers, call witnesses. Through this stake he is essentially able to control the nodes running the software.

The blocks goes back to the genesis block of the original chain. That means the text data from July 2016 is incorporated into database.

What Is Hive Power?

Hive Power is the term given to Hive coin that is staked on the Hive blockchain. It is done through a process called powering up which switches liquid $HIVE:$0.33 into Hive Power, or HP.

This is what gives people access to utilize the blockchain through Resource Credits. Thus, we can consider Hive Power to be an access token for the network and to write to the database.

Resource Credits (RC) are non-transferrable tokens that are central to the operation of the chain. Each activity is quantified "costing" a certain amount of RC to complete. When RC is used, it will regenerate daily, at a rate of 20%. This means that a full drained account will have the RC replenished in 5 days.

It is the RC system that replaces direct transaction fees. The saying is that Hive is fast and feeless. On most networks, a transaction is an expense. Under this system, people make an investment and are able to engage as a result.

Benefits of Hive Power

Access is only one utility of Hive Power. We see it pertaining to many other aspects of the system.

HP gives users the ability to engage in governance by electing block producers (witnesses). This is done based upon the stake one has. Since Hive is Delegated-Proof-of-Stake (DPoS), the community votes on the witnesses. The top 20 are determined by the stake voted for their node. Block production is evenly rotated through the top 20. Back up witnesses (those outside the top 20) are also rotated through, spreading the production out even further.

All of this is determined by the stake voting by those who have $HIVE:$0.33 powered up. It is here we see the base layer code is run simultaneously on many different servers.

Governance also applies to the Decentralized Autonomous Organization (DAO).

The pre-mine was moved to a DAO during the fork. A proposal system was built around this with the idea of financing projects that supported the ecosystem.

Community members are able to submit a proposal. If it is voted past a certain level, the submitter will receive the funding from the DAO, called the Decentralized Hive Fund (DHF).

Once again, HP stake is what determines the amount of each vote one is placing.

Financial Return

Governance and influence through Hive Power is just one aspect to it. There is a financial implication that many take advantage of.

Hive Power is still $HIVE:$0.33, simply in a different form. This means that holders can enjoy the benefits of speculation and price appreciation. The one drawback here is that HP has a long power down (lock up) period so this is not ideal for trading. Anyone seeking to take advantage of price swings are better off with liquid coins.

Over the long term, many do seek to enjoy the benefits of higher prices.

One area where HP has direct on-chain influence is regarding the reward pool. Each day there is a certain amount available to be distributed to content creators and curators. This is done via voting on posts and comments. As one increases the amount of HP, the vote weight follow suit.

This is financial beneficial since the rewards are split 50/50 between the author and curator. The curation of content with more HP will lead to larger curation rewards.

By staking $HIVE:$0.33, investors do earn a bit of a direct return. Instead of paying out interest, this offers an adjustment based upon the rate of inflation. To compensate HP holders for the dilution of coins, HP is provided to holders.

The rate will fluctuate based upon the liquidity of the coin versus what is staked. As more is powered up, the adjustment pool is spread out more, providing a lower return. If powering down takes place, then individuals will find the adjustment percentage will rise. Over the last couple years, this has ranged between 2.75%-3% annually.

Security

There was great debate within the community regarding the lock up period for those who power up $HIVE:$0.33. There is a 13 week power down period meaning that one gets 1/13th of the account each week once it is initiated (for a total of 14 weeks).

Detractors say this limits the appeal of buying $HIVE:$0.33 since the return is diminished by the lack of flexibility. Supporters, on the other hand, cite this as a security feature. If a wallet is hacked, a power down can be initiated yet no money removed for at least a week. This should give the individual time to see the issue and take corrective action.

It is also a deterrent against the cryptocurrency exchanges from powering up and using stake against the community. This occurred when Justin Sun attacked the network. Exchanges such as Binance powered up their wallets which has customer funds in them, not realizing this was locking them up for 13 weeks.

As a result of this, when the community forked from Steem, one of the features that was written into the base layer code was a 30 day governance staking period. During this 30 day window, newly powered up HP will not affect governance issues.

Hive Power ends up being a security feature as applications become the HODLer of last resort. Since we are dealing with access, these projects require the RCs to ensure their users can engage. This is where the success on the layer 2 has a direct impact upon the value of $HIVE:$0.33.

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