A witness on the Hive blockchain is responsible for publishing price feeds, which provide the current market price of the Hive token (HIVE) in other cryptocurrencies. This information is used to determine the value of HIVE for certain transactions, such as the conversion of HIVE to Hive Power (HP). As it happens to be and while I was browsing my list of voted witnesses, I observed that some of them (not from my last) have old price feeds and are not in line with what happens on the market right now. As I saw significant differences, one question popped into my head: What happens if a witness publishes a wrong price feed on the Hive blockchain? Can someone make use of that and manipulate in somehow the transactions to gain something from them?
Note: Base imagine generated with BlueWillow AI, all outputs free of use.
The thing is that if a witness publishes a wrong price feed, it can have significant consequences for the Hive blockchain. Some of these examples can include:
- Misaligned incentives: If a witness publishes a price feed that is significantly higher or lower than the actual market price, it can create incentives for certain transactions that are not in line with the overall goals of the Hive community.
- Incorrect conversion rates: The price feed is used to determine the conversion rate between HIVE and HP. If a witness publishes a wrong price feed, this can result in incorrect conversion rates, which can have a negative impact on the Hive economy.
- Unfair distribution of rewards: The rewards for Hive blockchain activities, such as content creation and curation, are distributed based on the HIVE to HP conversion rate. A wrong price feed can result in an unfair distribution of rewards, which can harm the Hive community.
In order to prevent these consequences, the Hive blockchain has a built-in mechanism for detecting and correcting incorrect price feeds. If a significant number of witnesses publish a price feed that is significantly different from the median price feed, the Hive blockchain will automatically adjust the price feed to the median value.
It is important for witnesses to be diligent in publishing accurate price feeds, as this is a critical component of the Hive blockchain's functioning. By doing so, they can help ensure the stability and fairness of the Hive economy. Having an accurate price feed is also a criterion when I vote for the Witnesses that I support, besides others like HBD Savings APR which I prefer to stay at 20% or uptime and last processed block.
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Thanks for letting us know what happens when some price feeds are wrong and that there is a built-in mechanism to revert to the median. It is something that I will review when I check on my witness voting.
I have picked this post on behalf of the @OurPick project which will be highlighted in the next post!
Greatly appreciated!
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Interesting facts... Curious if ever happened anything like this wrong price before? I think, no..cuz of that automatic adjust of price.
As you can see in the picture from the article, Blocktrades publishes a wrong price feed of $0.388. Now not sure if it generates negative effects being a single one and that the algorithm uses a median result. Or at least I hope it does.
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I think it works same like Governance > More people in favour of one thing like other witness with correct price and one wrong..decides this.
I like to think, posting the wrong price feed is possible, nevertheless I'm sure they wouldn't intentionally do this..
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For sure is not intentional, but it can happen and it is good to have the right mechanisms to protect the Hive ecosystem from such cases.
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Definitely, I also think and believe it's better to be safe than to be sorry
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For how long do you think the 20% APR on HBD will be available?
With the latest strong deposits of HBD into Savings (1 account with over $600k HBD), that 20% APR might not hold for long. I cannot see if more HBD is beneficial or not to the Hive ecosystem health, maybe we'll see somebody do an analysis on that.
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I see that the difference was up to 20% compared to the other feeds. If it was more than a certain amount it will automatically overide the prices !
I didn't know that happened and I thought it would just do a median price like the HBD savings rate. However, I think it makes sense because the Hive price is based on the actual price and not what the witnesses say.
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You are absolutely right when a special update like this is given, everything is viewed two or three times. Because this thing is seen by the whole world and this thing had to be absolutely right. They should continue to give this APR in the same way.
I don't know why blocktrades haven't updated their price feed, It should be automatically adjusted with the market and other witnesses.
Well, it happened I think before the fork, and this median value was implemented.
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