I went deep into P-HBD and native HBD to understand how the polygon bridge works, my first objective was to find out if P-HBD was Insolvent or just Illiquid. I found something that looked a little bit troubling at first but the more I thought about it the more I understood what was really happening. Read the whole article or non of it, otherwise, you will panic for no reason.

Insolvent or Illiquid

Insolvent means would mean that there isn't enough HBD on the Hive Blockchain to pay for each P-HBD over on the Polygon blockchain.

Illiquid means that every P-HBD is fully backed by native HBD but some of it is stuck in savings and not able to be used for the next 3 days.

Current HBD on native blockchain

The HBD from bridging over to polygon sits on the @p-hbd and @phbd-cold wallets.

The first currently owns: 29,840 + 46,100 + 15000 + 177 = 91,117 HBD
The second owns: 10,427 HBD
Meaning that Leofinance holds: 101,544 HBD

HBD On Polygon

You can easily see the current HBD distribution on Polygonscan. The first two addresses are the wallets used for bridging between both blockchains so let's focus on the third and fourth ones.

They're the smart contracts for the HBD-USDC and Polycub-HBD pools. Notice how much HBD they hold: Over 121,000 HBD. Well, that is a problem since there's not enough native HBD to back that up.

Don't panic

At this point it really starts to look like the team is printing unbacked PHBD but that is not the case. If you take a little time to better understand how Polycub and the bridge work you will get a different picture and realize why it is natural to have a higher circulating supply on one side.

There is no unbacked HBD. All of the HBD that can't be accounted for was generated from the Multi Token Bridge + oracle staking + the arbitrage bot. That HBD belongs to the protocol and is being used to fill the liquidity pools, it will never be dumped on the market.

Conclusion

It might not seem like it at first glance but if you understand that the discrepancy between the polygon and native assets was caused by the protocol-owned liquid and the team compounding the MTB fees and oracle staking fees it became clear that HBD is just illiquid.

A lot of investors are mad at @leofinance because of the recent pumps and it is true that people lost a good opportunity to arbitrage HBD and HIVE due to the illiquidity. That is part of the project, otherwise, there would be no oracle staking revenue...

Every investor should have a good understanding of what they're getting into before committing their coins to any project. This was an OBVIOUS opportunity cost from day one! Understand the costs and keep some liquid assets to play with. Polycub is a long-term passive way of growing my investments and not something I'm counting on to arbitrage when random hive / HBD pumps appear out of nowhere.