HBD Savings: A Simple Exercise In Wealth Building

Over the last few decades, the fixed income market was destroyed around the world. As interest rates dropped, the returns that people got from these assets declined. Nevertheless, if you talk to people who are now in their 60s, they would tell you about the days when bonds were the primary choice for investing.

Why was this?

When we look at the return that was generated, it was one of those "no-brainers". Investing in bonds made a ton of sense. The fixed income market was a terrific vehicle for wealth building. As stated, this disappeared over the last few decades.

The appeal was in sharp contrast to the high-flying, emotionally driven atmosphere of the equities markets. Everyone is always looking for the 10X stock. That was the theme since the earliest days of the market.

Today, we see a similar story in cryptocurrency. People want the mooning while overlooking the potential that fixed income assets can generate. It is one of the reasons why Hive would be well served to expand into this arena.

HBD Savings

One area that we are seeing the formation of this concept is with HBD savings. When one places his or her Hive Backed Dollar (HBD) into savings, the annual interest rate is 12%. Believe it or not, this is in line with Treasury Bonds in the early 1980s. In fact, the rate got close to 15% on the 30 year.

30yearbond.png

What this means is that the HBD savings is providing people with the ability to generate wealth over an extended period of time. e and rate of return are combined to compound our holdings. An entire generation of people do not really focus upon this due to the demise of the fixed income market.

Hopefully cryptocurrency will revive that idea. So far, we can see how this is shaping up on Hive.

US bonds are always attractive because of the risk associated with them. As compared to, say, junk bonds, the chance of default on US Treasuries is almost non-existent. In fact, since these bonds are considered pristine collateral, there is always a market for them. The US literally could engage in Ponzi-debt as a means of fulfilling the obligations.

HBD savings offers something similar. While the peg is still not ideal, it is getting closer. Since the token is resident at the base layer, as well as the "staking", there is no 3rd party counter-risk. One does not need to trust a company or application. This pulls the risk model down significantly.

We also have the fact that HBD is backed by $1.00 worth of HIVE. This means the other risk factor is if HIVE goes to zero. As long as that is avoided, we will see the backing remain in place.

Here we have an asset paying a superior return as compared to traditional assets while having very little risk associated with it. This is the epitome of the fixed income market.

12% Return Compounded

Does this mean we are on the pathway to enormous wealth building? The option is now present on Hive.

Everyone is looking for the 10X gains. The fixed income market guarantees any multiple return. It is only a matter of the risk profile one is willing to take along with the time invested. Obviously, a 10X return at 1% is going will require a lot of decades.

Fortunately, one receives 12% when HBD is placed into the savings account.

How does this look over a few decades?

Here is how it breaks down.

Year 1 1.12
Year 2 1.25
Year 3 1.40
Year 4 1.57
Year 5 1.75
Year 6 1.96
Year 7 2.20
Year 8 2.46
Year 9 2.76
Year 10 3.09

In a decade, we more than triple our money. That might not seem very impressive yet consider this is done with very little risk. Also, while a decade seems like a long time, keep in mind that 10 years ago, we were entering 2012. When you look back, it doesn't seem that long ago.

Things get more interesting the next 10 years.

Year 11 3.46
Year 12 3.87
Year 13 4.34
Year 14 4.86
Year 15 5.44
Year 16 6.09
Year 17 6.83
Year 18 7.65
Year 19 8.56
Year 20 9.59

A couple things happen by this time. The amount paid out in Year 20 is more than what we started with. In this example, the increase is greater than 1 HBD.

How many remember 9/11. It is hard to believe, but that was more than 20 years ago now.

Let us go another decade further.

Year 21 10.74
Year 22 12.03
Year 23 13.47
Year 24 15.09
Year 25 16.90
Year 26 18.92
Year 27 21.20
Year 28 23.74
Year 29 26.59
Year 30 29.78

It was a bit more than 30 years ago that we saw the collapse of the Soviet Union. Are you old enough to remember that?

After 30 years, each HBD put into savings would have compounded into 29.78 HBD using the linear method. We are actually underestimating what the total truly is.

Here we are using an annual compounding rate. With HBD savings, we are able to compound monthly. That means whatever interest is available, we can claim that each month. It is a fact that actually grows the numbers even more.

Using a compounding calculator, we see that each HBD in savings, at 12% over 30 years compounded monthly equates to 35.95 HBD.

In other words, here is a very low-risk 35X right before our eyes. Of course, this does not include any new contributions.

Expansion Of Hive Fixed Income

As we can see, this is a great foundation upon which to construct the Hive Fixed Income Market. There are so many other tools that can be built at the base layer to keep the risk low while offering amazing long-tern returns. This was one of the components behind the idea of Hive Bonds.

One of the next features that could be easily added is a time locked asset, creating a Hive Certificate of Deposit. Under this scenario, we see the opportunity for higher yields provided in exchange for the commitment of locking the HBD up for a long period of time. With the present payout rate for savings, which are mostly liquid, it would make sense to do a 20% return for a year commitment.

The compounding of our assets is what truly creates wealth. That is the key for many since it is something that eluded the masses under the present system. With interest rates so low, people are forced into riskier assets when searching for yield.

Here we see a situation where the yield is there, at least according to historic norms. This option, for those who understand the long-term concept, can really form a nice foundation in their asset building quest. It is not always smart to put all one's money into the highest flying assets out there. Naturally, it is great on the upside but awful when markets turn south.

Fixed income is a proven component to building a strong portfolio. With Hive, we are seeing the formation of such a market.

It is something people need to take advantage of and we should keep building upon.


If you found this article informative, please give an upvote and rehive.

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HBD is one hell nice of a stable coin with its 12% APR super power. I don’t think anything matters to me anymore.

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Well stablish for the moment. We still do have swings. The price dropped to .95 during the recent selloff. This is something we can live with but truly do need to tighten up.

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pixresteemer_incognito_angel_mini.png
Bang, I did it again... I just rehived your post!
Week 87 of my contest just started...you can now check the winners of the previous week!
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30x in 30 years sure does sound appealing but I'm not sure anyone has the conviction to hold anything that long, including the US dollar or a stable coin backed by it.

Hopefully, people will come to their senses but that may take a loooong time.

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Isn't it rather funny that people hold way more in bank accounts for longer time frames? Come on, it's sad...

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HBD isnt backed by the USD.

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Yeah. That was my bad. I was peaking about stablecoins in general and primarily had UST and Luna in mind because their yearly return is even bigger.

On that note, I tried to illustrate how hard it is to get people in the savings game because they will always trust banks more even though they are the worse option when you really think about it.

Even if you try to sell them the idea behind HBD. If you say that it is backed by Hive and then explain that Hive isn't really backed by anything they will quickly lose interest.

We all understand that community and content (along with all the tools that are being built and are already available) have a lot of value on the internet but communicating that to the general public is a really hard job.

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While I think most of the write up applies to dormant asset one can safely leave for that long, I feel the rate of inflation is not considered over the 30years period.

Will the compounding interest take care of the inflation over same period with real returns after?

BTW, that Soviet Union story is beyond my scope of understanding lol. I was probably kicking my mom in the womb then.

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Which inflation are you referring to?

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The global inflation that occurs in different countries over time. Take my country Nigeria for instance, the world bank has posited that we'll likely be experiencing the highest inflation of Over 15%. That means if my country's currency is USD for instance, over a decade period, the interest on my HBD tagged to one USD will not be profitable.

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So I have a question about the HBD savings. What happens to the HIVE deposited into the savings? Do they figure a average value and pay HBD intrest? I had 2200 HIVE or so in savings which I'm withdrawing to convert to HBD because it didn't appear to be paying anything.

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Only HBD savings gives returns. To get returns on Hive, you either power it up and curate with it or power it up and delegate it.

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HIVE in savings doesnt pay anything, only HBD.

Instead of converting the Hive to HBD, maybe simply swap it on the internal market. You can do that through the Hive.blog wallet.

It is much quicker to start, you get all your money at the time of transfer and keeps the HIVE in circulation.

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Thanks. Honestly they shouldn't let you deposit it unless they're willing to pay intrest imo..

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The deposit feature is more for security. Rather than holding fully liquid hive that could be moved immediately if the account gets compromised, the 3 days withdrawal period can act as a safety net for the owner of the account while he tries to retrieve the account.

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My goal is to get a couple of those moon shots so I can move that money into more stable investments like these passive income streams. They might not give you the huge returns right away, but as you stated over time the benefit is huge. I hope we see some of your ideas about HBD put into practice by the witnesses. I think it would be a really great direction to take that token.

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I am not sure these HBD ideas are really in the hands of the witnesses per se since it does have to be coded in. Of course, many of them do have stake which means their influence in what is done is enormous.

We will see how things unfold over the first half of the year. A lot taking place right now and the developers are working on the next hard fork so it will be a couple months, at minimum, before they are able to think about anything else.

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Ah, okay. I was under the i pressing most of the top witnesses were also the developers. I guess we just wait and see then.

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(Edited)

What do you mean by the next hard fork pls.. Just streaming through comments and saw that..pls Kindly explain or refer me to somewhere I can read about it.. Thanks.

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This post has been manually curated by @bhattg from Indiaunited community. Join us on our Discord Server.

Do you know that you can earn a passive income by delegating your Leo power to @india-leo account? We share 100 % of the curation rewards with the delegators.

Please contribute to the community by upvoting this comment and posts made by @indiaunited.

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Nice a really interesting read! We have just started to put HBD into savings so was good to see how it would go if we left them!

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I wonder if the conversion process being 3.5 days is a good or bad thing. After all, I can see that HBD is off the peg already and the price of HIVE is unpredictable in the short term.

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I dont think it is a good thing for the peg. It might be from a security standpoint but I think it hinders those looking to arbitrage.

We might find that more would try to scalp a percent or two if it was immediate.

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Would be pretty cool I wonder if it would open Hive to regulations though or give them more of a in to regulate it. Not sure the legal etc with all of that but any time you start to try and mimic government stuff they attack it.

HBD at the current rate though you're earning 24% in two years at the moment and with monthly compounding even more! The power of compounding interest it's a beautiful thing once you it 10k +

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Well written. A lot of people underestimate the power of compound interest. 12% is amazing, but it should be pointed out that those interest rates also come with a risk. Nobody can say for sure the hive project will be around in 10, 20 or 30 years. Nevertheless I'm building on it as I really like the concept and the people here. Exchanging knowledge, earning on it and getting 12% compound paid out monthly is not an opportunity I want to miss out. On top I enjoy being part of it and the journey along :)

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Nobody can say for sure the hive project will be around in 10, 20 or 30 years.

As long as one person is running the core software, it will be around.

With over 100 witnesses nodes going now, what are the chances that at least one is going in 10 years? I would say almost certain.

20 or 30 years? A bit more iffy but still something I think fairly reasonable to conclude. We will likely see more witness nodes opening up in the future.

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I also believe that hive is here to stay, but you never know. Nevertheless 12% in the current situation are a big deal :)

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As long as HIVE evolves to also be a financial center through HBD, we have a better chance at staying around than with only blogging. People will have a vested interest in keeping the place running.

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We also have the fact that HBD is backed by $1.00 worth of HIVE. This means the other risk factor is if HIVE goes to zero. As long as that is avoided, we will see the backing remain in place.

For further clarification to those who might not get it, Hive has to go to $0.000000 for HBD to have major problems.

I’ll certainly lock my hbd for 20% yearly return

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I’ll certainly lock my hbd for 20% yearly return

LOL well you arent offered that right now. So we have to settle for 12%.

But I agree with you. I think a lot of people would jump at the Certificate of Deposit idea of 1 year for 20%. That would be a smashing hit in my opinion.

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That is definitely a huge one..
Compound interest at 20%.
Everyone will jump in.

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Who knows %12 interest rate might increase in the future.

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That is fully within the witnesses rights. They could boost it if desired. My guess is we do see it creep up.

15% would not surprise me.

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There is a point where compounding becomes somewhat significant. If you are accumulating HBD on a constant basis and adding them to the mix, that 10-year scenario could well become a lot crazier in terms of being compared to isolated compounded returns.

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It is an exponential return chart. The further out you go, the more parabolic the return. As the numbers show, the first decade is like watching grass grow. Yet it will add up over time.

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It was a bit more than 30 years ago that we saw the collapse of the Soviet Union. Are you old enough to remember that?

I will be 30 years old on 2021.09.17, so no, I was not lived yet when the Soviet Union collapsed. But I am planning for the long term (years and decades) with the Hive Dollars (HBD). At some point I will take out some money to buy a sailboat, but I will probably keep building my HBD savings for decades. Hopefully it will work.

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Those who are younger do not realize how quickly 30 years goes by. Wait until you are in your 50s, then you will understand. LOL

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I already understand that time is flying. My 18th birthday feels like as if it would have been yesterday, but it was almost 12 years ago (on 2010.09.17). !LOLZ.

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Going to start to work on my retirement fund. So does the interest compounds automatically into my savings account or does it get paid out into my liquid HBD wallet?

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It is claimed once a month and goes into savings.

No big deal since the withdraw time is only 3 days so it is not being locked up for long if you do need it.

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Stats will show how much I've added to my HBD stack. 12% is a great rate, and since it is compounded monthly we see that 1.01 ^ 12 = 1.126825 so the actual yearly gain is about 12.7% I am IN at the current terms and look forward to seeing what else we can do with Hive CDs and Hive Bonds. Keep leading the charge, great job!

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Yes the APY is actually greater. That is a point I skipped for obvious reason. Just looking to give people an overview.

Obviously when dealing with APY as well as ongoing contributions, the numbers can get pretty large.

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I was waiting for this.. I don't have my calculator close by.. But this is the real compounding interest rate going by your formulae.
.thanks..

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HBD is a very good long term investment.Well explained

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investing in bonds may have made sense a few years ago, but with the big steps in inflation especially in the last two years it is crucial to move to a different type of investment, that's where cryptos can make a huge leap.

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Hive has many great things, and HBD is one of the most amazing ones, since I really like stablecoin because I need money to invest/save/emergency/daily expenses and i need stablecoin so I dont sell my other assets.

Having an stablecoin that is descentralized and its actually really stable, but also has a great savings yield is something that makes the Hive Ecosystem something great for investing and saving, because is safe and way better idea than having bonds (knowing that we dont want to take risk with variable yield assests)

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All that is true. The only question is the stable part of the stablecoin. We are still stablish, working on getting things tigether.

Hopefully the continual conversations about this bring interest from the community.

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This seems like some generational wealth making trick, I always thought currencies going to the moon is the way forward, but this insight here shows we could easily save up big time for retirement.

Thanks for the amazing insight. I am definitely giving it a thought.

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This seems like some generational wealth making trick, I always thought currencies going to the moon is the way forward, but this insight here shows we could easily save up big time for retirement.

Thanks for the amazing insight. I am definitely giving it a thought.

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And there are the three days waiting term to get ALL of your savings back. There is not a way to get the money back so fast in bank investments, even at a very lower rate

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Compounding is what makes HBD so desirable. Adding even a small percentage daily on your earnings increases the growth even more and is why the long term play is the smart way. 10 000 HBD sounds like a lot but in reality it isn't if you build towards goals knocking them off in small chunks. $100 monthly is a decent payoff for doing what we ae do anyway daily.

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According to this your post. It shows is very good to save this HBD, because it has a long way to go.

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But will Hive be around in 30 years ;)

Or will some govt print a few hundred mil just to buy out all the Hive stuff and become whales on each platform Hive forks to? Govt can always print unlimited money, and in my view they will do this at a certain point.

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Hi Taskmaster, Happy New Year ! Looks like you're off to a great start with your HIVE goals of posting , videos and comments etc ! I think the last time we chatted was on a previous HBD post you made.

I ended up finding the article I mentioned to you about claiming HBD by setting up an auto recurring HBD transfer to savings. https://peakd.com/hive-139531/@arcange/hiveautoclaim-update-hbdinterest

Any thoughts on the benefits of doing it this way?

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This blog really highlights the power of compounding your Hive Backed Dollars.

While this obviously isn't for small investors looking to make big money in the short term, it definitely is for larger investors looking to simply preserve their wealth.

PS. Stablecoins are going to be THE topic of 2022 and your content continues to lead the charge - Keep it coming!

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With crypto the concept is truly back.
This is what put DEFI so high.
Allow folks that care for fixed income to earn a living slowly and traders to do their things.
Crypto is paving the way for everyone to find what they are comfortable with and participate.

Hive is opening our eyes.
Hope everyone concerned can make an ample decision.

!BEER

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I have been adding to my HBD saving account every since you started posting about it. Already making about 2 HBD a month. It is pretty awesome. I think it will just keep growing and in the end be a great savings account for me!

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There is good reason why banks stretch out mortgages over 30 years.

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Thanks for this great post!
This is definitely true. 12% sound like nothing if you compare it to the mooning APRs some assets and projects do have. But being a stable coin there is a lot less volatility with HBD, then with most other assets and tokens on the blockchain. So yes, you won't become a millionaire over night with the HBD savings, but over time, they can really add to your funds and secure your wealth.

That is really something to consider - HBD savings can be a stable addition.

Keep up the great work!

Cheers,
@andy-plays

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A Hive Certificate of Deposit, in essence, wouldn't that be like a liquidity pool with a minimum time requirement?
Those interested in the 5-year HBD-CD would contribute to the 5-year liquidity pool.
Am I close or did I completely miss it?

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