Is It Time For A Hive Certificate Of Deposit?
During the past few weeks, we discussed some ideas surrounding the idea of the Hive Backed Dollar (HBD) and the creation of a fixed income market on Hive.
Part of this is the concept of Hive Bonds. Here we have a bond tree that provides liquidity while also producing a fair bit of HBD.
We also have to understand that Hive Bonds focuses more on the development of pristine collateral based upon HBD. It is fully transparent, enabling lending platforms to have confidence in it as a collateral piece. Also, creating the possibility of a liquid market where the Hive Bond Tokens are traded enhances the appeal of the entire project.
What we are going to embark upon today is a part of the larger outlook while allowing the community to experiment.
For this reason, it might be beneficial to start with a Hive Certificate of Deposit (HCD).
Source
Certificate of Deposit
Before embarking upon the discussion, let us clarify what a certificate of deposit is.
According to investor.gov:
A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. Certificates of deposit are considered to be one of the safest savings options. A CD bought through a federally insured bank is insured up to $250,000. The $250,000 insurance covers all accounts in your name at the same bank, not each CD or account you have at the bank.
It is a rather simply concept. In fact, it already exists on Hive. The savings account actually fits into this category. When one puts HBD is in the savings account it is subject to a 3 day withdrawal period. Thus, we see a certainly amount of money put in for a fixed period of time (minimum 3 days). Of course, with the savings account, it is open ended. One can leave the HBD there for as long as he or she sees fit.
This would be a bit different. Instead of it being open ended, the depositor is agreeing to lock up the HBD for a certain period of time in exchange for an increased interest rate. We will cover that in a moment.
As for the guarantee, this is where the blockchain enters the picture. We do not need an outside entity providing the protection. Here we have the blockchain code telling us what will take place. Once again, this is in keeping with establishing assets that depend upon no third parties.
Benefits Of A Hive Certificate Of Deposit
The Hive Certificate of Deposit would simply be an extension of what is already in place with the savings plan. We would establish another layer to attract investment capital, especially from the outside.
What would a good starting point be?
Here is where we can start with the first layer in a bond tree. Why not install a 1 year CD? This means people can opt for the locking up of their HBD for a 12 months.
In return for that commitment, we can offer an interest rate of 20% for the twelve months. This is about 8% difference from what the existing payout is in savings. Of course, with that one there is really very little time component involved. Hence, we would see the system incentivizing a longer commitment.
This is an asset that could be marketed outside of Hive. The Hive CD is guaranteed to return the money based upon the code. It is a base layer operation. Also, payouts could occur monthly, providing individuals with a stream of income.
As asset like this helps in the creation of HBD while not flooding the market with it. Since a fair bit will be always locked up, the release of "staked" HBD will be scattered as the 12 month window is hit. Each day, CDs will mature, returning the original HBD.
Of course, the front ends could build a feature in that gives people the option to reinvest when the term ends.
Imagine this concept applied to a community or game. Money taken in for commercial purposed can be placed into a HCD. The ongoing payouts could be used for contests or rewards. Those behind the project know what they are receiving since the annual payout is 20%. As this grows, it can allow for greater incentive within their organizations.
It also enhances the wealth within the Hive ecosystem. One advantage that Ethereum has is plenty of money floating around. Few can dispute that Ethereum is the "big bucks chain". While Hive does not have to target this, increasing the wealth tied to the ecosystem will create for greater development and expansion.
Finally, we provide the confidence by having the rate coded into the chain. While the Witnesses can alter the savings rate based upon their choices, this is hard coded. This way any investor, especially those outside Hive, understand what the exact payout is and how it will not change throughout the year it is locked up.
Technical Development
Since much of this is already in place, it seems like that it would not require that much coding.
As stated, the savings feature is already available. It simply would require adding another layer at a higher rate. We also would have to code in the 365 day lock up period from the time the HBD is put in.
The difference might come from the fact that the payouts of savings are kept in there. When people claim their interest, it is added to their savings balance. With the HCD, we should not automatically lock that up for another 12 months. If someone wants to reinvest their payouts, that is a personal decision. Payouts in liquid form would provide a great deal more flexibility and enhance the appeal of HCD as an asset class.
From my limited coding knowledge, this all there seems to be. Perhaps some of the more experienced developers could add to the technical conversation, especially if we are missing something.
As for the front end, again it is just adding another feature to their layout. In Peakd, as an example, another level could be added to the wallet, right below savings. The application already has different forms of notification so coding in an alert as to when the HCD is coming due should not be that difficult.
Total Value Locked
This is a concept that is spreading through the Decentralized Finance (DeFi) world. We could really enhance this concept on Hive.
Whereas many other entities are using staking, this is actually a time-based asset. The present financial system uses them all the time. This is one of the key factors. Instead of recreating everything in a different manner, perhaps we should take some of the easier concepts. Of course, having this at the base layer is paramount. We instantly eliminate the 3rd part counter-risk that is inherent in so many DeFi applications.
We already know the numbers that stablecoins can reach. We already know that UST has more than 10 billion tokens issued. How much HBD would we have in total value locked if we were able to garner 20% return on a base layer token without 3rd party risk?
It would seem this would hold a lot of appeal, especially to those who are mostly unfamiliar with cryptocurrency.
The final point to consider is that we are creating a massive wealth building vehicle. Cryptocurrency is about inclusion. While 20% might seem small compared to the numbers typically tossed around the crypto world, it is important to note that 20% compounded over a decade or two can result is massive wealth generation. That is what we want to be able to offer people.
As this concept starts to build, the Total Value Locked (TVL) will rise accordingly. This is one of those metrics that can help to gain Hive greater attention. A low risk asset with a high return (at least compared to the traditional financial world) is sure to hold great appeal.
What are your thoughts on the Hive Certificate of Deposit (HCD)? Let us know in the comments below.
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I liked this idea of bond its great for the hive to have a community with amx=zing idea and also other members support
Very good idea and it can lead to two things:
The later can increase the value of Hive even further than we have it today.
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It really doesnt have to take Hive off the market. Naturally it can but people might pull in money from elsewhere. Thus, the goal is to attract new money coming in from the outside, whether it is from Hive members or not.
This will likely end up putting some pressure on exchanges to get HBD since we could show an increasing amount of TVL on-chain.
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That's a good idea. It will be like a deposit book of a bank.
Well the savings is already like that. Deposit your HBD into savings, earn 12%, and take it out whenever you like (with a 3 day conversion time).
This is like a CD that one gets from a bank where the money is time locked into the account.
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To think I recently did a post on certificate of deposit, How were you able to cater to your children's education? where I intended to leave my children school fees in there to materialize into the complete amount needed to fund their education
This writing was centered upon the bank, certificate of deposit, imagine if Hive introduces this into the layer, I would love that very much.
I am beginning to find it easier to work with cryptocurrency, than the brick and mortar procedures.
I don't know who needs to see this post, but, I hope the people in charge will table this discussion and do something about it.
Let's make it possible for the transition from traditional way of handling money to the cryptocurrency way very easy for us and the outside world. Let's bridge the gap. Let's take away the third parties when it comes to our money, ruthlessly, and aggressively by taking steps like this one.
It is a process. Ideas like this are tossed out so they can be discussed. A lot of infrastructure, across the industry, is being build. The core developers on Hive obviously have stuff they are working upon, preparing for the next hard fork.
However, the more we get the discussion going and ideas flowing, the greater the chance the community has to develop new layers in which they can enhance the entire ecosystem.
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I completely understand, sir. Step by step we will get there. I am optimistic about the Certificate of Deposit though, it will definitely fund my children's education. And probably other areas of my life. Cheers to a better future with cryptocurrency.🥂
The compounding power of 20% is truly incredible.
I dont think people really understand what that can turn into over 20 or 30 years.
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Sincerely, it is incredible.
We'll educate into understanding the power of such compounding. It will be adopted by a large percentage of people. I am optimistic.
I just did the math.
20% for 20 years: 1.2 ^ 20 = 38.33759992447475122176
20% for 30 years: 1.2 ^ 30 = 237.3763137997698063289
This is for compounding interest paid annually.
For interest paid monthly:
20% for 20 years: 1.016667 ^ 240 = 52.831687714379
20% for 30 years: 1.016667 ^ 360 = 384.00928623667
For interest paid daily:
20% for 20 years: 1.00054757 ^ 7305 = 54.538349236099
20% for 30 years: 1.00054757 ^ 10957 = 402.6559417812
I'm not a financial advisor and this isn't financial advice, but if I did the math correctly, these are the yields at the given terms.
So $1000 put in a 30 year instrument paying 20% annual interest compounded daily would be worth $402,655.94 after 30 years.
I checked that here: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Their answer is $402,766.41 so I'm pretty close!
If we program in all these legacy economy tools but end up paying out x100 the yield... how on Earth are the banks going to compete? It seems like a lot of the banking regulations out there are gonna have to go away or undergo serious rework for them to compete.
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I think you strike the point of why we need to do this type of stuff at the base layer. It looks like the regulators are going to make the issuers of stablecoins come under the banking regulation. Hence, they are effectively going to have to operate like banks (Circle, etc).
If we take the legacy tools and have them on a decentralized chain, then yes I agree the idea of regulation becomes absurd. It also makes it near impossible for the banks to compete. Who is going to store their money in the bank and earn 1% when something like this pays 20%.
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Yes indeed. That 20% and the security are very attractive.
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I think that HEX is a good and successful example of a CD.
I recall reading that platform was modeling itself after the CD concept. Honestly I dont follow HEX a great deal so speak on it intelligently.
But it does seem to have its advocates.
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I have a feeling this may break the peg if there isn't enough utility for HBD. However if I had to say whether or not its better to have it or not, I think it's still better to have this feature. At least with it, we will be able to attract more users and I hope it makes HBD more attractive as a payment option.
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I am not sure how it would break the peg (which isnt holding as it is). This will end up producing more HBD. Certainly some of it will be locked up but a portion, the liquid payouts, will find their way elsewhere. Some might reinvest but as in the case of a game, it would be spread to the players.
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I am thinking more along the lines of having too much HBD in the savings and not enough people utilizing HBD. People could just throw HBD in and sell the HBD as soon as it comes out and if enough pressure holds, we might be off the peg again.
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That could be although it comes back to use cases. If they are constructed, then the amount going into the CD is going to have to come from somewhere else. Like was mentioned, perhaps people convert HIVE to HBD or maybe more people start taking 50/50 payouts.
Or there is the ultimate options: people bring money in from the outside and pick up HBD. That is really the goal, to target outside monies. We focus too much upon tapping into what is already on Hive.
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I suggested this a long time ago to the Hive Engine devs, they where not really interested. I think they can build it faster and more easily then anybody else in this ecosystem.
By the way, I also think that it will be hard to compete with HEX, that has the clear first mover advantage and Richard Heart is a marketing machine.
#HEX #PULSE #PULSEX #LasseCash
There is a large world out there. I do not know why people think there is only going to be one of something.
It is like saying who is going to win DeFi? The argument between ETH and other ecosystems is insane. There is going to be trillions rolling into these applications.
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There has already been HEX copy-cats (like wise and others) they have all failed miserably. So I believe that it will be hard to win a part of the "CD on the blockchain"-market, as HEX will heavily dominate this market (in a very long time I believe).
On the other hand then I think a "CD on the blockchain" based on Hive Engine tech, could win like 5-10% of this market, as we have some advantages over PULSE, IE the connectivity to a larger eco-system, social media tribe/OUTPOST and such.
About "ETH kiillers" then there are many of them, I believe they will fail, some will have some value, but PULSE will dominate as an "ETH helper". I only believe in PULSE these days (largest airdrop in history), I only use ETH for HEX as long as I have to, then I will not use it anymore.
People can believe what they like to believe, but at the end of the day then most of what is going on, on all the "ETH killers" is BS speculation.
HEX
PULSE
PULSEX
LasseCash
i have to agree with lasse.. i was one of the first hex millionaires.. in less than 2 years hex has returned over 10,000%..and even the copycats have had super returns..i don't think hive bonds would remotely offer enough interest to matter. it's going to need growth and unfortunately the community is hard at hearing the only tactics that can create that growth and value.
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Taskmaster coming in hot with yet another great post XD HCD seems like a very interesting idea that could add some more use to HBD and more inflow of funds into the whole ecosystem. Thanks for sharing as usual.
We will see if the idea takes hold. A lot of things we need to do to make HBD viable. Trying to help put out ideas which could help it along.
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This could also be a way of protecting against inflation. If you need 1 dollar to be worth 1 dollar in 12 months, then this would be the ticket.
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It has nothing to do with the dollar. It is merely a unit of measure.
It is $1 worth of Hive.
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Yes I get that. Just stating that it can be a tool to combat the effects of inflation of the US dollar. If we can believe what the government says about the inflation rate (6.8%), then the HBD CD (20% as you proposed) can be used to keep your funds from losing value. It's just getting fiat into HBD that will be the pain in the butt. Looking at my credit union's savings account rate, yeah this would be very attractive.
There is a huge problem with getting HBD from outside. This is something that will hopefully change in time. Of course, getting HIVE is easier so pick that up and use the internal market for the swap.
Either way, not easy. We need to keep building the use cases around HBD to ensure the appeal is there.
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I saw the call to get Binance listing HBD and this along with other exchanges would help this project massively. I really hope this happens as I would be in for a minimum of 5 years and adding whatever I could along the way. We are here for the long term so why not be all in.
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Getting it on something like Binance would help a great deal.
The key, from my perspective, is to get so much activity going that we they want it.
We simply keep developing the platforms ourselves and expand what is taking place.
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Thank you for information. I will be staking more of my HBD from today.
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Last time I invested in conventional CDs (a couple decades ago, I think), I was able to remove my principal at any time, merely subject to losing any accrued interest since the previous renewal date.
As such, in order to compete against conventional CDs, we would need to allow folks to access their HBD at any point in time. The difference would be that any accrued interest since the previous renewal date would be forfeited.
This is a great idea and if achieved will mark great beginning for hive and hbd holders.
I pray for the grace to make it work dear friend.
Thanks for sharing
I've been reading your posts about a Hive Bond and now a Hive CD, with great interest. (Pun intended!) I'm going to have to renew my knowledge of how HBD is created and backed. I understand that it is a debt instrument and each HBD can call a USD worth of Hive at any time. I'm wondering about the additional HBD being created to pay the interest on both the current 12% savings account earnings as well as the proposed higher rates on HBs and HCDs. There must be some limiting factor, or else why not offer 50% or 100% or 365% like this new DRIP project I'm reading about on here. The higher the interest, the more interested people will be! But what's the cost to the system?
This interest on locked assets concept is something worth looking into. I like how you compare it to legacy CDs, but as others pointed out, we have #HEX in crypto which is touted as the first crypto CD and it has been active for over 2 years now. I think you may want to research it to see what they have done right and not so right, to learn from existing projects. One thing you allude to is the transparency as to when people have committed to a 1 year CD and therefore when that 1 year expires. On HEX, people plot that info for others so as to know when large amounts of the underlying asset is ending its stake and becoming liquid again, therefore changing supply and likely price. Someone on Hive would likely do the same for a Hive CD so people can optimize their HCD buys.
Another reason to research HEX is because they are about to fork Ethereum WITH State, just as HIVE forked Steem with State, and we received 1 HIVE for every STEEM we had on the Steem blockchain. Every token on Ethereum including ETH is about to be duplicated. This has got to resonate with the Hive community as we already went through this and I think most people think it worked out very well. This ETH fork is called PulseChain and its coin is Pulse which acts like ETH but the fees are much smaller and Pulse is deflationary as some is burned on each transaction and there is no inflation. Also the block time is 3 seconds, sound familiar? :) Finally, in addition to the existing Ethereum projects that can come over to Pulsechain, there are some coming that are unique to Pulsechain, like Liquid Loans. They allow loans with 0% interest. You have discussed loans on HBs to provide a way for people to stay liquid despite holding an asset locked up for a long time, so this is related.
I'm mentioning all this not to write an ad for Hex and Pulse, but to show that the thing we seek to do - a crypto CD - they have already done, and the thing they are about to do - fork a chain with state - we have already done. Just seems that we can learn from each other. And who knows, maybe in some way partner with each other.
Certainly a lot of this is not novel. We are all in the copycat business. Even if not looking at another project, the odds of many of us coming up with something completely new is not likely. If I can think it up, someone else like has also.
That said, this is a simple innovation on Hive. We already have the saving account in place. As another mentioned, the idea of just one CD based system out there does not strike me as the way things will unfold. How many NFT platforms are forming? How many DeFi apps? The key here, from my perspective, is to build a fix income market on Hive, at the base layer. There are thousands here (and hopefully more in the future) who would like to participate in more things.
Plus since HBD is something we could be using in the future, why would we not want to stake our HBD in a system that pays HBD? If I get paid in it, that is something I can use where I am at. Does HEX help me with Ragnarok? Sure I can convert it which will get easier over time but why go through that if I have the service already here?
I can opt to invest in assets that pay me in Japanese YEN but prefer not to since I have no use for YEN.
As for collaboration, an interesting idea. Now sure the different chains would work together since completely different technologies. What could be very interesting is what some layer 2 developers come up with. Could there be a way to bridge projects on Hive with what is taking place on Pulse?
That is where I see interoperability coming from.
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I agree, we're all copying from those who came before us. You see it in music and art as well as in crypto. I'm programming a game and I take popular and successful ideas from other games. I think that it is helpful to look at other projects to see what works.
From what I have read about your Hive CDs and Hive Bonds, I'm ready to be a buyer! Yes, it does seem to be a simple upgrade to the savings and interest system we already have in place. Do you know if any dev has committed to look into implementing this at the base layer of Hive? If no one is looking at it yet, I'll at least do a bit of research into it and see what I can find.
Yeah, actually having HEX isn't very helpful for Hive as there are conversions needed to use it here. I was thinking more along the lines of knowing how HEX became successful and seeing which elements of its success could be similarly implemented here. For example, you have a rate chart in one post where the longer the term of the bond you buy, the higher interest you receive. On HEX, they have the same, "longer is better". Then they use some psychology to explain why it is not only better in terms of the interest paid. They discuss "delayed gratification" where one often does better in life when they forego a short term benefit for a longer term one. They give the example of Bitcoin. Some bought at a dollar and sold for 4 thinking they made a great profit, some bought at 500 and sold for 2K, and the point is that had they delayed their sale, they would have been much better off. Another example given is trading vs hodling. Most traders get rekt due to fees over time whereas hodlers tend to do well in the long run. A bond or CD incentivizes hodling.
So its not only having a great idea, its how you frame it and sell it and get people interested in participating in it. Those techniques can also be borrowed from projects who found success in their presentations.
Perhaps we can look at Splinterlands too, for inspiration and ideas to copy. New tokens have come into existence over there, over time. Some incentivize staking others. It might be too complex to create a new base layer Hive token to reward CD or Bond purchases but maybe there would be a way to offer some Hive tokens as part of the interest paid out. People like getting new liquid governance tokens and tokens for providing liquidity so its something to at least consider even if decided against in the actual implementation.
Thanks for taking the time to reply to my last comment! I'm excited about Hive CDs and Bonds. I think they will be a benefit to their holders and the Hive community at large.
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My understanding of the purpose of a CD or Bond is that the issuer can use the money during the period of issue. There are basically no similarities to this and government or bank bonds, but at the same time, that is the foundational purpose... I'm just wondering if the concept could or even should be considered here. (I know that is not the proposed idea)
Governments and banks have done super shitty things with money raised this way, but it could be used for funding in this way...
Just spouting thoughts.
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I am not really following. When the government issues out a bond, it uses the money (usually spent before the bond is even sold). So the issuer of the debt does indeed put the money to use.
When a bank issues out a CD, the money is used for loans or to purchase other interest bearing assets. Again, I fail to see how the issuer, in this case the bank, is not using it.
Are you asking if the issuer, ie the one who deposits the HBD, can have access to it? That could be one formation although that is basically what the savings account does.
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I didn't articulate that very well. I was just trying to say that conventional CDs and bonds are like loans and the money gets used. Just contemplating if that could be an option for fundraising here.
In traditional banking when the deposits are accepted, equivalent % of loans are disbursed to generate income on those deposits. What would be that corresponding source of income to pay 20% interest
It is no different than what savings is doing. There are no loans to pay for it, the difference is in the creation of HBD. We are woefully under-represented there.
Hence we need more units out there to operate. Right now is fine since there are few HBD use cases but that will not always be the case.
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I like this! Somebody start the project and I will vote for it!
Not sure this is a proposal type project since it is base layer stuff. It is something that the team that is coding the blockchain would have to take up.
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The idea of locking up large amounts of Hive in accounts paying 20% interest in a safe environment sounds very attractive to me, and an idea which should be easy to market outside Hive.
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really interesting thoughts that should be explored by the the dev team on Hive :)
One of the things I really appreciate about your writing is that you use the return we get for saved HBD 12% this year 10% last year as the bar.
IT gives me a headache when I read an article and they are talking about a 5% to 7% return. I am not a person to turn my nose up at passive income but it would make more sense to invest it in saved HBD and get that 12% than settle for something less.