We all get caught up in the insane rates paid in cryptocurrency. Everyone is looking for the moon. It appears that common sense wealth building has been cast aside. For that reason, let us take a look at what things really look like.
How often do we look at a project in cryptocurrency and say "that is only paying 40% return"? The yield farming projects really tilted our view of things. Everyone wants to be a millionaire overnight, with little to no effort. While we are seeing abundance created, time is still a factor in most cases.
With a project like @lbi-token, the idea is to Get Rich Slowly. Of course, since it is all relative, slowly in the crypto world is much accelerated.
Nevertheless, for our purposes, we will us a rather slow growth rate for crypto yet one that would make traditional money managers drool.
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The World With 20% Returns
In cryptocurrency, 40% sounds awful. That means a 20% return is downright unacceptable.
But is it?
Let us do some simple calculations to see where this can get us.
An annual 20 percent return looks like this:
Year 1 1.20
Year 2 1.32
Year 3 1.58
Year 4 1.90
Year 5 2.28
Year 6 2.73
Year 7 3.28 (we already tripled our money)
Year 8 3.94
Year 9 4.73
Year 10 5.67
Year 11 6.80
Year 12 8.16 (we now make more in a year than our original investment)
Year 13 9.80
Year 14 11.75
Year 15 14.10
Year 16 16.92
Year 17 20.30
Year 18 24.36
Year 19 29.32
Year 20 35.07
Look at that. An unacceptable 20 year rate of 20% equates to a 35x on one's money. Would you like your money to grow 35 times by 2042?
This is the power of compounding which requires the time element. Get Rich Slowly can make one very rich.
Let us add another decade to the mix. For those in their 50s, this might not be for you. However, anyone who is 40 or under, embrace this concept fully.
Year 21 42.08
Year 22 50.50
Year 23 60.60
Year 24 72.72
Year 25 87.26
Compounding another 5 years puts our money at an 87x. That extra time really made a huge difference in our returns.
Let us go the last 5 years.
Year 26 104.71
Year 27 125.65
Year 28 150.78
Year 29 180.94
Year 30 217.13
There you have it. The measly return, by cryptocurrency standards, provides a 200x over 30 years. Here again, how would you like to 200x your money by 2052? For those who are younger, this is a concept that should certainly be thought about.
Why 20%?
The reason this is being pointed out is because this is the target return for LBI. We seek to generate a boring 20% return each year. Of course, in the first year we far exceeded that level, providing up with a much higher level for the second year.
There you have it. We record a 63% profit 1 year from launch on token value.
This does not include dividends that started to be distributed part way through the year. Hence, the first year numbers are higher than that. Nevertheless, the key here is year 2 is now starting at 1.63% versus the 1.20 on the table shown above.
According to that calculations, we did on one year what would have normally taken 3.
How does this alter things. Instead of ending the first year at 1.2, if we plug in 1.63, after 30 years, the number would be 386.92. That is much higher than the 217.13.
Could we have some down years? Surely that is possible. However, we are already ahead of the rate to achieve a 200x on the value of the LBI holdings.
This is how 20% returns can make one rich. It is only a matter of time.