Image Source: @steembasicincome
Now that I’ve been a part of the Hive ecosystem for a couple of years, I’ve come to better understand how HSBI works. This is an updated version of the original article I wrote back in 2023.
HSBI – Hive Stake-Based Income
Since HSBI can be a little bit confusing to understand if you haven’t given or received it, this article serves as an explanation of how it works, going from a very general overview into more details.
In the most simplistic form, here’s how HSBI works: you can either send or delegate Hive to @steembasicincome. This gives you “units” of HSBI, which are converted into votes that go towards posts – not comments. When you create a post, you’ll automatically get a vote from this account and possibly a combination of other SBI-related accounts. So far so good?
Now, in order to get a vote, there are a couple of requirements: 1) you have to be sponsored (that is, someone has to have sent at least 1 $HIVE to @steembasicincome with your username as a memo), and 2) the vote threshold has to meet the minimum of somewhere between $0.02 – 0.025 (this means that if your vote hasn’t reached the minimum, you won’t get a vote until that minimum is reached).
Sponsorships
Take notice of the fact that when sending HIVE, you have to place a username in the memo. That username cannot be your own account – it must be someone else’s account. This means that when you send Hive, you’re giving someone else the ability to earn HSBI. HOWEVER you’re also earning the same rewards as the person whom you sponsor. It’s a win-win situation!
Image Source: Hive’s Ecency frontend
So for instance, if I send 191 Hive to @steembasicincome with the memo to sponsor hive-140084 (the FreeCompliments community), I’ll receive 191 Units, and so will hive-140084. Both accounts will benefit from these Units as long as they are active. These Units are permanent.
On the other hand, delegating Hive Power (HP) to @steembasicincome results in 0.5 Units. For instance, if I delegate 100 HP to steembasicincome, I’ll receive 50 HSBI Units. Nobody else has those units expect for me, and the Units would decrease to 0 if I remove the delegation.
What are Units, and how are the votes calculated?
Units are used to increase the total balance which you collect. Essentially, every unit provides you a permanently increasing balance which will go towards votes. Every several hours, the total balance accumulates some additional funds based directly on the number of units you have. Think of each Unit as a permanent producer of a tiny amount of income. Makes sense so far?
Every vote that you can receive is exactly 1/3 of your total balance. So, if your balance has, for instance $10, you next vote will be worth $3.33. If your balance is $6.66, your next vote will be worth $2.22.
Here is a visual example (compare the “balance value estimate” column to the “next vote estimate” column):
Image Source: hivesbi.com
Once you receive the vote, this is removed from your total balance, but you continue to accumulate value in your total balance based on how many Units you have. So if you have a lot of Units, you can recover that balance back pretty quickly. If you don’t post frequently, your balance can grow at a pace quicker than it’s depleted by the votes that are given out.
For instance, let’s consider Bobby McGee, who has $10 in total balance. He creates a post and earns $3.33, depleting his balance to $6.67. He has a very large amount of Units, and posts only once every few days, and within a matter of those few days his balance grows to $12. His next post will earn a $4 vote, which is 1/3 of the new total balance.
If Bobby McGee decides to permanently post twice per day, his total balance might not increase quickly enough to keep up the same votes. His $10 balance depletes to $6.67 after the first vote → he recovers $0.83 for a total of $7.50 → he posts again → his vote is now $2.50 with $5 remaining in the total balance.
Where can I find the total balance and value of my votes?
In order to visualize these statistics live, you can find your username on the Hive SBI website, where you can input your Hive username. You can also view the “Richlist” to find information about other users, including how many Units they have from delegations, permanent Units, etc. This is where I found information about that one user who had 4 years of non-posting with a 1 Unit sponsorship. It took about 5 minutes of digging to find this!
Here’s an older example of how my total and projected values looked back in June 2023 (updated values are in an image above). Keep in mind that this is all publicly available information:
Image Source: hivesbi.com
At which point will you profit from HSBI?
For those who receive sponsorships through HSBI, you profit instantaneously and permanently because you will automatically start accumulating a positive balance without losing any Hive.
For those who are sponsored and delegate, you’ll also profit rather quickly, but mostly temporarily, because 1) Units are lost when undelegating, 2) there is an opportunity cost of delegating Hive to @steembasicincome versus elsewhere. The permanent aspect will remain for the amount for which you were sponsored.
For those who only sponsor and don’t delegate, it will take quite some time to make a profit. However, after that period of time, you’re making pure profit as long as you continue posting. I’ve done a bit of research and calculations to figure out approximately how long it would take to get break-even and into profit mode.
Break-even point for sponsors
In my previous post, I calculated a breakeven point of roughly 7 years, which was determined by using a single account that had 1 HSBI and had built up an unused balance. However, this was limited by a few assumptions, such as: keeping the amount of HSBI constant, keeping Hive’s price constant, and keeping the totality of HSBI’s accounts’ Hive Power constant. Naturally, none of these factors are going to stay constant if you’re an active user who utilizes this service.
I can now use my own account as a good example, as most of my HSBI sponsorships happened back in 2023 within a period of 2 months. The amount of HSBI I’ve added since then has been small; not negligible, but sufficiently low than I can make a good estimate on my returns.
I currently have 12701 HSBI Units. My rewarded estimate is $2013. Now, keep in mind, the rewarded estimate is in dollars, not in Hive. Thus, the actual current Hive value of my rewards, based on a $HIVE price of $0.43, is 4681 HIVE. Since we receive half of the listed rewards, we can decrease this by 50% to 2340 HIVE. This has been accumulated over the course of 1.5 years, thus about 1560 HIVE per year. This comes out to an average APR of about 12.2%.
An APR of 12.2% will result in a doubling of value in just over 6 years, which means I would earn 100% of your invested amount in a little bit over 6 years (as opposed to the previously calculated 7 years).
Now, this is a rough estimate which is once again based on the current price of HIVE plus not counting changes to the HSBI’s accounts’ Hive Power.
Let’s assume that we use a weighted average price of HIVE for the past 1.5 years – I’ll guesstimate this one at around $0.36. That would mean that I’ve earned 5592 HIVE in terms of votes; divide this by half because our rewards are actually halved – 2796 HIVE over 1.5 years. That’s 1864 HIVE earned per year for a cost of 12701 HSBI Units, which comes out to an APR of close to 14.7%. This would take just under 5 years to yield a complete return of investment. Not too shabby.
Now, imagine that you’re sponsoring a family member with HSBI, and all of your rewards are being pooled into one familial income source. This means that both of you will benefit from HSBI, thus cutting the return of investment time in half. That 5 year timeline could turn into only 2.5 years. Amazing!
How is HSBI affected by HIVE’s price and the HSBI accounts’ Hive Power?
Great question! (Wink wink)
Since HSBI rewards are calculated in terms of dollars, the higher the price of Hive, the quicker the total balance gets depleted. Each HSBI unit costs more because HIVE is more expensive. Thus, when HIVE is more expensive, it takes more HSBI to receive a full vote. This is because a full vote delivers a specific amount of HIVE.
Just to make it a little bit clearer, I’ll use numbers: when HIVE’s price is $0.20, the full vote of HSBI’s accounts might be something like $4. When Hive’s price is $0.40, the full vote of the accounts might be closer to $8 (this assumes that voting power and Hive Power are both constant). Thus, delivering the same HIVE rewards when the price is higher uses twice the balance that was required compared to when HIVE’s price was lower. That balance depletes faster, making HSBI more expensive. This is why you need more HSBI to receive a full vote when HIVE is more expensive.
Now, HSBI’s Hive Power is another factor to consider. For the most part, once someone sends out sponsorships, the units remain forever. It’s not common for someone to revoke their HSBI units. Thus, we can assume that the likelihood of HSBI continuing to grow is much higher than the likelihood of it decreasing in size.
Image Source: hivestats.io
Just take a look at how @steembasicincome’s account grew over the past month – and this is not accounting for powerups given to the other HSBI accounts!
So, not only is the HSBI program growing in the form of curation rewards and regular Hive inflation (combined these are roughly 11-12% per annum), it also benefits from growth due to sponsorships it receives. Thus, its real growth comes out to far more than 12% per year, and the increased Hive Power translates to increased votes (assuming we whales and are able to receive full votes). For most people, the increased Hive Power doesn’t mean much, and simply translates into a more efficient distribution of votes.
Finally, voting power is important. The HSBI accounts are very widely used, and sometimes the usage results in a rapid depletion of voting power. When voting power is lower, the delivered votes are lower (including HIVE rewards). This is a normal mechanism programmed into Hive, but HSBI’s founder is able to adjust the accounts’ voting parameters to restore the voting power when it falls too low.
All things considered, the consistent growth of HSBI as a program would ultimately decrease the time to reach the breakeven point, particularly if you’re a whale who hovers around the maximum vote value.
Notice in my calculation from the prior section, decreasing my cost basis from $0.43 to $0.36 per HSBI increased the APR and decreased the time to return of investment substantially. It’s ideal to obtain HSBI units at a lower price, since the rewards are based on dollar returns.
Some limitations and considerations
The most significant limitation would occur in two situations: 1) if you post very frequently, and 2) if you sponsor an account with a very large amount of Hive.
We already discussed the limitations of the first situation earlier (total balance decreasing quicker than it’s repleted), so let’s consider the second scenario.
With the second scenario, a large sponsor who doesn’t post frequently may find that they have a great deal of permanent Units that cause their balance to increase more rapidly than they are able to receive an equal amount of votes. You might be thinking, “how can that be possible? Don’t you automatically receive 1/3 of your total balance in votes?”
Here’s the limitation: the combination of HSBI accounts can only provide a limited vote, based on the amount of total Hive Power which they contain. If all available accounts provide 100% votes, then that’s the maximum vote you can possibly receive. We can see such a case with one of my favorite posters, @improv (who built his Units from scratch using sponsorships that he awards from his fantastic Punday Monday contests), who receives 100% votes from all HSBI accounts – significantly less than the 1/3 vote that he would obtain from the total balance. If he chooses to post more frequently, he’ll likely decrease his total balance enough that he’d be able to receive the actual 1/3 votes. We can see this as a case with other users who have more Units but also post far more frequently.
As mentioned previously, as the $ value of Hive increase, so will the maximum vote that can be delivered by the HSBI accounts. If the $ value of Hive doubles, so will the maximum vote in terms of $.
What if I want out?
Should you come into a situation wherein you need to sell your HSBI Units, or simply don't want to participate on Hive any longer and thus have no need for your HSBI Units, it is possible to sell them. You won't get a 100% refund for your units, but you can likely get about 50% refunded. You can either do an "over the counter" trade with another person who wishes to obtain more HSBI, or you can contact @josephsavage directly to sell back your units at a discount.
Most people who sponsor or receive HSBI Units and stop using Hive do not, in fact, sell them back. I'm not sure whether this is because they simply forgot to sell them back or they just considered it a negligible amount which is not worth transacting. Possibly, they just wish to support the program even if they don't receive all the rewards in their balance - something which helps other, more active users of the program earn rewards.
But… universal basic income is socialism! 😡😡😡
I’ll be honest, the name of this program threw me for a spin at first. I have family members who came from a socialist state and ran away to the United States because of the horrors they experienced. It took me a few months to come around to reading what this program was truly all about.
What ultimately drew me in the end is the fact that in order to earn from HSBI, you still have to post! You’re not going to get a bunch of free income for doing nothing at all. You must remain active, even if only for a small number of posts, in order to earn the basic income.
There are those individuals who accumulated hundreds of bucks in total balance, but due to a lack of activity, never benefited from this program. Maybe their contributions were simply an act of generosity to those they sponsored, or maybe their delegations were also just acts of generosity… or they just lost interest in Hive. Their losses become the gains of those who continue to be active, since every unused vote contributes towards the growth of this program’s active users.
I personally approve of programs that encourage useful, active contributions to a community. You can still contribute the type of content that you want, essentially without limitation, and the existence of this content is considered worthy of receiving income. As long as you work and contribute, you continue to earn. Fantastic!
Conclusion: is it all worth it in the end?
After all these calculations plus my experience with HSBI thus far, I still think HSBI is a pretty worthy investment, and I will be using it for a long time to come.
If you have family members with individual accounts whom yous sponsor, and you keep all your earned wealth pooled together, then you’ll reach the profit stage at least twice as fast as you would alone, with continuing returns building upon each other thereafter. If you’re a committed whale who can afford to sponsor newbies, then you’ll be making profits, connections, and potentially helping retention of users who have a long-term vision on Hive.
If you decide to invest your income in HBD savings, which currently pay out a 15% monthly APR, you might end up doing better, without the benefit of directly helping other users. However, that 15% may not be permanent, and if it’s decreased by several percentage points within the next few years, the HSBI might end up giving you better returns in the long run.
If you’re in for a quick buck, then HSBI is certainly not the best option for you... but, let’s be honest, if you’re in for a quick buck, Hive isn’t really the best option either. Quick bucks typically come with a lot of risks. Hive, on the other hand, is optimized for long-term usage. Those who stick around for a long time tend to see the fruits of their labor. HSBI is a great example of a program that encourages you to grab those tasty fruits once you’ve let them ripen.
