Last week we posted about the idea of implementing another layer into the Hive Savings program to expand Hive's entry into the fixed income market. This was something we called Hive Savings Bond.
The idea is to use the time locked capabilities of Hive along with the interest payment for staking to create an attractive option for all users of cryptocurrency.
Our first idea is to offer a 1 year lock up for the Hive Backed Dollar (HBD) in return for a 25% APR. The rate, of course, would ultimately be decided by the Witnesses. However, whatever the rate, when one puts HBD, that is what is applicable for the next 12 months.
We are trying to get the ball rolling on the first expansion. From the post, a lot of great ideas sprung forth, which can be added/discussed in the future. There is no reason that a project like this, if successful, could not be expanded upon.
Let us look at a few of the comments that came back.
Those Who Are Excited About It
Certainly this is the idea. We want to attract outside capital. Hive offers a capability that is not common in the cryptocurrency industry. Since HBD is a base layer token, all yields paid occur at that level. Hence there is reduced risk since no additional token is inserted into the equation.
Hard to argue with this logic.
Here is one who sees the potential: a 25% return for only a 1 year lock up. That is 4x time powerdown period of Hive Power (albeit not on a weekly basis). It might be an insane opportunity. Either way, it does hold a great deal of potential.
Some Other Ideas
The Hive community was good about putting together some other ideas. As stated, the goal is to insert Hive in the discussion for fixed income opportunities. We can expand this project in the future to be more encompassing.
We all would like to see HBD (and HIVE) on more exchanges. Could this be the motivation that is needed for some entities to pick it up? Hard to tell but it cannot hurt. If there is a called for HBD outside of Hive, it stands to reason that exchanges will step up to fill that need.
As for pairs, of course we want them to develop. This is all that can take place as a result of the introduction. Perhaps it motives some of the decentralized projects to add HBD as a pair.
A number of people jumped on the idea of shorter as well as longer term lock up periods. This would then present different options in terms of return.
Naturally, here is where we can see the concept expanded in the future. Different levels, ala a bond tree, can be implemented. If there are second layer solutions developed, the base level asset then can be collateralized to provide some liquidity. There might even be the option to create a liquid form of the HBD held in the account, tokenize it, and make it tradeable.
In other words, the potential additions in the future are wide.
The Hunt For Yield
This is a phrase many have heard. It became very pronounced when interest rates got to the point where they provided little return. Because of this, the fixed income market is very difficult.
What if Hive offered a powerful solution for this. Most of the investing world is not into setting their hair on fire and looking for the next 1000x. Instead, they want to take their money and put it into projects that offer a strong return.
Here is what Hive can offer with this:
25% APR, base-layer algorithmic driven stablecoin with no third party counter-risk.
Compare that to the rates paid by a local bank in a savings account.
This could simply be an entry point for Hive into this arena. Consider what the other stablecoin projects are paying. Most of them are lower than the 25% although they do have liquidity. Thus, in this instance, that is the trade-off. We also see the payouts in another token which adds a degree of risk and volatility not present in this equation.
Is this going to be the answer for everyone? Certainly not. However, as more people find their way into cryptocurrency, they are going to be seeking yields where risk is reduced as much as possible. This is how the majority of investors operate.
If Hive is offering a platform of options, this could be a desired destination for many. It will also expand the amount of HBD that is created, something that is vital to generate the commerce within the ecosystem using that token.
This Is How Powerful It Can Be
With the insane returns promoted in the world of Decentralized Finance and Cryptocurrency, it is easy to lose site of what is possible with the straight-forward, time-based returns. Here we are not threatened by rug pulls or projects disappearing. Hive is certain to keep producing blocks every 3 seconds, meaning people can always access the chain.
When we discuss the idea of creating wealth on Hive, here is a fantastic example put forth by @quinnertronics.
The idea is to put $1,000 in, per year, at 25% return. Do this for 20 years while compounding the money and this is what we get:
This is how wealth is generated. If one followed this, he or she would have over $500K at the end of the 20 years. There is a problem, it is only compounding once per year. With the Hive Savings Bond, we can claim monthly, hence it compounds 12 times a year. The total with that scenario is over $700K.
Are you seeing the potential now?
One final example: In the United States, one is able to put $6,000 in an Individual Retirement Account per year ($7,000 if over the age of 50). Using the Hive Savings Bond would produce a much different outcome using the same 20 year time period.
Now imagine this potential with some longer term bonds, say 3-5 year lock up with higher rates of return.
Do you think would be attractive to people? Certainly this will provide a much different angle on the fixed income market. The wonderful thing is that Hive requires the generation of a lot of HBD.
It is the perfect opportunity to insert Hive into the broader cryptocurrency discussion.
What are your thoughts? Let us know in the comment section below.
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