Understand Compounding and earn
HBD - Hive-backed Dollar has now 10% interest rate. This is huge. Because it beats every Bank on earth on rates.
1 HBD = 1 Dollar worth of Hive. (with a Haircut rule at 10% total MC on Hive token, exclude DAO fund).
The Haircut limit was never reached in the past.
Let's talk about how to get Rich with compounding
HBD pays interest monthly. This means it allows 12 times a year to compound. So you earn interest rates on your interest rates. This is the wonder behind it that makes you rich.
To keep it simple. 1000$ with 1 time a year interest means 100$. With 12 times it means 104,71$. Sure on a short scale, it is not a big difference. But in 5 years it means a lot. Let's look at the data.
After 5 years with monthly compounding it looks like this:
As you can see the numbers snowball up after year 1. The monthly compounding works perfectly in terms of wealth building.
From 1000 HBD to 1645,31 HBD after 5 years. That's a total increase from 64,5% for stacking.
Stacking 100$ each month to the compounding HBD
Let's think about stacking 100$ each month in the timeframe of 5 years. It could be author and curation rewards or some funds adding additional.
This escalates quickly. You can see to stack 100$ a month brings the benefit of additional interest staking that compounds. In total 2389,02 $ interest earnings after 5 years with 100$ a month + 1000$ initial investment.
And these numbers are doable.
Let's talk about some higher numbers
Now the funds start with 10k$ and adding 500$ a month. The Compounding is again monthly + 5 years holding period.
On higher numbers, it is easier to see the power of compounding. The total investment after 5 years is 40k. 15171,63$ adding to the savings in interest after 5 years.
To make it a bit more obvious, this is how it looks like after 10 years
You see the funds start to go parabolic. The Interest that earns Interest every month starts to become another huge deposit every month.
59492,90$ earnings alone in interest. Compared to the 70k fund's contributions it is a lot. This is massive.
And this is the way to build wealth over time.
No financial advice, don't go crazy :)
If you want a more technical explanation about it, look at
another article to understand compounding from me here: https://peakd.com/hive-167922/@urun/compound-interest
Here the calculator you can play with: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Some words to the end:
IMO the demand for HBD will increase massively if more people start to know about it. A stable coin that offers a nice interest rate and is decentralized is unique in crypto. DAI is some, but it isn't a backed one, it is a collateral one. That could trigger extreme market movements.
Even if we run in a bear market, and btc goes back to 10k. It would not affect hive that hard like the last crypto winter. The demand for stable coins increases most time and the world economy sucks. So a decentralized $ nobody can take from you has a huge advantage. Even without Interest rates.
If the demand should increase dramatically, we see a massive conversion from Hive to HBD. This means a higher demand for Hive and higher prices too. This should move the haircut line higher and makes it more stable.
Special if HBD becomes a multichain stable coin.
Have fun with the 8th world wonder.
No financial advice.
Posted Using LeoFinance Beta