I had heard about compound interest, but never quite fully understood how it worked until I noticed it happening on my Hive wallet. When you start out and have very little Hive stake you still don't quite fully understand the power compounding has on your stake. As time goes on and the stake grows through your efforts the compounding effect does start to show and is worth looking forward to. This is one of the many reasons why having stake is very important to your overall growth.
This evening I thought I would try and explain this to those who are still trying to come to grasp with how this works. I use these calculations to gauge my growth and to envisage what needs to happen to grow faster on my outside Hive investments.
Today my Hive wallet ticked over the 110K Hive Power mark and is a good round number to use as an example. We earn roughly 3% APR for having Hive power staked and today it is exactly 3% and can fluctuate slightly either side. The curation earnings vary and average around 8% so we are looking at around 11% as a total APR on our Hive stake. Forget other rewards like posting as hey vary and are never constant, but will only boost the overall growth so they are not included in this example. Also forget the dollar signs as they are not relevant on this and 1 Hive is I Hive.
As you can see time is the important factor here with the longer you let this compounding effect take place the more powerful it becomes. Year 1 earns roughly 13K Hive, Year 2 14.3K Hive, Year 3 15K Hive, Year 4 18K Hive and Year 5 20K Hive. Over the 5 year period excluding earnings from comments and posts this will return 80K Hive or an average of 16 Hive per year. If you are thinking long term then a 10 year period will triple this stake by adding 220K Hive totaling 330K Hive. Obviously adding the post rewards will boost this much more, but this is to emphasize how the compounding works.
You can do this on any crypto that has staking as an option paying an APR giving a guide of the growth. The APR does fluctuate and why this is only a guide as it may be more or less especially over a lengthy period of time.
One could use this to gauge the stake growth over a 4 year crypto cycle helping you plan the sell off and buying back after if that is what you would like to do.
My COTI is on 120K currently and the plan is to sell at the next Bull cycle high which is expected in the next 18-24 months so you can get a rough idea of what size bag you will be selling off. This is a little harder due to the APR fluctuating and also being involved in 3 different staking pools but you can do it manually and still get a rough idea. The 120K COTI should be in the region of 143K COTI by the time I come to sell the stake with an extra compounding growth of 24K which is roughly 20%. This also does not include if you add to the stake over that period of time which I probable wont be able to resist. I like round numbers so 200K COTI as a minimum has to be the selling target.
The compound interest calculator can be used as a valuable tool to help you achieve your targets highlighting what you need to do in order to achieve them.