HSBI – Hive Stake-Based Income
Although I’m relatively new to Hive, I’ve read quite a bit of history related to HSBI and its predecessor, SBI (St33m-Based Income). It had its times of rapid growth and success, and times of trouble when a small group of users retaliated against its users. However, this is all in the past. Our role is to learn from the past and look into the future.
After reading quite a few material about HSBI, I was still a little bit confused about how it worked until I saw it in action on my own account. So I decided to break things down, a step at a time, for those people like me who might need to see things explained differently.
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 (and sometimes comments if you never post). 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!
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.
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 example of how my total and projected values look at the time of writing. Keep in mind that this is all publicly available information:
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
Looking at some accounts that recently received sponsorships, as well as older accounts that received sponsorships, I found a single one that had been sponsored for 1 Hive (1 Unit) for about 3.5 years but never posted. As it happened, this account’s daily total balance increase was the average of the more recent ones that I looked into. Thus, I’ll use it as an example to make further calculations.
This single account, after 3.5 years, has a total balance of $0.71278 with a sponsorship of 1 Unit. This comes out to a balance which increases at a rate of $0.00055577 per day.
Thus, we can say that sponsored users will increase their total balance at a rate of $0.00055577 per Unit per day.
Now, let’s not forget the very essential aspect of Hive that half of post rewards get shared with curators. This means that the actual balance, in terms of how much we can possibly earn, is half of that, or $0.000277886.
Thus, the actual earning potential we have is $0.000277886 per Unit per day. Keep in mind: this is only an estimate, and may not line up with higher Unit values, as I’m not sure whether this value increases linearly.
Note: the following calculations were done a little bit over a week ago, so Hive’s prices are outdated. It’s an even better time to invest now for long-term gains.
Let’s consider Hive’s current price in terms of $. At the time of writing, it is $0.344. The APR would consist of multiplying the daily earning potential per unit by 365 and dividing by the current Hive price. This comes out to $0.000277886*365/$0.344 = 0.2948, or 29.5% APR based on the current price. Keep in mind that this incorporates the past few years, when Hive’s price also skyrocketed to over $3 for a brief period of time!
(I conducted another experiment a few days later with my own HSBI over a period of 2 days and came up with an APR of 8.91% at Hive’s current price, and we can expect that the APR will be significantly higher when Hive’s price increases during the next bull market; investing Hive now yields a higher APY since it’s currently cheaper!)
Let’s see how long it would take to break even based on the $0.000277886 daily earning potential per Unit. Divide Hive’s current price by the earning potential, and you get 1238 days, which is 3.4 years.
But wait, there’s more! Let’s consider the fact that Hive’s value, when powered up, grows at a rate of about 3% per year. Doing a bit more math (here’s the formula: 0.344/(0.000277886365)(1.03^3.79) = 3.973), the breakeven point becomes closer to 3.79 years.
Let’s consider the opportunity cost of potentially delegating that HP elsewhere, as certain delegations provide a pretty good return. I’ll use the Ecency delegation as an example, where you earn about 8% APR directly in Hive, in addition the 3% growth that’s always ongoing. This comes out to about 11%. Thus, the new formula becomes 0.344/(0.000277886365)(1.11^7.16) = 7.16. Thus, when considering an 11% APR, the break-even point becomes 7.16 years.
Now, remember that when you post, only 1/3 of your vote is used at a time. This means that you’d have to post numerous consecutive times in order to deplete your total balance. Each post gives you a remainder of 2/3, or 0.667 of your total balance. In order to immediately deplete this balance by 99.9%, you’d have to post 17 times (as 0.667^17 = 0.001). A bit crazy and potentially spammy, but not completely unreasonable. If you’re willing to spread out your 17 posts to one per day (during which time your balance will still continue increasing), you can deplete your total balance by a bit >99.9%.
Thus, after 7.16 years, considerable opportunity costs considered, you’ll be making pure profit. If you and a family member or hubby are sponsoring each other, upvoting each other, and sharing your profits, then chop this estimate by >50%!
Now, if the random person whom you sponsor decides to sponsor you back, or votes on your content with powered-up Hive from the earnings they make, your time will be substantially lower than 7.16 years. This is what we call a win-win situation.
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.
However, here are some points of optimism to consider: 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 $.
If you’re someone like me, who primarily powers up, then this will not matter much, and you’ll be looking at another optimistic perspective: since HSBI constantly receives new sponsorships, it’s constantly receiving new Hive. This Hive is then powered up directly into the @steembasicincome account or its affiliate HSBI accounts. Thus, they’re constantly increasing in terms of Hive Power. Increases in Hive Power lead to larger votes, and no matter the price of Hive, lead to larger Hive rewards!
Thus, HSBI is set up for constant growth over time. As such, those who earn maximum or near-maximum votes from HSBI due to permanent ownership of a large amount of Units, over a period of several years, can find themselves earning ever-increasing profits from HSBI. Due to HSBI’s growth, that period may end up being less than the projects 7.16 years, even with opportunity costs.
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!
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 17 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, I 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 20% monthly APR, you might end up doing better, without the benefit of directly helping other users. However, that 20% 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.
LeoGlossary Sources: 1 2 3
Image Sources: screenshots from Hive (Ecency frontend), HiveSBI.com, and Hivestats.io
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