Honesty Bank: Steem's New Banking Solution for Viral Mainstream Adoption (Business Plan)
Honesty Bank is seeking early investors! Power up @honesty by 11/15/16.
Secure a x100 Dividend Payout with convertible stock option!
Introduction
Hello,
My name is @cardiff. I'm a young anarchist with a Westminster College finance degree seeking to change the world with music. I've been mulling over Steem's financial instrumentation for a few weeks now & believe wholeheartedly that Steem has what it takes to be the NEXT GLOBAL CURRENCY.
I might have been the first person to trade Steem Dollars (SD) for physical USD cash. That $420 transaction helped me see the viability of Steem Dollars as a method for trade & transactions. Today, I'm proud to present the missing key for Steem that will open the doors to mainstream adoption:
BANKING
Through a bank, Steem can offer competitive savings & CD rates worldwide with lower barriers to entry than every other crypto currency on the market. Clients only need to send USD from their checking account. Therefor, Honesty Bank will be the only [ store front / financial instrument ] that can convert global wealth into Steem without requiring consumer comprehension of crypto currency & blockchain technology.
Here's how it works...
Business Model
Honesty Bank can provide 4-12% interest rates to the entire world by converting USD into Steem Dollars, Steem & Steem Power.
Savings Accounts
Honesty Bank's 'bread & butter' revenue stream lies in Savings Accounts which will offer 4-6% APR paid monthly to consumer's 3rd party checking accounts; $5 minimum balance required.
Honesty Bank will NOT use fractional reserve lending.
100% of Savings Account holdings will be stored in Steem Dollars, remaining liquid & marginally profitable. Consumers can either compound interest payments, or receive payouts to their checking account every month.
Once Steem Dollar holdings exceed Savings Account holdings (plus 50% extra to handle growth), Honesty Bank will either Power Up excess funds or diversify them.
Initially, all consumer payouts convert back to USD until (1) consumers vocalize diversification via customer support, and (2) investors are satisfied with Steem's market cap valuation. Then, payout options will diversify.
CD's
Honesty Bank will offer Certificate of Deposits (CD's) with an interest rate of 8% in exchange for a 1 year lock on funds. CD's will secure long term liquidity for Honesty Bank, and additional revenue for consumers. If investors are bullish on Steem's rising market capitalization, CD's will convert to Steem & Steem Power.
Honesty Bank will also offer a Compounding CD (CCD) that indefinitely accrues a 10-12% interest rate. In order for CCD's to be profitable, there must be a few conditions: (1) 18 months minimum lock on funds is required, (2) a 6-12 month "cool down" period must takes place after announcing withdrawal of funds, whereby both parties have initiation rights, and (3) investors are confident Steem Power will outperform the Steem Dollar.
First to Market
Listed below is are the necessities to realize Honesty Bank's Minimum Viable Product (MVP):
- Incorporation & Licenses
- Email Automation
- Initial banking & support team
- Advertising Content
Launching Honesty Bank's MVP is feasibly obtainable by January 1, 2017. However, it will require participation from investors to finalize the checklist above.
Marketing Campaign
Honesty Bank will initially run a digital promotion campaign (Instagram, Twitter & YouTube) to jumpstart Savings Accounts. Advertising will link to a landing page with an email sign up form (beta welcome email linked below):
Note: missing from the demo email linked above is an explanatory video.
50,000 - 1,000,000 Steem Power will be spent catalyzing demand. This offer may be reserved to four (4) periods of expansion: (1) initial rollout of MVP, (2) initial rollout of CCD's, (3) announcement of payment diversification, and/or (4) incentivizing businesses & corporations to offer diversified payment options to their employees. Note: options three (3) & four (4) will be highly prioritized within countries experiencing hyperinflation.
Within Honesty Bank's first year of operation, commission will be offered to affiliate marketers ranging between 0.2 - 2.0% interest (tiered based on performance) for 1 year on all new sign ups. A successful affiliate campaign can secure Honesty Bank as a mainstream phenomenon. Diversified currency payout may be upgraded to boost motivation.
Target Markets
Our primary target market will be social media consumers aged 18+ seeking safe, liquid & high yield savings. Social media will gateway Honesty Bank's mainstream market. They do not need to understand Steem to bank with Honesty Bank. Beautiful pictures & videos will line users walls & feeds with Honesty Bank's 4-8% interest rates. After social media marketing has reached saturation, Honesty Bank will redirect marketing efforts to passive affiliate marketing.
Our secondary target market will be consumers with high FICO scores (great credit ratings) that seek to profit on savings rates outweighing lending rates. This may extend to young consumers with relatively weak FICO scores on the basis that they have access to subsidized loans.
Our third target market will be small businesses & corporations seeking high savings rates. Once Honesty Bank diversifies payout methods, this target market will be incentivized to offer the Steem Dollar as an optional form of payment to their employees.
Securing these three (3) markets will collectively bring Honesty Bank (1) high net worth clients, and (2) widespread brand recognition.
Risks
Honesty Bank's biggest risk is a long term weakening of the Steem Dollar against the US Dollar. A long term -2% decline in the Steem Dollar's strength will make Saving Accounts unprofitable.
Currently, Honesty Bank will incur friction via exchange fees & market fluctuations between USD <> BTC <> SD. Direct transactions between USD <> SD is feasible, but not foreseeable without investor help securing infrastructure.
Speculation in Steem's success depends largely on platform integration. Steem's financial instrumentation alone may not guarantee complete investor payout. The "pay for likes" or "like economy" ecosystem needs to thrive in order for Honesty Bank to capitalize on a long term withdrawal of Steem Power.
Right now, Honesty Bank is merely the idea of one (1) young entrepreneur who doesn't have the resources to independently finance operational costs. There is currently no additional team in place to secure Honesty's future. Honesty Bank is largely dependent on investor contribution of both (1) finances & (2) human resources to realize long term success.
If Honesty Bank is unable to secure at least 100,000 Steem, promotional campaigns & company expenses may encounter restructuring or time delays.
If automation isn't perfected, errors can result in major losses.
Powering Up CD's during market declines may significantly absorb liquidation. Market downturns can force 50+% of CD funds to be locked into the hard asset during time of withdrawal. If liquidation rates drop too low, with too few Steem Power to guarantee withdrawals, panic can spark a bank run.
The legalities of incorporating a worldwide bank is complex. Honesty Bank is at risk of stagnation if (1) investors do not bring legal experience to the table, and (2) weak fundraising cannot compensate for legal startup costs.
Benefits
Luckily, this niche banking opportunity is currently only applicable to Steem's 3-tiers of currency.
If CD's are Powered Up while Steem experiences exponential growth, Honesty Bank will realize immense profits. Powering Down will be extremely lucrative during this time, as a few weeks can generate 100% CD liquidity!
Steem is relatively young & cheap, with immense potential to seize numerous financial & social markets who's collective market caps vastly exceed $1 Trillion. Honesty Bank's primary holdings will be diversified throughout Steem. Therefor, Honesty Bank will realize immense gains from the currency's success.
There are no other banks in this market. Honesty Bank has the opportunity to wholly dominate the market. If the first round of fundraising locks a large portion of liquid Steem, Honesty Bank will secure a long future of dominant currency holdings.
These savings & investments are all protected from economic collapse & fiat hyperinflation. The Steem Dollar has a "loose peg" to the USD which can retain its strength as/if the USD deteriorates over time.
Honesty Bank can thrive during any economic state, but has more potential to thrive countercyclical to the US economy.
Honesty Bank is expecting to be operational as early as January 1st, 2017.
Investors
The first Investor's Meeting is November 11th in Amsterdam. Honesty Bank will start operating November 12th to incorporate by January 1st.
Dividends may be converted into stock after 3 years. Latest Payment for x100 Dividend Payout is December 25th, 2020.
For security reasons, Honesty Bank is only accepting Steem Power: (1) Power Up Steem, (2) select "Advanced" & (3) send funds to @honesty. Find more detail about Dividend Payouts, Investors & Financial Sheets below:
Investors will be invited to the private channel:
Here we will divide & conquer before & after #steemfest. Invitations are given solely at the discretion of @cardiff, who can be reached here:
Investment Priorities
Once Honesty Bank's fundraising is complete, Powering Down will initiate for the following funding purposes:
- Incorporation
- Infrastructure
- Marketing Campaign
- Liquidity maintenance
Exit Strategy
Payout options will inevitably broaden due to market awareness. This will likely force Honesty Bank's "bread & butter" revenue stream to decline. Marginal profits will decrease as competitors absorb economic profits.
Honesty Bank has a few exit strategy options:
- Expand lending operations (finance Steem platforms, secured loans, etc).
- Liquidate assets & payout shareholders.
- Initial Public Offering (IPO).
- Diversify revenue streams (beyond lending).
It's essential for Honesty Bank to be operational as quickly as possible. Maximizing early on Steem Power during Steem's exponential rise(s) can generate early dividends to investors. Having sizable market share before worldwide fiat hyperinflation can secure Honesty Bank's brand recognition worldwide. Honesty bank will be the anomaly when it comes to banks capable of protecting Account Holders & prospering during economic downturn.
Conclusion
I, @cardiff am absolutely in love with Steem & its brilliance; passionately obsessed with its potential. I know the power of intrinsic value & financial instruments. Steem has everything necessary to gain love & acceptance the world over! My girlfriend & I purchased 1 way tickets to Amsterdam to be at #steemfest!
I want to assure you that - to my knowledge - it's impossible to hack & steal Steem Power funds unless it occurs for 2 years or longer. The initial financials are made, the hard asset (Steem Power) crowdfunding reassures long term interests, and the steemit channel will secure communication & momentum between investors. I cannot steer head this bank by myself. Together, I know WE can build something great.
Our goal is to make Honesty Bank the poster child for Steem. Our aim is to provide fair & competitive banking opportunities. Then, we wish to familiarize the public about the financial & economic benefits of Steem. Honesty Bank will likely be - indirectly - the first point of contact between the majority of consumers & Steem. Long term success requires maximizing Steem (and Steem Dollar) market cap valuations. Therefor, Honesty Bank will funnel consumers towards utilizing Steem's expanding platforms.
FOR SERIOUS INVESTORS AT THEIR OWN RISK!
Cheers! To Steem's 2nd exponential :D
I am interested, but I have some questions:
When you speak about incorporation, what country do you plan to incorporate in?
In that same vein, I understand you are an anarchist, but I wanted to find out if you have looked into the tax and regulatory structure of running a bank in the place you plan t incorporate and are those costs assumed in your budget? For instance in the US, just being a money transmitter (not a bank) comes with a host of regulations (Know Your Client, Suspicious Activities Reporting, etc) and a substantial financial cost to operate in 50 states (about $25 million in regulatory and registration fees). The designation of a bank opens the institution up to BASEL III regulations (60,000 pages last I heard).
How is this model different from the failed Bitcoin bank Neo & Bee which was formed (and failed) in Cyprus?
I see you discuss checking accounts and interest payments in your proposal. I see the checking account valuation is in dollars. First, if this bank will not engage in fractional reserve lending, how do you propose to pay the interest rates mentioned for the various products (bank accounts at 4% - 6%, CDs at 8% - 12%) without going bankrupt?
How will honesty bank generate its fees?
I have a host of other questions as well. I think the idea is great and could follow a direction similar to microlenders like Kiva and possibly grow into something like Prosper or Lending Club in the US. In the Bitcoin space two microlenders you may want to look at to compare business models are BTC Jam and BitLendingClub.
One of the things which kills many crypto "banks" is failing to plan for serious downside volatility in the crypto they choose as their default currency. I think if you can solve this problem, then the rest should be fairly simple to solve in comparison. I am very interested to both see your response and investing if the opportunity is right.
What is the plan for getting Steem into the bank in the first place? Is there a credit card component to this or do you plan on strictly accepting Steem generated on the network?
@rgeddes Honesty Bank will solely accept USD into a designated checking account, where we will convert USD into Steem Dollars & Steem.
@lpfaust Your questions have sparked an addendum for Honesty Bank's beta phase. I'd ideally like to have a US based bank to save the American people when the economy crashes & hundreds need crypto currency in a rush to save them from a hyperinflating currency. However, the Investor's Meeting may sway the final decision.
Profits can be made on the Steem Dollar's financial instrumentation. If you do not understand how a profit can be made, I'd encourage you to do more research before investing.
@honesty I'm glad to see an addendum is being considered. Personally, I don't believe the US regulatory environment would make the United States the best choice for a crypto bank. That being said FATCA regulations would still overshadow a foreign bank with customers in the US in most cases.
Regarding the comment about not understanding how a profit can be made, I would suggest to you that the plan you currently have outlined weighs heavily upon SBDs maintaining an annual return of 10% APR. I do not believe it adequately addresses potential negative swings of STEEM or STBs, nor how it will impact real returns of loans whose real value could be impacted by cryptocurrency swings. It does not address fees which will arise for foreign currency translations into other currencies, nor does it address costs of insuring depositor funds (unless there will be no insurance). I don't see an adequate projection of what sort of loan loss provisions need to be in place, regulatory fees, nor a host of other normal operating expenses a bank would incur (even virtual banks) which will be deducted from the bank's gross profits before any profit will be recognized.
I would suggest you may want to look into Neo & Bee and understand why that Bitcoin bank failed in Cyprus despite having the perfect environment to succeed once the EU refused to bail them out.
I wish you and your investors luck on your future endeavors.
Bravo my friend. The regulations & fees are the most toxic element of this business proposition. I will look into all the valuable information you've provided. In the meantime, our MVP will sidestep banking and enter investing for now.
Thank you.
Curious if Honesty is still viable?
Hello @honesty,
It gives us pleasure to inform you that this post have been upvoted by Project Better.
The Mission of Project Better is to reward posts have many votes from Minnows but earn pennies.
Your payout is $0.08 before we vote on your post.
Learn more about the Project Better here!
We hope to see you continuing to post some great stuff on Steemit!
Good luck!
~BETTER~
@better,
Following.
Thank you
You say that the long-term weakening of SBD is a risk. Please consider the fact that long-term strengthening of SBD is also a risk, and I believe a damning one.
Your business model seems to depend on the SBD interest rate to fund your depositors' interest payments. Here's the problem: when you increase worldwide access to SBD by arbitraging between SBD interest rates and consumer banking interest rates, you'll (if you're successful) put a huge demand on SBD. This will cause the price of SBD to rise above 1 USD, and if it stays high for too long, the witnesses will vote to reduce the interest rate in order to encourage people to sell their SBD.
Put this another way: If SBD is low-risk, safe, liquid, and all the other things we associate with cash, then arbitrage opportunities will tend to drive its interest rate closer to the rates that banks pay. Please carefully consider the possibility that your business model may be self-defeating.
@biophil we encourage you to do more research on the Steem Dollar. There can always remain a constant peg to 1 USD. If SBD spikes in demand, @steemit is expected to flood the market with additional SBD in order to keep the peg constant. If demand in SBD steeply falls thereafter, we trust in @steemit to buy back SBD to remain that peg.
Thanks for your calm answer to my unfriendly post. :)
It's not about whether or not the peg holds. And BTW, the @steemit account is not the reason the peg holds. The peg is fundamentally enforced by the witness price feeds and the ability to "convert" SBD to STEEM at the price feed. The @steemit account could disappear and we'd still have something like a peg. (I'm assuming you know this, but I figured I'd write it just in case new people are listening in.)
Anyway, the point is that your business model says this:
Fundamentally it's arbitrage, plain and simple. You're "buying" SBD, repackaging them, and "selling" them as bank deposits at a better price than the banks offer. There's absolutely nothing wrong with that.
The problem is that arbitrage is often self-defeating. If we were guaranteed a 10% interest rate on SBD forever, your plan would sort-of work. Unfortunately, we're only at 10% interest because SBD is chronically trading at a discount to USD. If that discount becomes a premium (and your business, if successful, would surely cause this), the witnesses would be forced to reduce the interest rate to suppress demand for SBD and bring the peg back in line. There is no way @steemit would continue dumping SBD just for the sake of funding your business.
I'm sorry to be so negative. I really am! I wish you the best, and maybe I've read this whole thing wrong and you'll be fine.
Well said my friend. You're absolutely right. As arbitrage margins minimize, Honesty Bank's main source of income will cease to be profitable and we will enter a decline phase.
However, I think you're underestimating the (1) length of time and (2) amount of wealth this arbitrage opportunity can sustain. SBD has a potentially infinite supply. When demand picks up on SBD, @steemit (or @ned / @dan founder team) has the authority the spurr the digital printing presses to match supply with demand. The unprofitable venture on their behalf won't be pouring SBD into the markets, it will be taking them out when/if demand dies. Then again, it's the ultimate buy low / sell high opportunity.
This is how SBD can be sustained in the first place. Otherwise, SBD couldn't really peg. So if we're confident Steem will have long term success, we can be confident that SBD trading volume will increase & volatility will decrease.
Upvoted look forward to seeing more!
Check out my latest steemit originals
https://steemit.com/food/@lily-da-vine/strange-food-in-a-strange-place-pot-pie-in-mexico
https://steemit.com/mexico/@lily-da-vine/adventures-into-mexican-markets-part-4-carpintero
Are you accepting investments now?
Is there a minimum amount?
@everittdmickey Yes! We are in beta, but will gladly run a test on the model with you. Read over our addendum and contact customer support:
We can start with the minimum required $5 if you'd like.
I found a small problem when I confirmed my subscription to the Honesty Bank mailing list. After confirming, I click the link "continue to our website" and it takes me to your cardiff.pizza website instead of the Honesty Bank website. Otherwise, it all worked great. Ready to invest. Just need the minimum amount and green light to go.
@gregory-f thank you for subscribing! Honesty Bank is breaking out of infancy with this business model post & fundraiser. We're currently utilizing the resources of founder, @cardiff who owns record label: Cardiff Inc.
cardiff.pizza is the current website avaiable now. More work is being done.
Check out the new leak: Polo
This post has been linked to from another place on Steem.
Learn more about and upvote to support linkback bot v0.5. Flag this comment if you don't want the bot to continue posting linkbacks for your posts.
Built by @ontofractal