Founding of The Hypothecary Bank in CryptoTown
- We issue long and short bonds and thus borrow money from investors.
The IPO consists of 1,000 units priced at 1 million each, and no founder's of finder's fee is paid (all money goes to the company).
The Series A bond is a 50-year bond paying 0.30% APR and comes in 10 million coupons, secured by all the Bank's assets. Every coupon pays back 11.5 million at maturity in 1554 (2014-12-26).
I would like to purchase 200 of each
200 stocks and 200 million worth of Series A bonds to Marquess Karl registered.
Now we start to consider if the time is ripe for a long bond offering. Some background.
The 50-year bond is 25 real-days, so if it could be renewed (which is likely possible), it matures 14.6 times per year. 1.15^14.6 = 7.69. Therefore the real-annualized return on the Series A bond is 669%. It is possible because the game is in such an early stage that the assets bought with the money can appreciate quickly (Jacket's recent sale of land in N, netted him 689% in 18 days, which is much less than a year, and he invested the profits in more land).
But it does not make much sense to pay back 8 times the amount in one year. In this case it would be better to invest the money in the game yourself. The economic rationale for interest rate is composed of:
- opportunity cost for money;
- risk of not getting back the amount promised.
- (in addition comes the actuarial cost of managing stuff, for this reason the large banks cannot be bothered to corner CryptoEconomy just yet)
XMR's opportunity cost is zero, since it does not have any other venues that offer keeping your money in XMR, still receiving interest on it.
Risk of not getting back is composed of bank failure and game failure, compounded over a year.
- The bank
may be too big to fail, although as the Professor of Economics we staunchly deny the willingness to interfere with free markets, as King we care for the townspeople. In any case the bank is not especially prone to fail, because the failure would cause ripple effects in land markets etc.
- The game has many reasons and opportunities to fail, and the probabilities everyone must assess himself. Once the long bond markets work, then the interest rate tells (roughly) what is the probability that the market gives for the game's continued existence over one year.
So much said, the
Long bond is a debt instrument whose maturity is 365 real-days. Its face value is 100 million, and the price is quoted as continuously compounded interest rate until maturity, or the market value (these two are the same thing because knowing one, you can calculate the other).
(now the rates are given as daily, instead of "game-APR", since the length of the game-year changes during the maturity of the bond)
Daily % Real-APR% Pay Get back
1,27 % 9900 % 1 100
1,08 % 4900 % 2 100
0,82 % 1900 % 5 100
0,63 % 900 % 10 100
0,52 % 567 % 15 100
0,44 % 400 % 20 100
0,38 % 300 % 25 100
0,33 % 233 % 30 100
0,29 % 186 % 35 100
0,25 % 150 % 40 100
0,19 % 100 % 50 100
0,14 % 67 % 60 100
0,10 % 43 % 70 100
0,06 % 25 % 80 100
0,03 % 11 % 90 100
Several game ventures can pay back more than 1.27% daily currently. I am sure many would like to invest in a bond that cleanly pays back 100 times the original investment - but that is not possible, someone will overbid you
To generate value in the economy, the playing must be fun, and the high returns are just a
result of generating value. The King is not a believer in generating value by adding numbers to databases, but adding colored squares does qualify.
To get the Long Bond, the
barometer of the health of the economy and trustworthiness of the continuation of the game, started, the Hypothecary Bank of CryptoTown is issuing 5 units of long bond, 100 million payback value each.
SERIES 1 LONG BOND
The Hypothecary Bank of CryptoTown, pays to the presenter of this parchment, on the day and year that does correspond to the day of 2015-12-2 in the land of Humans and their Lord, 100,000,000 moneretos.
His Majesty The King bids 20,000,000 per unit, for a nice 5-fold payback if the game still exists after a year
It is possible to bid for 1-5 units and auction closes in 24 hours.
