Steemit - The Unlikely Online Savings Account

in money •  2 years ago

(This article is mostly aimed at readers who have not yet become part of the steemit community. For a much smaller and easier to read post, which explains how to achieve the same (albeit with less privacy than outlined here, read this. Regardless, for members of steemit, there is still information here that will be of use)

In a world of pitiful, even negative interest rates, it may come as a surprise to many that right now it is possible to earn 10% yearly (USD denominated) by exchanging your crypto-currency to SteemUSD.

Whether you already have a steemit account or not, and regardless of your goals concerning financial privacy, here is what you need to know.

Background story

Ignoring the fact that modern economic models do not adequately model human behavior, central banksters, and their less important minions (the average bankster) have been busy devising tools to correct a situation caused by no other than themselves and their failed, obtuse policies.

In a perverse move, for a growing number of people in the world today, the reality is that they are paying the bank for lending the bank money!

Imagine the following scenario.

Your good friend Karnal needs 10000 to start a new business.

In a world that still makes sense, since you will be missing on opportunities by not having access to the capital, and since yours truly friend needs the capital more than you do, it makes sense that you are to be financially compensated (in the form of interest).

We both benefit - you earn some interest on money that would otherwise be sitting there, and I get to start my business.

Such straightforwardness is quickly becoming a thing of the past.

Of banksters and trickery

The present economic system is fractional in nature.

At some point, it became cool to lend money that was lent to you (the bank) without giving anything back to the original lender in return.

This is why the banks seldom have more than about 10% of the capital deposited with them at hand: they lend the money that their customers deposit to someone else.

That is why bank runs can happen: If all customers rush to withdraw money from the bank due to whatever reason (loss of trust being a common one..), the bank will be unable to serve everyone - the emperor has no clothes.

This is already a dubious proposition - to reiterate, you lend money to the bank, who then goes and invests it on your behalf, and you get nothing in return.

Note that I am not talking about term deposits here, or similar products; in that case, you do get a (small) return on the investment; No, the mere act of having money available in your checking account means that the bank will soon be profiting from lending that money to someone else.

Modern trickery

What we now see increasingly around the world is a negative interest rate policy on the part of the banks.

This all but reverses the scenario presented some paragraphs ago, about lending someone money to start a business.

Under the new rules, it would be you paying me for taking your money!

(When depositing (lending) money with the bank, you will be charged a percentage for the privilege - they still go and invest your money though.. good deal, if you are a sucker!)

Imagine that! You lend money to someone else, and it is you who has to pay interest.

This flies in the face of every sound financial principle I can think of.

But .. why?

The logic is as simple as it is perverse: by penalizing depositing / parking money (also known as: saving), banksters and "economists" want to force you to spend that money instead, in an attempt to stimulate the economy.

Hopefully you will understand why it is no joke that there is an ongoing WAR ON CASH.

This has nothing to do with terrorism, or the drug trade (itself controlled by major worldwide banks, as we have repeatedly seen when major, world-renowned banks get a slap on the wrist for being caught heavily involved in it - and at any rate, contemporary drug policy is completely upside down, but that is besides the point here).

Think about this: If your bank is taking your money when you deposit it there, what will a rational person do?

Certainly not keep it at the bank, where it keeps getting eaten away!


You will stash it under the mattress, a time-honored technique.

Watch a few minutes of this clip (begin at 54:00), and you will realize what is happening:


(actually I recommend you watch the whole thing when you have one hour to spare, it is worth it)

Did you connect the dots?

If physical cash is not an option, then you have to keep your money in the banksters system, where your money can be arbitrarily taxed at any rate and time of THEIR choosing!.

This is not "conspiracy theory".

This is not "hypothetical".

It IS happening right now.


I am sold (lol)! How do I get in?

Before you do, it is necessary to understand some background information.

To begin, here is a list of posts about steemit and its economic system, which you must grasp beforehand:

PLEASE NOTE: It is of the utmost importance that you truly understand the concepts being exposed in the articles below.

Take your time, especially if all of this is very new to you.

You WILL lose your money if you fail to properly secure your account.

Homework

Take some time, then, and go over the following material.

STEEM ECONOMICS

SECURITY

PRIVACY

Understand the following.

At this point in time, all transactions and balances on the steemit.com blockchain are public.

This means that any and all money you put on steemit will be visible to the entire world.

As you will most likely agree, this is not good at all!

The developers are working to remedy this; In the mean time, here is how you work around it.

Connect to steemit.com through the Tor network


(wait for the tor reference ..)

Plenty of people use Tor daily. Today, you will become one of them!

Start by downloading the Tor Browser and remember to use it exclusively to access steemit (when using the account that you will be creating for the purpose of having a steemit cryptobank account).

You will be hiding your physical location (and the fact that you are using steemit at all) from anyone - whether it be the other computers on your wireless network, your ISP, and yes, even the NSA.

A warning, however: the ISP will know that you are using Tor, which may be grounds to deploy increased surveillance on your connection (did you not get the memo? if you care about privacy and anonymity it must be because there is something rotten you want to hide.. like your hard-earned money!!).

You can circumvent this by, during the initial setup of the Tor Browser, doing the following:

  • Check the box: "My ISP blocks connections to the Tor network"

  • Select meek-amazon or meek-azure in the list of available transport types.

    • If you later find that browsing is too slow, return to this window and select obfs4 instead.

      • You can get back to the network setup window by clicking the green onion left of the browser back button (top left) during normal usage (after initial setup).
  • Finally, click OK. You will now connect indirectly to the Tor network instead.

Great! So this part is taken care of. Which brings us to..

Create a random steemit.com username

Do not use any username that can be tied back to you.

It goes without saying, do not use your facebook account to register.

You will want to register a new reddit.com account - you guessed it, by using the Tor Browser - and gain some comment karma, which is necessary for steemit.com to accept your reddit account as valid.

Simply put, it means that you must go and write some posts on reddit that will be upvoted, so that you gain comment karma, so that steemit will accept your reddit account.

In the mean time, read on..

By using a randomly-chosen steemit.com username and connecting through Tor, when the time comes to send funds to this account (which, remember, will pay you about 10% interest yearly), the account balance will be public, but the funds will not be associated with you.

And remember - this account you will only be using to store money. If you want to be part of steemit by commenting and curating, consider registering another account.

Keep things separate.

Do not login to your steemit cryptobank account any more than you have to. Treat it like the glorified online banking account that it is.

It is also very important that you do all of this from a secure computer. If you lose your keys, or someone gets hold of them, your funds are lost.

This is why I stressed the point so much that you have to understand how to securely set up your account - all the relevant information is, once again, under SECURITY, above, on the Homework section.

When the time comes to load your account, consider using a bitcoin mixer.

This is perhaps a bit overboard but for completeness sake, I chose to include it.

Let's review what we have at this point:

  • Your connection to steemit.com cannot be tied to your physical location.

  • Your steemit.com username is not related to you in any way.

  • When you load your steemit.com account with Bitcoin (getting a SteemUSD balance), this balance will be public, but it cannot be linked back to you.

That is, depending on how private you want to be. There is one loose end left.

There will be one company that will be able to tell: the one converting your Bitcoin to SteemUSD.

You see, all transactions on the bitcoin network are public as well.

But since addresses are used instead of names, it is much more difficult to track which addresses belong to whom, assuming good privacy habits are employed.

Later in this article you will see how to send your bitcoin mixed to steemit if you prefer to do it that way.


Exchanging fiat for SteemUSD

You have noted down and understand the information presented above. Excellent!

A small detour

At this stage there is no way to go from USD (in a bank or similar) directly to SteemUSD.

You will have to take a small detour through Bitcoin, and then exchange the bitcoins for SteemUSD.

It is easier than it sounds!

Step #1: Get in on the crypto-currency ecosystem | through bitcoin

There are three main ways:

  • PATH #1: Through a centralized bitcoin exchange. This is the least private of all methods:

    • ID copy + proof of address must be sent to the exchange for verification of identity.

      • You better believe the integrity of this company's employees, and the security of their systems, because you will have provided them with everything they need to steal your identity.
    • Your bank will likely become aware that you are transacting in crypto-currency, and your account may be flagged (they cannot compete, so why not. Also, terrorism and stuff. Maybe I am just too cynical when it comes to banks..)

    • Giant bureaucracies may not be happy with you wanting to escape their rigged system, and may start monitoring your bitcoin transactions.

    • Indeed, the bitcoin exchange itself will most likely monitor your transactions as well.

  • PATH #2: Through a decentralized exchange, such as bitsquare (see "Video Links" section at the end). This is more private than using a centralized exchange.

    • Your transactions will not be (potentially) immediately flagged as you will be transacting with other individual users - as far as the bank will be able to tell, you are sending money to another person, and that is that.

    • Regardless, I believe it is a good idea to open a bank account specifically for your bitsquare activity.

      • Should the worst happen, your main account will not be locked out, which would be extremely inconvenient.
  • PATH #3: In person, through localbitcoins. (you can also do wire transfers using this service, but I recommend the in-person variety).

    • It bears repeating, access the site using the Tor Browser, and do not use an email address tied to you. You can register (again through Tor) an email address at Tutanota.

      • Note that since you are registering through Tor, your new email account will require manual approval to send/receive emails, usually done within 48h.
    • If you go the physical cash route, this is the most private way to acquire bitcoin.

    • Be sure to pay attention to physical security, although incidents are reported to be rare.

If you are fortunate to know a friend who would be willing to sell bitcoin for fiat directly to you in person, then even better!

Oh, I almost forgot. There may be another way, depending on where you live: a Bitcoin ATM.

I am not up to date with that technology and will not comment besides noting that the spread on those things used to be a bit steep, and that you may or may not be asked for ID when purchasing.

It is worth finding out more information, anyway.

Keep the following in mind:

  • When you use a centralized exchange, your bitcoin will sit at the exchange, out of your control. You want to minimize the amount of time they remain there.

  • Bitsquare doubles as a bitcoin wallet. You will receive and send bitcoins directly from the software.

  • For localbitcoins or ATM , you will need a bitcoin wallet, likely on a mobile device.

    • Here is a good link to help you choose which software to use.

Step #2: Convert your BTC to SteemUSD.

Regardless of the path you took in the previous step, you will now have some BTC (bitcoin) sitting in a bitcoin wallet.

From here on it's piece of cake!

Using the Tor Browser, go to https://blocktrades.us/ - this is the company that will take your Bitcoin, and give you SteemUSD - which, remember, will pay you interest for as long as you leave your funds there.

At this point, you have to make a decision: are you breaking the chain by mixing your bitcoin before converting them, therefore remaining anonymous at the bitcoin blockchain level as well, or not?

Let's begin with the easiest case (not mixing):

No mixing / less privacy but probably ok

On the blocktrades tab that you have just opened, select Bitcoin and Steem Dollar - that is, you will be sending bitcoin, and blocktrades will be sending you Steem Dollars.

Pay attention to the suggested deposit limit.

Now, look at your Bitcoin balance

Decide how much you want to convert to SteemUSD (and heed the warning above), use preev.com to convert between BTC/USD, and fill in how many bitcoin you will be sending where it says: "If you send XXX BTC, we'll send you YYY SBD"

Finally:

  • Fill up your Steem receive address (your unlinked to your real identity steemit.com account)

  • Click Get Deposit Address.

  • Send the requested amount of bitcoin to the address displayed..

    • From your bitcoin exchange account,
    • Your bitsquare wallet,
    • Or the wallet that you installed on your phone.
  • Which one depending on which method to acquire bitcoin was chosen.

Simple enough!

Mixing / more privacy and some counterparty risk

Follow the steps outlined above ("No mixing" section) up to the point of actually sending the bitcoin.

The only difference is that we will not be sending Bitcoin directly to blocktrades.

Instead, we will be using (once again, from Tor Browser) a service called PayShield.

A quick word of warning: you will be trusting PayShield to do two things: one, actually send you the bitcoin in return, and two, erasing any proof of what the input and output bitcoin addresses were from their systems.

There are better ways to go about anonymizing bitcoin, but for our purposes, this is more than enough.

Having said that, let me know in the comments if you would like more information about alternative mixing methods.

For the time being, it should suffice to say that I have used PayShield for ~1.5 years without a single problem. (disclaimer: I am in no way affiliated with them, this is just a personal recommendation)

For a small fee, they will take your Bitcoin, and send you a mixture of unrelated bitcoins, breaking the chain (that otherwise will quite trivially trace back to you) in the process.

On the PayShield site,

  • Click "Mix My Coins".

  • In "Address To Send Mixed Coins To", use the address that blocktrades gave you.

  • Solve the simple captcha.

You will now receive yet another bitcoin address; Send at least 0.2 bitcoin, from your wallet software or centralized bitcoin exchange wallet, to that address.

After about half an hour, the following will happen:

  • Transaction is accepted by PayShield.

  • PayShield sends bitcoin to Blocktrades.

  • Blocktrades takes the bitcoin, and sends SteemUSD your way (in about 10 minutes).

  • You end up having a SteemUSD balance on the steemit blockchain, in a virtual cryptobank account that has no ties to the real you.

Final thoughts

Congratulations!

You now have an anonymous, interest-bearing, USD-denominated bank account secured by the latest in financial technology.

Happy profits! And tell Big Brother to go f... himself.

Cashing out

At some point, potentially years from now, you will most likely want to put your SteemUSD profits to good use.

I am happy to announce that by then, it should be even easier to get in and out of the ecosystem (in fact, this tutorial will very likely be quite obsolete by then).

Nevertheless, given the experimental nature of all blockchain technology, in my opinion you should consider this as a medium-risk investment, and plan accordingly - do not put all of your eggs in one basket.

Questions?

If anything is unclear, feel free to ask in the comments section!

Acknowledgements

Many thanks to @blocktrades for providing this service!

Video links

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Upvoted and followed. I like your content, thanks.

Steemit Crypto Mag | Issue #1 | 25 July 2016
https://steemit.com/money/@darknet/steemit-crypto-mag-or-issue-1-or-25-july-2016

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Glad you enjoyed. Thank YOU for reading!

On the motive for negative interest rates. Your perspective is supported in many publications, I however am inclined to believe it is a simple issue of liquidity. When a loan is formed double entry book keeping creates a credit and a debit; the interest owed is not created. Canada for example has no asset ratio requirement to the credits and/or debits. Just poof a credit and debit pops into existence. That the interest is not created leaves a systemic stress that is reduced by growth in the debt economy - increases in the velocity of money, reduction in interest rates and/or growth rate of debt.

For visualization, imagine the liquidity (money availability) squeeze if debts are extinguished by repayment or default faster than loan creation and interest earned is not spent into the money pool. On a macro scale without getting into which entity benefits, negative interest rates alleviate the liquidity issue. In loose support of this liquidity argument are a couple of links that shows negative yielding debt is past $13 Trillion which about 15% of global GDP, http://goo.gl/I359Sv
https://goo.gl/FH2Vi5

Wow that is an extensive tutorial. Very informative. This may be the most I've seen on the topic in a single location. Sadly Sunday (from my two Sundays now on Steemit) seems one of the slowest post days. Hopefully, people see this and still up vote you. This post is valuable.

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What else would you like to see written about, regarding this topic?

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I'm mainly trying to change some perceptions. I believe I am done with such posts (like mine) for awhile, but other people are welcome to try their hand.

https://steemit.com/steemit/@dwinblood/that-person-is-not-worthy-neither-are-you-neither-am-i-but-who-is-do-things-my-way-or-else

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Thank you for the positive feedback!

Well researched, well written and highly valuable. Deserves some up votes!

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Thank you!

Nice ツ

If you would like to take a couple extra steps to be even more anonymous, I would look into setting up the TAILS operating system onto a flash drive. Much more effective than just using TOR.