Bitcoin Forum

Is this site for real ?
I've got the links from google news.

flexcoin.com


with interest.... hmm.... 
sounds interesting...

an explanation from official owner would be nice :)

Look scam to me!

I'm going to vote total scam. They have nothing to invest the bitcoins into to get you interest. Selling them for another currency (in an attempt to create interest) would be too risky. I don't see how they can do what they say. I could be wrong.

Yeah - I could probably take a bunch of people's Bitcoins and buy/sell them all day and generate dividends for them...

... or one bad swing could happen and I could lose a fuckton.

Nothing about this even remotely says they won't just ride off into the sunset with money after liquidating the Bitcoins on the open market.

I thought about doing something like this myself but with loans to, you cant expect people to give you there btc without giving them a chance to trust you.

Yup, the financial infrastructure you need for a bitcoin bank to work is explained here.

http://forum.bitcoin.org/index.php?topic=19130.0

It doesn't exist, so a bitcoin bank won't work.

Guys, there is a simple legit way to generate interest on Bitcoin without risk: borrowing it for shorting.

The bank borrows 100 BTC to some party for a month for 3 BTC. It gives 2.5 BTC to the person depositing the BTC and keeps 0.5 BTC as fee.

Sombody wants to short BTC. It borrows 100 BTC, paying 3 BTC for this privilege to the bank. It sells the 100 BTC. One month later it buys the BTC back (hopefully for a lower price) and gives it back to the bank. The profit covers the commission.

The central banks do this with gold for example, earning interest with zero risk. This assumes no counter-party risk, but this is what contracts are for. Of course, in Bitcoin world everything flies, no contracts needed :)

How would the back find someone trustworthy people to loan to? I suppose they could have some USD in escrow and have a way to force them out of their position if they are reaching their escrow limit. But all in all, it requires a lot more infrastructure than we have at the moment.

I would put money into a site thats run on Wordpress

I keep hearing variations on this theme -- like no contracts or security or regulation is possible with bitcoins. It is, and I imagine many transactions eventually being kept in a regulated and insured bitcoin bank for example or very detailed legally binding contracts written between involved parties. There is nothing about bitcoin that prevents such legally binding contracts from being formed and enforced.

As far as a bitcoin bank, there are a variety of ways such a bank could generate an interest rate. Certainly speculating in other markets could be part of it and there is a possibility that the bank could take a loss. Same with lending bitcoins out at interest but having enough total capital to cover a "bank run". I would not entrust my coins in a bitcoin bank unless it was clear what our legal arrangement would be and what their liability would be in case of loss of my funds and how that would be enforced though.

You could absolutely run a bank, but I would only put my money in it if it did NOT use fractional reserve practices

I.e. there are two types of accounts at this hypothetical bank, one type that is essentially a checking account, generates no interest and the depositor actually pays a small fee to have it sit there (maybe .2% or 10BTC, whichever is less monthly) - The bank then secures the funds, insures the deposit (if the bank gets robbed, the bank is responsible for replacing deposits since protecting them is its primary job here), and collects the fee for holding the money.  This money is NOT lent out.

The other type of account would be the time-deposit account, as described by someone earlier - Basically by depositing your money for a given legnth of time, you are lending it to the bank who pays you interest for it (This could be as high as 10%, depending on competition for investable BTC vs. number of projects/individuals seeking loans), and then the bank lends it out to one or many participants, again for a length of time no longer than the term of the deposit.  The bank charges a higher percentage than it pays the depositor(s), and at the end of the agreement the debter pays back the bank who pays back the borrower with everyone in the chain getting interest for their involvement.   If the loan(s) go bad, the bank takes the hit because their primary role in this capacity is to investigate and vouch for the lenders they loan money to.   This means you wouldn't be able to just ask for a loan and get one, but rather would need to either provide some collateral or have a very established reputation with the bank and a history of paying back on time.

So many of these problems are solved because it is in everyones best interest to make sure things go smoothly - Nobody gets a free lunch, but everybody benefits in a way that reflects real costs.

you don't have to trust anyone, all you really need is a liquid market, and quick automatic liquidation of positions.
one exchange already announced to implement it. at high rates though...and they dont have liquidity yet so you probably have to expect very high margin rates.

It's not a scam guys...  I own that site.. we threw up wordpress just to put in a place holder.  It should be up in Beta July first (that's when the SSL / Firewall / Security) should be tested...  all passwords / usernames will be encrypted.. ect ect..

"interest"  is nothing more however than a cluster of servers that are mining... and people that use that as their online wallet IE: online bitcoin bank do get the dividends from it.   It's my way of saying thanks for using the free service.

I want to STRESS ... though we are focusing on security.. it will still be in Alpha / Beta for a bit..  I'm trying to build a real company on bitcoins,  so reputation does matter... and it has company backing by Yooter Interactive.. ..   so if you want to test it..  use a small amount of coins...  I'll put a notice on the site when it's out of Beta.

Honestly I think it's the first time a tax paying company is putting up real money to build something for bitcoins.

Enjoy....    (crossing fingers it's secure by July 1st.)

So the profit comes from where?

Honestly,  I'm thinking that eventually someone will either 1 ) buy it... or B) it's adopted widely and I can put ads on the site....  I don't intend on charging people.

but I already threw thousands into it.

My apologies for suggesting it is a scam without further evidence. I look forward to hearing more details.

No worries... dude it's the first freaking bitcoin bank that is paying people "interest"...   everyone's first instinct is that it's a scam until they read that it's from mining that the dividends are being paid.

This is easily done with a pyramid scam, I pay interests using the last guy's deposit and so on, until my bank has enough coins and I'll hire some hacker and "puff"   ::)

The profit can come from advertising. Just throw a banner and try to grow your customerbase as large as possible and add as many attractive features as you can to attract eyeballs.

It could, but this isn't...  I'm just paying dividends on mining on top of giving people a central location to buy/ sell / trade coins...  what happened is someone sent my bitcoins to my work address... and I was a home... and I couldn't access them....  so I thought this would help... I saw a service that did that.. and figured I could improve with adding interest to it.

So bingo... in a matter of a week we'll have the first bitcoin bank.

Look just test the thing when it's live... use a small amount of coins and see if it works right...  give feedback... tons of it...  the goal is to build a fully functional bitcoin bank...

Interest and deflation... 1% should be very-very high then...

What makes you so sure there will be deflation?
Money supply of bitcoin has an upper bound.
The user base of bitcoin does not have a lower bound.

Interesting, negative bitcoin users???

what he's saying is that there could be 21 million bitcoins, and no one using them.... which is possible.. and would also mean that this project failed.
I don't think that's a likely outcome... 

One thing I learned over the years... geeks always win... maybe not a first.. but in the long run they will.

Agree with you, but think that new geeks will come up with a superior platform, and that the new geeks win.
Still holding on to my coin, however, while I wait for the new geeks.

Banks that have office would be nice  :D
If that is possible ofcourse...  ;)

You can argue as much as you want, just go check the bitcoin exchange rate history.

ok it's taking invites now... and yes we have offices outside of Philadelphia, PA.
http://www.flexcoin.com

Potentially cool stuff. The site should explain the types of security that are in place. Could you possibly get an insurance company to guarantee the deposits in the event your site is hacked?

We could...    we just need to find a third party that would insure the deposits...  the FDIC would laugh at us.

LOL

No https?!

HTTPS will be up for banking... this is literally just the invite process...  HTTPS has trouble ranking in Google.

If anyone has any questions regarding it,  just ask :)

What do you have as far as insurance?

We are looking for a counter party to insure it...  anyone have any advice?

If you are doing it wrong: http://www.seomoz.org/ugc/seo-for-https-with-s-like-secure

:]

I'm guessing that your company uses service providers that are physically located within the continental USA.  Do you have mirrored systems on different continents, in the event of a disaster?  If the USA FBI accidentally took the rack containing your BitCoin repository...could you resume normal operations within a reasonable amount of time?  And without the loss of anyone's coins? 

The profit comes from bringing together the people who bank with you (who make money if bitcoins go up and lose money if bitcoins go down) and the people who want to take a short position on bitcoins (who make money if bitcoins go down and lose money if bitcoins go up). You just have to trade bitcoins and move money.

Here's an oversimplified example:

Say someone wants to put 100 bitcoins away for a month. He hopes to get 2% (APR) interest. That means that someone has to provide him with about 100.2 bitcoins in a month for his 100 bitcoins today. So he gives you 100 bitcoins, you promise to give him 100.2 bitcoins next month.

Say someone else thinks bitcoins will go down. They want to sell 100 bitcoins today and buy 102 bitcoins next month (hoping to keep the positive difference in USD), the extra two bitcoins are his transaction fee. Of course, they don't have any bitcoins because they think they're going down.

How can you make both these guys happy and make money?

Answer:

1) The second guy gives you a secured note for the maximum expected cost of 102 bitcoins next month.
2) You take the first guy's 100 bitcoins and sell them for USD. You invest those USD.
3) You wait a month and buy 102 bitcoins for USD. You use the USD from the second guy's note.
4) You give the first guy his 100.2 bitcoins.
5) You give the USD from the first sale to the second guy.
6) You made 1.8 bitcoins and the interest on the USD for 1 month less the cost of the two USD<->bitcoin exchanges.

If the bitcoin ever shoots up so high there's a risk the note cannot buy the 102 bitcoins, you immediately buy at least 100.2 bitcoins and your deal with the second guy terminates, him forfeiting the note. He can make the note as big as he wants to ride out bumps, or as small as he wants to cap his losses, it's his choice. (You still keep up to 1.2 bitcoins if you buy fast enough.) This also allows the second guy to set the maximum amount he can lose if he guessed wrong and bitcoins go up.

I hope it solves the "easy-for-grandma" issue.

As far as the profit goes, perhaps a quarter (2 bits) fee for all transaction over $25. That ways it's only 1% or lower. Promise to never increase the fee. All transactions below $25 will be free. And if it ends up being gamed (3 transactions for a $74 item), let 'em think they found a loophole.

How will flexcoin use the Bitcoins? The FAQ does not give any information on this subject. What safeguards are there against flexcoin making bad investments and being unable to give deposits back? I am not accusing flexcoin of operating any scam - however, further information would be useful to understand how flexcoin operates.

EDIT THIS QUESTION HAS ALSO BEEN POSTED IN THREAD http://forum.bitcoin.org/index.php?topic=23733.0

If the "interest" is paid from mining, please don't call it "interest," as that has some very specific meanings. Also, if you're actually planning on paying people proceeds from mining that you yourself pay electricity for, you're basically running a money-losing service, not just a "free" service. May be a good idea to open up Excel, put your business degree to work, and run some NPV calculations...
P.S. I'm all for the idea of a bitcoin bank that lets me store some money in the cloud in an insured account. Just not sure how that can possibly be a profitable, or even a break-even, operation at this point.

Also, I live, like, an hour away from you, so if I deposit and you steal my money, I can just come knock on your door ;D

We updated the FAQ

http://www.flexcoin.com/?page_id=15

I second Rassah's inquiries.
How is mining considered "interest"?
How is the amount of deposit benefit you in any way? (It doesn't really make sense since you also offer different interest rates based on the amount deposited)

The deposited amount should benefit you in some way to offer such interests.
Are you gonna trade with the deposited amounts? I mean, if you had a tested awesome autotrader I would understand your move since the more deposits you get the more gigazillion potential of profit for you from playing the market.

But if you are just gonna sit on the deposited accounts as a simple ewallet, then the "interests" doesn't make sense.
It seems to just fall into a simple lure for a huge scam OR a very badly planned business plan OR a very poor understanding of what banks (and the finance system as a whole) actually are.

Hmm, needs some minor proofreading. I still wouldn't really call it interest, since that implies a return on the money deposited. Since the money will not be lent out or invested, and proceeds will come from mining, selling advertising space, running financial services like escrow and arbitration, or whatever else, the payments are actually closer to "proceeds from company revenues," aka Dividends.

I've only been able to come up with one way to earn "interest" (technically dividends) on bitcoins that do not involve another currency. It comes in the form of an insurance agency combined with a bank.

Essentially, a bitcoin bank makes the following guarantee:
We will store your bitcoins securely and we will only release them given condition x and will charge a small fee.
The condition could be a pgp signed directive to release a certain amount of funds to a given address.
The bank will then become liable for any funds lost for which it cannot produce the signed directive.

Unfortunately bitcoins are essentially uninsurable. To solve this the bank is also its own insurance agency.
The bank locks away very high security keys under physical... as well as legal... safeguards.
It can then execute contracts with large (or many small) bitcoin holders who approve of the banks security and methods.
By signing the contract you agree to insure in proportion any losses incurred by the bank. A loss in this example is not when the user loses control of their pgp key. That would be on the user. Only when the bank is compromised would this go into effect.

Assuming no breach occurs the insurance depositors earn "interest" from the fees in proportion to their deposits.
If a breach occurs the bank then needs to go through the legal hoops to access the escrowed money.

Still doesn't make sense.
If these are dividends I am papa smurf.
So what's gonna happen once the difficulty level becomes prohibitively expensive, or simply put, all the coins are mined? The dividends/interests will stop?
Are we going to be paid with the profits from the ads?

As it is now, it doesn't make sense. At all.

Why are Bitcoins uninsurable? A bank can take out an insurance contract in USD in the amount larger than the current bank holdings to allow for BTC currency to increase in value, or eventually get a contract in BTC. The fees will be smaller than the total holdings, but hopefully the insurance company will have more stashed away than needed in case problems arise.

Also, the point of insurance is that the fees can't be paid back. They are only big enough to cover losses (most of the time ongoing losses) from some members. If they are large enough to pay you fees or money back (Whole Life insurance, among others offered around the world), they are essentially ripping you off and paying you back your own money they don't actually need to insure you.
(I sold insurance for a while, so I know all the BS behind it)

I specified in the the first sentence that you can't do it without involving another currency.
The government is the insurer of last resort when it comes to banks... for example the FDIC in the US.
I would never deposit money in a bank that guaranteed my funds on the condition I didn't mind being paid back in Rubles.
Since its impossible to have an insurer of last resort for bitcoin the bank would have to work in reverse.

IMO insurances are the biggest legal scams ever.
Essentially insurances insure you for something that is very unlikely to happen,
That, for starters, is quite illogical.

For exemple, if an actuary assesses that your risk is extremely very low, then why the hell do you need an insurance in the first place?
You could cover that risk by yourself.
You could actually deposit a portion of your income in a jar (or invest it) and have yourself insured for when "shit happens" and there would be plenty of money available when it happens, since the probability of happening is quite low. If you collect your own money for each time that shit doesn't happen and use it when "shit happens", you should amass a considerable amount of money in your little jar.
Because of this I still don't understand the compulsory nature of certain insurances.
If you have a freaking low risk, you should be exempted from having an insurance.

If this isn't enough: If you are insured and shit happens, be ready to be rejected because of a definition in cryptic minute clause in the corner of the backpage of the insurance policy that technically excludes you from certain conditions from collecting the insurance.
If that isn't conning I don't know what it is.

Anyhoo, a bank that insures their money from being stolen in the very high risk environment like the online medium would be a freaking suicide, unless... you have placed extremely safe measures and extremely reliable redundancy to make attacks and data loss extremely unlikely, otherwise offering insurances would be totally senseless and stupid, business-wise.
Obviously I imagine that the fees or the premium for such warranty would be quite expensive and the investment for such infrastructure and personnel would be quite considerable.

(Our primary concern isn't depression of the economy or bank runs, but penetration attacks and data loss. So talking about FDIC I think it's out of the question by now, what we really need is a Fidelity Insurance Protection or similar)

Not true. You can have your USD denominated cashflow insured with USD by putting some of that USD into a pool. If your cashflow is interrupted, you take your share out of the pool that everyone has been putting into. That's how life insurance works.
With a Bitcoin bank, a bank can self-insure individual accounts by charging a small fee. If someone's account is lost, the bank can restore the money from the collected pool of fees. In the case of insuring an entire bank, there could be an insurance company that many banks pay a fee to (charged from individual account holders), and if the entire bank collapses, the insurance pool of money should have enough set aside to pay the people back. Best case scenario would be banks who insure a portion of their funds among many insurance companies, so if one insurance provider collapses, at least hopefully the remaining ones will restore some of the money.


If something is very unlikely to happen, that is usually reflected in the price you pay. The chances of you getting killed or losing a limb in an accident are extremely tiny (compared to dying of health issues), and so AD&D (accidental dismemberment) insurance is only about $2 to $4 a month. The chances of you needing some sort of really expensive healthcare service when you are 80 is rather high, thus insurance is high.



You know how bitcoin hashing works. Accidents work the same way. Your chance of getting into a car accident that costs you $50,000 is extremely low, but it could happen today. Obviously the BEST method is to both pay for insurance and save up money. Specifically, when you buy insurance, yo pay for a certain amount of coverage, say $50,000. As you save up $10,000, lower your coverage to $40,000, and so on, until you are self insured.
In some cases, though, it is much better to buy insurance than to self-insure. For example, if I'm running a business that needs $100k in liability insurance, but likely will never use it, I would much rather pay a small monthly insurance payment and let the professionals work things out should anything happen, while using the $100k to actually do business and make money, than tying up the $100k in some untouchable bank account where it sits doing nothing, and then looking for lawyers and help on my own when something happens.


The compulsory part is because "freaking low risk" does not mean 0 risk. Low risk people still get into accidents, get infections, and even get cancer, yet because they thought they are low risk and didn't buy insurance, when they go to the hospital and get treated, everyone else who actually DID buy insurance ends up paying for them in higher insurance costs. Options are either force them to buy insurance too (and pay much lower premiums), or force hospitals not to treat them, and send them off to some island to die so the don't bother anyone here. The gov decided t go with option 1.


That's called "free market" and "read the damn contract" :D


That's true. So, that just means that the bank will have to weigh it's expense options between setting up extremely good security, or pay extremely high insurance premiums. Likely, it'll do what everyone does, and balance the costs somewhere in the middle (though since securing digital things is much easier than physical things like in a bank, I suspect they will exhaust every digital security option before going on to buy insurance.)