Bitcoin Forum

It is time to announce the Free Bank of Digitalcoin, an initiative that aims to introduce  a new concept to the crypto-world.

What is the FBD?
A community inspired and funded effort to further the usage of DGC as a store of value and monetary unit.

What services are provided?
The primary service will be hedging and profit enabling. FBD will allow people to purchase DGC at a fixed rate (set to match market price), and hold contracts that provide the option of selling back the DGC at purchase price. Deposits and withdrawals will initially be accepted in bitcoin, litecoin, and USD.

How is this useful to me?
The FBD will serve to lower investor risk in crypto-currency and allow simple, risk free cash flow into digitalcoin.

Example:
1. John Doe decides he wants to invest in digitalcoin but he can't handle downside risk.
2. J.D. contacts the FBD for a DGC quote.
3. J.D. purchases digitalcoin directly from the bank and is given the option to sell them back at purchase cost.
4. Now, if the price drops, J.D. can execute his option and sell back the coins at purchase price. If the market rises, he can sell his digitalcoin on the open market.

By removing liquidity uncertainty regarding DGC, the FBD will serve to promote and nurture digitalcoin growth.

This is something rather unique. I like the idea behind it, should do well for DGC :)

I'm glad i've invested in DGC

Really exciting news I look forward to more info.

what fees/sorcery make this possible and trustworthy?

I got same question, please baritus explain because i am big fan of DGC.

Sorcery: If you think about crypto-currency in the sense that each is a promise of fiat redemption, instead of assuming innate value(which really doesn't exist), you open up the opportunity for a promise exchange based on a fixed asset, fiat in this example.

Fees: There will be small fees to cover the day to day operations and transaction processing.

Trust: I will be taking responsibility for the Bank's day to day operations and will provide public statements for accountability.

any consideration on including ARG in this?

The details aren't public yet regarding ARG and how it will fit in, but I can assure you it will have a role.

https://i.imgur.com/n9hmqAe.jpg?1

Seriously!


-tb-

Sounds good! Do we have any rough ETA for a beta? Seems an ambitious project

There will be more details provided very soon.

Holy shit, that's brilliant. Absolutely brilliant.

I don't know what kind of crazy dream lead you and your team to this idea, but it completely revolutionizes the concept of crypto banking. There is no risk to anyone involved. No fees are necessary unless you are trying to make a profit, and it doesn't sound like you are. Absolutely genius. I assume there will be a built in escrow service to prevent front-end fraud in the form of BTC, LTC, or USD deposits.

If you need a few thousand DGC to get the ball rolling, hit me up. I don't have a huge volume, but I'd be more than happy to help out with this project.

Its called hedging and its common in old financial markets and physical mineral miners use it to reduce their expose to downside risk in price.

Additionally, the second phase of the project will enable the trading of options. So you can even sell your rights to buy DGC from the Bank for a profit.

I assume this is like a trust fund, where the money used to buy in will not be spent on anything else, so in case the Joe decides to sell back at original price, you still have a way to refund him?

any fiat as an example is seriously the single worst idea I have ever come accross on a cyrpto forum.

Sadly, this is Earth.


@NickCoin

There will always be funds equal to the purchases to cover all repurchases. The Bank will make enough to operate by fees and enabling trading of of the options given.

Sounds pretty good Baritus

How long is the period between purchasing DGC and being able to return it should the market value drop?

It might be asking a lot for an investor to assume you are going to hold and not spend the funds from his and every other investor's purchases for the next year + and return everything if DGC crashes. Not saying you are not honest, but the potential for taking the funds and running if things go bad doesn't seem to really lessen the investment risk IMO.

However, if someone was about to invest in DGC anyway, they might as well go through your service to perhaps have some short term insurance against value drops. Especially if the fees you charge equal out to the purchase/withdrawal from Cryptsy and Vircurex. At that point there would be no reason to NOT go through you.

Again, not calling your reputation out or anything, but this is probably how potential investors are going to look at the service.

Sound good for me... if you not thinking on switching to fractional reserve banking in a later phase :).

Worried about the outcome...this has been tried before:

https://bitcointalk.org/index.php?topic=50822.0

Price is very volatile. Imagine the situation: people bought in at high price. You need to give them DGC, so you have to use money to buy them. It's either buyer's money or your own. Then price falls, and it's only a half of what it was. Naturally, many people are going to want to use this situation. They are cashing out, and then buying twice more. Your bank are at huge loss.  Who is going to cover the shortage? You?

Exactly...not to sound like a party pooper, but I have the same concern. "No risk for anyone involved" as another poster put it (to paraphrase) is the same as "too good to be true". What exactly are the downsides here?

Beyond that, thank you for your continued innovation on DGC. Happily mining and saving it.

This would kind of make me nervous.  Just look at the list of Ponzi schemes that BTC got hit with.

https://bitcointalk.org/index.php?topic=94900.0;wap2



I'm not saying this is what you're doing, but I could see this thread being inserted at the bottom of that list eventually.  Just be careful!

lol, what a joke, yea, lets bring banks and into cryptocurrencies, just what everyone wants. I see a target for hackers there, also, DGC is already hanging on by a thread, people selling back for what they bought for after a price drop will just kill it faster. I cant believe people are still mining this.

Go spread your FUD elsewhere please

The structure of the bank is such that money that is from investor purchases and that is available for investors to sell back their DGC for will be in a public address.

The bank better have lots and lots of money backing it. This is giving put options for free and the person providing it will be very sorry when things go bad. You just don't get "risk free" investment with unlimited upside in a free market. I would suggest that the bank sells these put option for a price then it may become viable. The question is whether the investor will be willing to pay the price.

Fees are one way the bank remains viable. The investors have a lot of reason to pay for the service, including the value of the option itself and hedging.

It won't be risk free even if bank do write options since option has an expiry date. If bank provide option with no expiry date, then the fees must be massive.

As I said, price is too volatile now. Either your fees would have to be very big to cover all potential loss, or you are going to need to use lots of your cash to back it, as qwerty1231121 said. Otherwise, if enough people decide to cash out - you won't be able to pay them. Too risky.

Let's say I buy 10,000 DGC at 1 BTC per 1,000 DGC. I pay 10.5 BTC (0.5 for a fee) and then get my coins. It doesn't matter if the price drops, as long as they hold my 10 BTC I can still get paid out and they made 0.5 BTC on the transaction. As long as there is no dipping into the payment funds, there will always be enough to payout.

Baritus, does it matter if it is the same DGC that is returned to the bank?

Let's say I buy my 10,000 DGC, but I am able to sell them for 20 BTC. The price then drops to 2,000 DGC/BTC. If I buy 10,000 DGC from you, this time it would cost me 5.25 BTC with the fee, could I call in my previous order and receive 10 BTC back?

Sounds good  ;D

http://www.hwdyk.com/q/images/imarriedmarge_11.jpg

sorry i had too. but no , seriously its a great idea !

The only joke here is you, buddy.  ;)

i love that you guys are all out there and shit , and doing things - , the price rose to quick on the recycled cash from the pools and the Xchnage maybe?

but i support you , and I'm along for the ride , right in there !



I'm just going to market my currency to people and say something retarded like :


"buy this it will go up, and if the world ends you will be rich, latest update is Terrorists are eating people in Syria , {pointing} so that's where we are at...."

"oh also its under 1c "

And again, I ask this simple question: who's money are going to be used to buy DGC?

If it's yours, then if price drops - baritus is going to need to sell more DGC for the same amount of BTC, to return to you. If it's not yours, then it's his, and he is taking a loss to pay you off, because your DGC is now worth less then he is paid for them. And if you buy back low - he's going to need to use his money again to buy you more DGC. Prices can rise and fall significantly at this point of time, he is going to need to be able to cover for that volatility.

The bank will only sell options when there are options available to sell.

That means there will be no digitalcoin sold which are not already in the bank's possession.

The bank issues options at a fixed rate and returns them at the rate promised, so there is no buying or selling of digitalcoin done by the bank except directly to investors.

The money in the bank will be backed by the shareholders of the bank. That means digitalcoin holders will have the opportunity to invest in the bank itself instead of using the bank only for investments.

The bank will generate returns through fees from issuing options, as well as from the trading of options done by investors(we intend for a platform to enable this). That means the options are not tied to specific coins, they are tied to the owner.

I don't think the bank is going to attempt to sell any coins it does not already own. It can then add more coins by buying with the fees if necessary. It isn't an endless supply of coins at a set price.

ah, so there are going to be investors in the bank itself,and it's going to trade options only if enough funds available. now that I can understand.
thanks for clearing things up

The community has done nothing but ruin the concept of Bitcoin... DECENTRILIZED MEANS JUST THAT.. yet you want to herd coin into "EXCHANGES" and "BANKS"

This is decentralization of banking.

A bank funded by the people, for the people.

you are herding coin brother.. spin it how you want but you are herding coin

Expanding the usefulness of crypto-currency for potential investors is a necessary step towards adoption.

Im not saying im against your concept, just that we have all done a great job of destroying what was the foundation of bitcoin

This will be popular Banks are popular !

especially in a Cryptocurrency market !

Anything that allows people to raise their profits and lower their risks will be popular.

I like it - where can we sign up to buy shares?

I'll have more details about the shares later on, they're not yet available.

I don't think this is a viable ideea. Assuming the case: DGC rises in price, everibody sell and they make a nice profit. After that DGC falls and the same people buy and sell back to the bank with the initial price witch is higher now than the market = nice profit again... And this is just one scenario... Think about it!

This is an amazing idea. What an opportunity for low risk growth of DigitalCoin's value via outside fiat / BTC means. Very impressive concept that adds even more incentive to invest in the future of DGC.

Maybe I'm misunderstanding, but the way I see it is say the person buys DGC and keeps it in the bank. If the price drops and he panics and wants out, he gets his initial purchase price back minus a fee. However if the price goes up, he pulls the DGC out of the bank and sells on an exchange. He can't reaquire DGC and put it back into the bank at this point and get his original purchase price back as this is now a new deposit, and besides that, he didn't acquire the DGC through the bank anyways so how is there even a price point from the bank's point of view to reimburse any losses, not there is a loss in value since it wasn't purchased through the bank. Hope that made sense.

But if one purchase from the bank and can't use it without loosing the posibility to sell them back (is obligated to keep it in the bank account) than... what's the point? Everybody would buy only to speculate... so... nothing to gain for the coin... isn't it?

If you remove it to use it, that's fine. Why would you be able to use it and then sell it back? Presumably when you purchase something you lose those coins anyways.

But that's a big "if"... the majority will buy hopping for a price increas and if that happends everybody would rush to seel on the marked so a quick price decreas... the ones that didn't cash out from the account would rush tu sell back to the bank in panic that the bank would go bankrupt... more price decreas... anyway, it's not going to work because people would assume that is un investment without risk... things just don't work like that.
P.S. This is just my personal opinion and i could be wrong, don't take it as un advice because it's not. In fact i would be glad to see this become real and viable.

It may sound good in the beginning, but thats how they all start "for the people by the people" blah blah, then people get greedy, then fees increase, too many people starting these types of schemes on here end up ripping off people once they get enough funds in their hands....  When all is said and done, all you are doing is stashing your coins in someone else's qt wallet......   smart?  I think we can all agree..... No

Seriously, why do you bother?

If you have nothing constructive to add go and troll somewhere else.

You just made yourself look like an idiot, read the last 3 pages, its nothing but trolling in one fashion or another, 99% of this forum is trolling...

I don't understand why the bank would go bankrupt. The funds used to purchase the coins in the first place will never be spent (as I understand it), and no more coins will be sold than are physically available to move.

Bank rushes only occur because banks loan out your money to other people, so they don't physically have the money on hand. It sounds like Baritus will be keeping all of the deposited money available for people to cash out, but it is reasonable that removing the coins from the bank would forfeit your option of selling them back so that you cannot abuse the system. Risk only occurs once you go from holding the coins to using the coins.

Well that's my point. The bank is betting on the downfall of the coin in that case so he can charge the fees, because that is the only source of income of the bank, the people are betting in the rise of the coin that will led to decrease anyway... my point is that the coin would'n benefit from this ideea in bouth cases.

this !

Is there a free market where "everyone sells" and subsequently "everyone buys" in unison in existence?

Also, even in this scenario, how does the bank get affected?

Example:
1. Market is made of 2.5mil+ coins
2. The bank for example has 250k coins
3. Bank sells all 250k coins for 250 btc to investors
4. DGC price rises to 250k coins for 500 BTC
5. Investors sell their coins for 500 btc, make 250btc profit, and still have option to sell DGC back to us at 250k. But now they would have no DGC, so they would need to buy it before they could sell it to the bank for the rate they purchased it. The option only gives them the right to sell back DGC at that price, but first they must be able to buy it at that price.

You can research the principles of hedging further for an understanding of the concept.

In conclusion, it is a useful tool for investors who are thinking for the longterm. It guarantees a floor price but gives that freedom to go in search for profit. However, it cannot be circularly abused due to basic supply and demand principles.

This "bank" it's not a free market. My point is that this is a good ideea for making some profit for the "bank", but it doesn't benefit the coin in any way. It's just a good business ideea that everyone will try to profit but you all know that it can't happend. If you know that kind of business point me to it and I'll invest right now :)

Jonsi, read my previous post, I expanded to explain.

Also, the benefit is to provide liquidity at a certain price. Investors do not know that if they buy at a price they can get their money back at it. We give them that guarantee.

This immensely benefits the coin by lowering risk for investments.

Any and all investors can use the service and it is completely safe. Their funds are kept at the rate they purchased them at, and they have the right to buy it back at that rate. That means there will never be an imbalance.

So yes, an investor can use the bank to lock in a rate and benefit from upward movement.

The bank will make a profit from both issuing the options and from letting them be traded on an exchange platform.

Conceptually: The investors in the bank are lending their digitalcoin in exchange for fees. Because the amount lent always equals the amount received in collateral, the balance does not break.

Well, to rephrase this, I think you will get stuck because of the limited amount of capital in your bank.

Except for the (probably relatively small) fee, your bank is in essence providing a free way to bet on a market rise.
There is no risk for the guy buying DGC in your bank. If the market rises he sells them on exchanges and gets is benefits.
If the market drops, then he just sell them back to the bank.

In this situation, the winning strategy is clearly to buy up to the last DGC your bank can provide. If the market rises, almost all of them will be sold on exchanges.
The shareholder of your bank would them have essentially sold their DGC for fiat or others coins. And to continue operations you would need to buy new DGC (at higher price) or find new shareholders. You could also wait for the price to drop again ... but in any case your bank is taking a great risk.

I have read it. Only that you omit the part when everybody rush to sell the price will decrease drastically.

No. The ideea is very good, the bank will make a profit anyway, no matter how the price will go. If you want i can explain further.

the price would not drop below the initial selling price of the bank, as people would have the choice between:
- selling back to the bank at almost no loss
- waiting for a new price increase

Your bank would thus not be able to buy back its coin (not all of them anyway). Gradually the capital would be sold entirely.

At least this is how I see thinks, but I'm no economist ^^

In fact, the more i think about it the more i see how a brilliant ideea it is. If I would have the founds i would create one right now.
+100 baritus.

You are wrong. The bank will always profit. I can explain if you wish. This is one of the beast ideeas i have heard in a long time.

People people calm down. Maybe I am missing something here but this isn't anymore revolutionary than a crypto exchange is to an actual exchange. Allow me to explain. Stop loss order. Done. Not trying to be inflammatory, I'm a fan of DGC, not a fan of smoke blowing. I honestly don't see the diff.
http://www.investopedia.com/terms/s/stop-lossorder.asp (http://www.investopedia.com/terms/s/stop-lossorder.asp).
I mean, Cryptsy could offer Stop-loss trading and it would, as I see it, render this null and void. Again, maybe I missed something.

Good Job Baritus!!
Onother great idea from the creator of the BEST alt coin at the moment!!

Just AMAZING!!

I'm interested, I don't see how I would loose in the scenario I described previously ^^
(except if the fee is high enough or something)

A stop loss order is just a trigger for when the price falls below a certain price. The bank is a guarantee of repurchase at a certain price REGARDLESS of market movement or position. Meaning, the two concepts are completely unrelated.

Also, you can sell your DGC and you still own the options.

Yes, you are missing a lot :). The exchange can't fluctuate the price, it will be self established by the buy/sell process. Instead, this "bank" can.

Ok. The business ideea behind it, ass i see it is:
1. You buy lots of coins (no matter the name) at the actual price.
2. You create the "bank" as described in the thread.
3. You sell the coins a little higher, the people will buy anyway because it's no risk for them, they always can sell at the same price anyway.
Now the two cases:
 a. Price increase: people will cash out the coins to seel them on the market and the bank remain with the profit.
 b. Price decrease: people will sell back to the bank, and the banck charges fees and remain with the profit.

Once again great business ideea, but no really benefit for the coin.

The benefit for the coin is giving investors a more stable way to invest longterm.

It does have the benefits of bringing liquidity to the coin and offering multiple means of entry. The addition of purchase by USD and LTC are significant in their own rights.

So approximately when this will enter its beta stage?

Oh, not incompatible with what I said, but it is a one-time business then.
After the capital has been sold, you cannot continue your operation.

And if you expect to buy back the coin (probably at higher price) and start again ... well ... this would become a bigger and bigger bubble. It would surely pop at some point ^^

"It does have the benefits of bringing liquidity to the coin and offering multiple means of entry. The addition of purchase by USD and LTC are significant in their own rights."
:)

That liquidity will never bee use, because the bank will keep it, not spend it... so it doesn't bring anything

And for the part with the long therm investment... it's even worst... The coins will sit in accounts and not beying use at all... because when you widrawn the coins you will lose that "no risk" that attracted you in the firs place.

Now I can understand that baritus want to prove his ideea as something benefic for the coin and will not look at my arguments, but in fact i speak for the others that are looking into that and can follow my logic.

Once again: This is my personal point of view, don't take this a advice!

Exactly. There is no other way around it.

Unless options expire after a certain length of time. :)

The bank sells digitalcoin and keeps other currencies.

So in fact, it is promoting liquidity and investment.

Haaa, nice one :)

Anyway, baritus, that it's a great ideea and if you have the founds to implement it you should do it. I'm sure people will buy and you will make a nice profit. Only pls announce me just before you do that so i can buy some coins and sell them just right after the bank will come online so i can make a profit too from your briliant ideea, jus because i don't have the posibillity to implement it myself ;)

P.S. It would be nice in a forum were we are trying to escape from the tirany of banking system not to use the same expressions as the real fiat bankers: So in fact, it is promoting liquidity and investment... when in fact we bouth know what this is...

Want to make a new dictionary for us?  ;D

I understand what you are trying to do ... but even making the options expire, I'm not sure it would work.

If the option expires entirely at a given time, then people would either sell on an exchange if they have the opportunity, or sell back to the bank just before the expiration.

You have at least to make your option "gradually" expires (buy guarantying a decreasing buying back price). Then it *may* work, depending on the tuning.

Ha ha. We can make new coins, with new concepts, so... I can't make a new dictionary because I don't have the time and the skills, but it may not be such a bad ideea after all if you think about it. Anyway, a good start on that dictionary would to take out all the fancy words that encifer the banking system so the bankers have more and more control of the people lives, don't you agree? (I guess not, I can see you're in this only for the money and I'm not. Most of all I stand for the ideology of the cryptocurency and I really do belive in a better world, and I'm trying to shape my life starting with "Be the change you wanna see in the world"... but I guess this is off toppic)

For digital currency to be worthwhile and to gain adoption, it would need to provide a benefit. Profit is a universal benefit.

You'll have a better idea of the concept once you see it live. :)

Yes, I agree it must provide a benefit. What I'm trying to say is that you announce your ideea and you perfectly are aware of the result... It provide benefit only for you by trying to trick people into it. You don't describe scenarios, you don't make realistic predictions, but instead you use words like "promoting, liquidity and investment"... And the worst part it is that people will actually buy into this...

There is no trick.

It's transparent and clear at all steps.

I had a hope of Digitalcoin taking off, and was one of the 2 Alt coins I started mining (Stablecoins and Digitalcoins).  I lost faith in Digitalcoin when you waved the red flag in front of the bulls.  (Tempted the hackers to 51% your coin), and even said a few questionable things.  But announcements like this help restore my faith in Digitalcoin.  Not because I think it is a great idea, but because it shows you are actually thinking outside the box and not following all the other cookie cutter coins that have been announced recently.    Assuming the coin doesn't go down in the next 10-15 days (I am still kinda leery) I will gladly jump back to the Digitalcoin network.

And nope I didn't dump my Digitalcoins.  Just keeping them in my wallet waiting to see what the next 2 weeks brings.

Well, it seems this FBD bank thing is a REALLY BAD idea.
some smart guy holding DGC just dumped all, I guess hoping to get onboard of FBD?
lol  :D

We definitely have some smart trader/investor among us  :)

Troll alert. Every time someone says dgc is going down it comes back up. Dgc is in for long haul evidenced by its growing popularity, innovative dev and team and ever growing list of alt crypto community leading services and marketing.

Great work Baritus! Excellent. Sign me up baby!  ;D ;)

Lol  :D
I just pointed out a big flaw I believe. If I was heavily invested in DGC prior to FBD came into effect.
Once FBD is fully functional, I could dump all my DGC crashing the price and then applying* to FBD with the money from the sell.

Easy money  8)

You should thank me for pointing this out before this FBD went into effect.  :)


EDIT: *apply
donations are welcome ;)

Rely looking forward to this! Great work Baritus :)
Also looking forward to the ARG announcement, seems like a good time to buy right now^^

I cant wait to open my own bank!

This is awesome :)

Yeah I'm sure Baritus will announce it all in good time :) Very excited about this. Could be a real game changer. Price protection for your dgc. Brilliant concept.

Sounds great! I don't why ppl don't understand this concept. Some ppl are slower I guess...Basically all the DGC purchased will be backed by the initial investment. He wont spend it guys

Will have to see the actual fees that will be charged for this, and whether it's scalable to larger volumes.

I love the idea,  but when going through the different market development scenarios I couldn't quite figure out how you will handle the rise in price of a coin.

Let me put together how I understood this to work:
a) You start the bank with lets say 1000 DGC
b) User 1 comes and buys 1000DGC for 1BTC with an expiry date of 3 months in the future, hence bank deposit = 1BTC, bank DGC balance=0

Now we have two scenarios: 1) price drops, 2) price rises

1) Price drops:
User sells back the 1000 DGC for 1 BTC,  bank deposit  = 0BTC, bank DGC balance = 1000
   Result: Bank earns transaction fees
2) Price rises:
User withdraws the coins and sells them on another exchange. Bank keeps the deposit,  Bank balance = 1 BTC,  0 DGC
  Result: Bank has no more DGC and needs to purchase DGC of the market, the 1 BTC deposit will not buy 1000 DGC anymore but less due to the increase in price.

Case 1) is obviously not an issue, but case 2) is. The bank will run out of funds and thus liquidity becomes a challenge unless you stop the business once you run out of DGC.

My guess is that the bank will start with a large pool of dgc and from then on the fees earned by the bank on transactions will be more than enough to cover any difference in costs to purchase more dgc if need be. I guess Baritus can give us a definitive answer on that scenario tho :)

Seems like a good idea actually...

There is one guy in here implying (it seems to me) that baritus is doing something underhanded by always making a profit! God forbit he would want to make a profit! lol...

But it seems to me that this is mutually beneficial, the invester would always make a profit too. Well okay maybe it is not guaranteed for the investor but they have a very good chance...

If the price goes up = profit for invester

If the price goes down then sell back and buy back in at the cheaper rate, you could obviously buy back more coins than you originally had, then wait = profit

I would defo use this service and I think it would most certainly offer DGC some stability!

I can see many services like this springing up!

Look forward to the garnd opening, though if I invest will depend on the fee! ;)

The bank retains liquidity in the following ways:

1. Shareholder involvement: Shareholder investments into the bank will be the primary source of capital. Shareholders will be repaid through monthly dividends resulting from the issuing of options and the trading of them.

2. Fees: The secondary source of liquidity will be fees from the issuing and trading of options. A percentage of fees(voted on by shareholders), will be set aside.

3. Loans: Since the bank is fully backed by equal assets at all times, it can take DGC loans and repay an interest rate equal to a percentage of fees generated from issuing options. This bank has no risk of default.

How u can think about loans.... can i ask a loan? and disappear? In my country corruption is this high that it is easy to stay away from the law.

Or you are thinking about something like the "jak bank"

Centralized banking for a free and open coin? hmmm...

Decentralized banking using a decentralized currency where anyone can become a shareholder and use the services.



There are no loans, the bank can itself borrow money but does not lend. It will start with the focus on providing the services listed in the first post.

Now this, I like :) Thx for clearing that up! Sounds much less malicious now :) Carry on~!

Thanks for explaining how this service is going to work in more detail Baritus. Can't wait to become a shareholder, and see it up and running :)

Sorry if this has been mentioned, I did read the whole thread but can't remember reading anything about it.... What if you have DGC already? Can you deposit them in the bank? How would that work? Would you still be guaranteed a price etc?

Great news for all of those how invested in ARG:)
Also news on the DGC bank;)

 ;D

This does not work.  The bank will get crushed if DGC falls in value.

Simply put, the bank is guaranteeing a counter-party a profit while assuming all of the downside risk.  If DGC falls, the bank will end up holding the same quantity of an asset that is now much less valuable.

it is still the same amount in dgc so there is no "loss"

Any value DGC has at this point in time is relative to its BTC or USD exchange rate.  Believe me if you buy $10k worth of DGC on Cryptsy for too high of a price and it falls 90% in value, you just lost your shirt.

If the bank buys back $10k of DGC worth $1k in market value, it just lost its shirt

Look guys I hate to burst the bubble on this but it is just simple economics.

Consider the case of a pawn shop owner who gets the great idea that he can sell more physical gold if he guarantees to always buy it back for the purchase price ...

Oops.  Welcome to bankruptcy, Mr. Pawn Shop owner.

There's no reason for him to go bankrupt. He just ceases making money on gold, which is why he wouldn't do it.

The pawn shop can't mint gold.  He has to buy it at market and, with that scheme, he would be guaranteed to lose money every time someone returns it.

Simple economics.  If you guarantee a counter-party will always break even or make a USD profit, you incur the USD loss if the asset goes down in value.

If Gold goes from $1400 an ounce to $1 an ounce, admittedly an extreme example, the pawn shop owner ends up buying back a near worthless asset with hard currency.  He didn't acquire that asset for free - he had to buy it (!!!)

The error in assumption everyone is making here is they assume DGC is free for the bank.  That is NOT the case the bank needs to acquire DGC on an exchange for USD or BTC

This is only true if he buys gold to meet the demand of everyone who wants to buy gold from him. If he only sells the gold he owns he won't lose any money at all.

What would happen is:

1. Pawn shop offers to sell gold, but buy it back for 1 month at the price you paid.

2a. The person brings the gold back because the market price decreases, the pawn shop breaks even.

2b. The price of gold rises, the person does not sell the gold back and lets the option expire. The pawn dealer keeps the money from the purchase.

EDIT: Since, you changed the post while I was typing. Baritus said the bank will be funded initially by purchase of shares with DGC. The bank will only sell what it owns, they will sell it as an option with an expiration, and the shareholders will receive dividends based on the premium the the purchaser pays for the initial DGC.

So highlighting the error.  Everyone assumes that the bank can simply "mint" $1,000 of DGC out of thin air while holding onto the $1,000 in deposits as an escrow.

Hence, they assume the bank incurs no loss since it can just return the $1,000.

What people ignore is how the bank gets the DGC.  They can't just mint it.  The bank needs to buy a large quantity of DGC at market value or, more likely, it would need to buy the DGC using the capital provided by the buyer.

Hence, the bank NO LONGER HAS THE $1,000 since it HAD TO BUY THE DGC WITH IT.

Hence, when DGC crashes and the buyer comes back for his refund the bank has to come up with $1,000 out of pocket.  If the DGC they buy with it is only worth $1, admittedly an extreme case, the bank just lose $999

I edited my post to explain this.

let me be more clear - the pawn shop owner is assuming 100% of the risk if the asset declines in value while, in exchange, getting NONE OF THE UPSIDE.

That has enormous negative value.  It is like selling a call option to someone with no premium.  Every investor on the planet would be lined up around the block to take the free option.

Look I trade options very regularly.  I cannot express in words how bad of a value proposition this is for the bank.  They are guaranteeing speculators a profit.

I'll buy all the DGC they have FOR THE LIMIT please.  Put me first in line.

Have you read the rest of this thread where it was explained?

Let's say I buy 10,000 at 1,000 DGC/BTC.  I pay 10.5 BTC with 0.5 BTC fees to the shareholders. At the end, you can sell your DGC back for 10 BTC. It isn't entirely free, the bank just provides risk averse trading (as is mentioned in the title).

What does the bank gain from this? DGC liquidity. The ability to purchase DGC for USD. That's the only part the devs care about.

fenican, I will try to explain it again, anybody feel free to correct me please.

10 shareholders give 100DGC each so the bank has now 100*10=1000DGC to borrow
You pay 1BTC+0.05BTC fee for 1000DGC and you can have it back 1BTC for 100DGC for let's say, 1 week

DGC rate goes up:
You sell it on exchange because you can now get more than 1BTC

DGC rate does down within 1 week:
You can get 1BTC back from the bank

Now please explain how shareholders lose because I cannot see it, they still have 1000DGC (initial investment) + 0.05BTC

+1. It can be hard to grasp at first but it's not a scam or a horrible idea like many are suggesting. This is another really innovative service from the DGC dev team.

If DGC goes up, the buyer will NOT be returning any DGC to the bank.  To make shareholders whole, the bank will then need to acquire additional DGC at a higher rate incurring a loss to the bank or the bank will need to return less DGC to the shareholder.

This is a zero sum game.  A bank and its shareholders cannot guarantee a speculator a profit without incurring counter-party risk.  

This is a proof by inspection problem that, absent some profoundly huge fees (an option premium), the bank and its shareholders will lose money over time

They are essentially writing a call option with no option premium.  Nobody in the investment community does that because it is a money losing proposition.  Why do you think there are no similar services for Gold or Silver?  Except for an outright scam, a company would be out of its mind to guarantee cash refunds on purchase of a highly speculative investment.

If this goes live, just buy 100% of the bank's DGC and then dump it on an exchange if the price goes up.  Free money for you.  Bad day for someone else.

Let's play out the two different scenarios, because it's really quite simple. In both scenarios, the investor purchases 10,000 DGC for 10 BTC with a 5% fee, making the total purchase 10.5 BTC. THe contract expires 30 days from purchase, and the investor can return the DGC at that time for 10 BTC.

Scenario 1: The price of DGC doubles.

The investor removes the money from the bank and sells the DGC on the exchange for 20 BTC, netting himself a 9.5 BTC profit. The shareholders split the 0.5 BTC fee as a dividend. The bank purchases 5,000 DGC with the money from the expired contract, and sells those 5,000 DGC to a new investor for 10.5 BTC.

As you can see, even if the price increases, the shareholders keep getting dividends from fees and the bank always keeps the exact same capital that it had to begin with.


Scenario 2: The price of DGC drops in half

The investor sells back the 10,000 DGC for 10 BTC, losing 0.5 BTC for the initial fee (the bank covered 95% of the losses). The bank then resells the 10,000 DGC for 5.25 BTC to a new investor at 2,000 DGC per BTC.

The situation is not ideal, but the shareholders continue to see dividends, the bank has the same capital, just in a different form (DGC vs BTC).

You are correct that no trading firm would do this with gold or silver, because it leads to the possibility of 100% net loss. What you are not seeing is that the bank and the shareholders only have DGC invested in the process. If DGC goes to zero, they just end up with the same DGC they started with, plus a little bonus from fees in the form of dividends. Without the bank, they would have just had a bunch of DGC that is worth nothing.

If the bank goes under it is because DGC failed. If the price of DGC increases, the bank will always maintain the exact same profit margin, just on smaller and smaller portions of DGC that it can buy back with the money from expired contracts.

Please find a loophole in this, because if there is one, it's better to get it now rather than waiting until later.

Excellent explanation, and what also needs to be understood is that the bank offers the ability to trade your contract with other people. This is another source of income because of the fees to the bank.  You also own the contract even if you sell your DGC.

If I buy from the bank at 00026 and it goes up to 0005 and I sell, the bank made money off my fees and I made money off my sale (more than covering the fee I paid the bank for the contract)

Now the price collapses to 00015 and my contract hasn't expired yet. I sell my contract to Joe Blow through the bank. The bank makes more money on fees, I make more money on the sale, and Joe Blow gets to sell his DGC to the bank at 00026 which means he makes more than on the open market, the bank now has its original DGC back (plus more fees).  So even though the bank gave up the original BTC or USD or whatever, it got back the same amount of DGC it had originally plus made out on fees. Everyone's happy.

or mine it - or get it from fees from the Cryptsy exchange -

seems legit - the devil is in the detail - so the bank gets more fees on the re-sale of the contract ?

The bank gets fees if you sell your option to someone new, but I don't think they get fees if you call in the buy-back option.

Your logic is correct.  But this is the crypto world.  This 'bank' is not legally bound to fulfill this 'contract'.  This could be the ultimate of scams.

Baritus, do you take USD or just BTC?

First, you must agree that it is a zero-sum game.
If the buyer can't lose money, the bank can't win money.
If the buyer can win money, the bank can lose money.

The loophole is

Scenario :
(the bank has initially 0BTC)
The investor purchases 10,000 DGC for 10 BTC with a 5% fee, making the total purchase 10.5 BTC :
The bank purchases 10,000 DGC with the money from the  contract, and sells those 10,000 DGC to the investor for 10.5 BTC
(the bank has now 0.5BTC)

1) First the price of DGC doubles
The bank still have 0.5 BTC.
A new investor purchases 5,000 DGC for 10 BTC with a 5% fee, making the total purchase 10.5 BTC :
The bank purchases 5,000 DGC with the money from the contract, and sells those 5,000 DGC to the investor for 10.5 BTC.
(the bank has now 1 BTC)

2) Then the price of DGC drops in half
The investor sells back the 5,000 DGC for 10 BTC, losing 0.5 BTC for the initial fee (the bank covered 95% of the losses) :
The bank sell 5,000 DGC with the money from the contract, and obtains 5 BTC.
Then the bank gives 10 BTC to the investor.
(the bank has now 1+5-10 =  -4BTC).

The bank wins nothing when the price goes up, but loses when it goes down.

except for the fee - and a fee if it is on-sold, but i don't see a huge market incentive to on-sell there - so , mainly just the original fee - 

Don't forget - as I understand it the basis of the whole idea is to build interest in DGC itself, by providing risk free entry into holding / trading DGC. This would surely benefit DGC as a whole on a far greater scale than just what the bank makes in profit. So if it works and people invest heavily in DGC because it is a risk free investment it would be mission accomplished with the extra bonus of a small percentage of fees as profit.

Yep one of the things a coin needs to break out and become more popular is great services. This could very well be one of those great new services that puts dgc out in front and sets it up for the future. Can't wait to see it in action.

cool ！

You have it wrong. It is absolutely impossible for the bank, if run correctly, to have a negative BTC balance.

The bank will not use the BTC from a contract until said contract has expired.

Also, it is not a zero-sum game. The investor is risking 5%. The bank will always increase its BTC holdings in this scenario.

Yeah sounds pretty logical to me. I'm sure Baritus has been over all the scenarios many times before even starting work on this great new service.

Please Donate some Crypto

BTC:
1GvMzgTgXikgHF9zEjsNaBPxwTBdvKD3jU
LTC:
LMZ5aQSXixu2yFoqtBfPiqjsqY3iF8W6NH
FTC:
6yhYJ4onCSNpSXrMPpQ7HfD6F7bv5N47Va
DGC:
DH1VCqWVffyT65k3NZRBh7zpGmfWh9tq3x
PXC:
PnpaD36FWRBrqBd4XeoJh8yLhNsDpzrNxw
ARG:
ANhTeKu8NaeqUySgiV6PZiWKAZL5XpiEZZ
WDC:
WdmU2g4xZMRLkX2jJ2149e2V9m23eCfm9Q

I think DGC definitely has a future ;D

when is the launch date set?

This bank is like a huge buywall, which will keep price from falling.

Price will keep going up and so the biggest problem will be to get enough DGC into the bank.

Baritus explained that the following will retain liquidity:

1. Shareholder involvement
2. Fees
3. Loans

Shareholders invest expecting a return, and this return is proportional to the fees charged by the bank. The people who loan money to the bank do so also in proportion to the fees charged by the bank.

So how does the bank determine the fee? This seems like the most crucial question. If it is too low, for instance, shareholders (and people giving loans) will simply buy DGC from the bank instead of investing in it.

Still taking donations! :)

You should only donate to proven DGC-represented addresses posted by baritus or others on the team. Everything helps!

Lets take DGC to the next level...

all your posts are just begging and posting wallet addresses into free-giveaway topics...
is there possibility how to buy directly shares od DGC bank?

There won't be a way to purchase shares in the bank directly until it's launched. The bank will now likely be added directly into the exchange itself.

That way users and merchants can exchange, process payments, and hedge all in the same place.

Shares of the exchange are available until August 5th through the fundraiser thread: https://bitcointalk.org/index.php?topic=262648.0

Sounds great having it all on the one site. Looking forward to it!

ETA on this?

I have got a question. Is this bank taking some legal issues into concern? Some money laundering prevention in DGC exchange? Several exchanges had problem with this. Traditional bank needs to have a license, although this will not be a traditional bank, is it legal?

Is this project still alive?

friendly bump :)

This is a GREAT idea, looking forward to using your service! (& you should absolutely be able to profit from this, it would burn you out & collapse if it wasn't worth your while)

Bump?

Project is still alive. Its scheduled for phase 2 after the release of CryptoAve.  :)

CryptoAve is set to launch tomorrow.