Bitcoin Forum

In an apparent step to increase liquidity and attract users, Japanese cryptocurrency exchange Bitbank has announced a bitcoin burrowing program.

One of Japan’s 16 full-licensed cryptocurrency exchanges, Bitbank offers eight cryptocurrency trading pairs and is ranked 31st in the world in terms of total daily traded volume.

Interestingly, Bitbank is seemingly stringent with its 12-month lock-in period.

Interestingly, the exchange’s rival GMO offers a much better deal for users with regards to a lock-in period – offering a three-month minimum timeframe for users who lend their bitcoin, and a 150-day timeframe for other virtual currencies, such as ether, ripple, and litecoin.

https://www.ccn.com/this-japanese-exchange-will-burrow-your-bitcoin-for-a-yearly-fee/

In other words, it's a legal ponzi scheme.

People keep blaming banks for being jerks, but crypto related services holding your coins aren't any different. In no shape or form do you own anything until the service in question returns your coins and you are the only one with access to the private key(s).

People need to understand that regardless of how reputable certain services may be, they don't hand you over free money. Your funds are exposed to high risks, which they can cover as long as these services remain solvent, but what if they become insolvent at some point? You definitely don't want to find out what's going to happen afterwards, so don't 'lend' them your coins. Don't let others gamble with your funds, ever.

It is not a ponzi scheme. The exchange does not pay this interest / yearly fee out of other's deposits. The exchange will not collapse if new customers do not come in.

Exchanges use these funds to lend bitcoins to customers who want to short them. As long as the margins are appropriate for Bitcoin's volatility, it is not that risky. This is something which takes place in the equity markets as well and nobody calls them ponzi schemes.

This could well be the first fully regulated return available for crypto anywhere ever.

What is their insurance cum guarantee situation? Since many a government doesn't guarantee bank balances above a pitiful amount I don't see how they can guarantee this. I doubt their insurance has been put to the test and I wouldn't want to be a guinea pig.

there was/is an exchange that did almost same https://vircurex.com/
they offered interest if a trader kept balances over a certain threshold,think it was 5 btc
guess what happened? yes,they stopped paying the money and froze the balances
so think twice if you want to keep your coins locked at an exchange
p.s. its borrow,not burrow because it sounds much grimmer

You'd have the full weight of Japanese law behind you if these exchanges tried to pull the traditional piece of shit moves.

That joint was nothing but just another nothing from nowhere. These exchanges are unlike anything available anywhere else.

It might not be the standard definition of a ponzi scheme, which is why I called it a legal ponzi scheme, but the core structure is almost the same.

Third party wants to put your coins to work; check.

Third party promises you a reward per whatever time frame; check.

Third party can mess up with coin loss for you as result; check.

We are talking about a party that doesn't have much past history in this field, which is what I consider to be an extra risk. The problem with this is that it works till it doesn't work anymore, and when it doesn't work, you have no insurance, no backup fund, nothing. Perhaps I'm too paranoid, but we shouldn't take risks with semi high probability of losses.

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