Bitcoin Forum

If I deposit some Bitcoins with a trader like Kraken shouldn't I be earning interest on my bits?

Banks pay interest because they lend your deposit to people at a higher rate. It also protects you against inflation.
Bitcoins are more like gold. Interest isn't paid when you store your gold somewhere. both gold and bitcoins are hard to lend. Bitcoins even have deflation.

Thanks. By deflation my bits are losing value?  ???

It's the other way. Inflation means losing value and deflation means appreciation.

But to be more presice, BTC is still in the inflation stage and around 4000 coins are mined everyday.

Inflation is when BTC prices are going up. Btc is in the deflationary stage.

There are gold loan interest rates. Any valuable asset can be loaned for a rate in return. Gold is hard to loan because it can be forged.  Bitcoin does not have this shortcoming. Gold is also indivisable, hard to spend for daily use, thus not suitable for use a money nowadays. But Bitcoin is a combination of gold and money. Anything you do with money can be done with Bitcoin.

In theory bitcon can be deposited in a bitcoin-bank with an interest rate. People may ask where does that interest come from since it's a deflationary currency. The answer is: as long as there's business going on, as long as there's investment and return going on, there can be bitcoin interest rate. In short the interest rate comes from the risk the invester takes (the bank being default, company going bankrupt...). In other words it comes from a successful business that is financed by the bitcoins lent. It comes from the bitcoins (or dollars or any other currencies) that the cusotmers spent on buying that services from THAT business.

The only thing preventing interest rate from happening is that bitcoin is not yet acknowledged by law as an asset, so it is hard to sue anyone if he doesn't return your bitcoin. Once it becomes a legal asset, I don't see why interest rate won't happen.

Looking into the future, there will be bitcoin bankers, and bitcoin-backed fiat. I can imagine that the technically versed may be able to manage their bitcoin asset on their one and potentially able to manage bitcoin assets for other people, and thus become bitcoin bankers. While the non-technical people who don't understand the technology enough thus cannot take the risk, will have to use bitcoin-backed fiat. This is similar to the ancient times, when the nobel class use gold, and the poor use coins minted by the king.

So I am confused, are these things inflating or deflating? I'm guessing inflating erodes their value so we must be deflating? And what happens when we reach 21000000 Bitcoins on the market?

Btcs are inflating as they are still being issued at a rate of 4,000 per day.  However, the value of each Btc is rising due to demand. Demand is outstripping available supplies.

From that perspective, even though btcs are in the inflation phase, they are overall considered to be deflationary because goods and services are falling in price when priced in btcs.

So a currency can both inflate and deflate at the same time?

I do not think any site pays interest for BTC. You can try storing it on cloudmining sites.

inflationary in short term (# coins is still increasing thru mining), and deflationary in long term (after reaching the 21M limit the # coins will start to decrease). But this 21M hard limit has a very strong psychological effect even in short term, so people have been trying to save as many bitcoins as they can, knowing that the bitcoin supply will eventually decrease. Thus even though the total number of bitcoins is still increasing in short term, the bitcoins truely in circulation (being spent daily buying goods) are already decreasing. (It's increasing in terms of USD value, but descreasing in bitcoins number). Not very long ago there must have been someone who spent thousands of bitcoins buying a hamburger. That was circulation. But now how many bitcoins can be earned by selling a hamburger?

So over all it is a deflationary currency. But bitcoin's deflationary nature won't cause an economic recession simply because it is not the only currency. Don't worry about it. The world economy will move on happily because we still have other currencies like the fiat. In ancient times, we had the gold standard. Gold did not cause economic recession also because it was not the only currency. The nobel class uses gold, while at the same time they minted coins and printed paper notes, which were very inflationary, for the poor people to use.

Bitcoin is a deflationary currency, so doesn't need interest rates.

As more dollars are printed they buy you less Bitcoins.

This is because the supply of dollars is increasing faster than the supply of Bitcoins.

Inflation is a currency phenomenon. The more money you create the less it's worth.

My fiat bank account is paying 1% while inflation is running at 11%, in effect they're stealing 10% of the value a year to bail out the banks. Inflation is a stealth tax.

As nobody can print $85bn new Bitcoins a month to keep up with the Fed, the value of Bitcoin rises instead.

No, btc is deflationary so you don't need to earn interest

The meanings of "inflation" and "deflation" are ambiguous.


In economic terms, Bitcoin is currently inflationary because its money supply is increasing. When no more bitcoins are mined, then Bitcoin becomes deflationary because its money supply can only decrease as bitcoins are lost.

In layman's terms, bitcoin is currently (and probably will always be) deflationary, because the demand for bitcoins is increasing much faster than the supply, and as the value of a bitcoin increases, the prices of goods decrease.

Hello

What a risk free BTC interest rate could look like ?

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2432367

 ;)

I think that right now the only Bitcoin exchange which is offering interest on your deposits is Vircurex. But unfortunately, that exchange have been hacked multiple times in the past. So not that secure to store coins there.

What happen with the frozen accounts on Vircurex ?

I seen Bitcoin interest services like pirate or TradeFortress but somehow they just dissapeared one day with the Bitcoin deposits, I dunno why  :D

Actually, over the recent few months, bitcoin has been inflationary both in economic terms AND layman's terms.

http://bitcoincharts.com/charts/bitstampUSD#rg180zigHourlyzczsg2013-11-29zeg2014-05-09ztgSzm1g10zm2g25

https://i.imgur.com/qgp8iZd.png

No because your bitcoin are not being used for something else (like investement or being lended to other people as with banks) in fact it should be the opposite lol since they are providing a service by storing your coins, and don't forget don't leave much of your coins on exchanges or else you risk to get goxed

So, in economics terms, bitcoin will always be in inflation, until block reward become zero, right?

Maybe.

However, there will probably always be people losing small amounts of bitcoins (hard drive crash, lost password, deleted private key, etc).

Meanwhile, the block reward will get VERY small:
7.03124928 BTC per day in 2050
0.10986192 BTC per day in 2075
0.00085824 BTC per day in 2100
0.00001296 BTC per day in 2125
0.00000144 BTC per day in 2139

If the amount of bitcoins lost each day from the total supply is more than the amount of new bitcoins created, then you could say that is when deflation begins.

Wait so I had the similar mind as well this, but I wont be alive to see those prices since its prob in the near 2140.

I am also newbie. Its clear to me that I will not get any interest. One member saying that BTC is in the inflation stage, other saying BTC is in the deflationary stage. Its quite confusing to me. If 4000 coins are mined everyday than BTC must be in inflationary stage.

Yes, you are correct.

Of course NO! There is no inflation so no interest for keeping money. Welcome to the new world without banks and              debts.))))
Дoбpa!=)

Yes, you are right.


Maybe you could read post #16.
And to your surprise, borrowing and lending (with interests) exist in the bitcoin world. FYR: https://bitcointalk.org/index.php?board=65.0

I don't think that Vircurex pays any sort of interest on frozen or inactive accounts. However, I am not sure, and you will have to raise a support ticket to make sure of that.

Is there a site, where you can draw reports on what the rate was daily for say the last year.

Or year on year?

I only recently started looking into "Bitcoins" and want to see, how it fluctuated from year to year.

Hope someone can help.

You just see people making statements like ..."In 2009 1 bitcoin was 0.0000001 cents and now it's $400.

Thanks for any reply.

bitcoincharts.com/charts/ (http://bitcoincharts.com/charts/)

Just buy several stable POS coins and get income from 20 to 100% per year.

You can get interest on your bitcoin on at least two exchanges:
www.bifinex.com you have to lend the bitcoins to other traders, the rate is low, but it's trustworthy
www.mcxnow.com you don't have to lend the coins, interest is paid just to have them there. On the issue of trust, opinions are divided. The owner adopted some controversial commercial practices, but he warned everyone to withdraw their money when he limited the trading at the exchange and came back

That is not true; banks are not allowed to loan your deposited funds.

Lending the money that is deposited on your account is the goal of any bank.
I think you wrote something you didn't want or, at least, your sentence isn't clear.

That is not true because bank loans are generated ex nihilo.

Professor Hyman Minsky once wrote “Banking is not money lending", which is to say: Banks do not have money to loan as a matter of fact.
Source: http://www.positivemoney.org/2013/06/banks-dont-lend-money-guest-post-by-michael-reiss/
Related source: http://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/

The bank would first need your permission because a deposit is not property; it is a debt owed to the depositor.
I posted more info to this thread: https://bitcointalk.org/index.php?topic=521992.msg6039543#msg6039543

Under a formal perspective, your money is still at your account, so the bank isn't lending YOUR money, is creating money based on your money. True.
But if you opened an account with paper money, YOUR money is going to be lent or paid to others. It won't be sitting there waiting for you. And they don't need your consent to lent it, it's implied on all banking regulations.
And, in any case, they will use your money as the base to lend to others, by creating banking money.
It's the base of fractional reserve Lending.

You are incorrect; banks never lend out reserves, and they are not in the business of loaning money.

Did you follow the links which I graciously provided?

Here is Forbes magazine saying the same thing:
http://www.forbes.com/sites/francescoppola/2014/01/21/banks-dont-lend-out-reserves/

Please verify this for yourself and then we can resume the discussion.

The number is inflating. The value is deflating. Two separate things you're looking at.

Overall we'd say that the coins, as a whole, are deflating.

ever heard about inflation related to price. If a gov prints money, people say that they have inflation because the price is rising, not because there is more paper supply, but because the price is rising


vircurex offers interests on bitcoin balances (if you have 1 btc or more), payment made every 6 hours, but they have been hacked this year, so up to you take the risk or not

Playt.in also provides interest payments.

I think it's a 4% annually with a payment every 6 hours.

More than that. Their average over the past month or so has been ~270% APR. That's around 25% a month.

InstaForex is a broker who will accept bitcoin deposits and pay 5% APR to active accounts (2% for inactive accounts), but they do not allow US citizens/residents.

I guess you're talking about the average of their bankrol shares wich have a much higher (but sorta unstable) yield.

I was. I didn't see any other way to invest in the site or anything. Were you referring to something different?

Yes. Recently they added this interest on deposits I talked about. 4% annualy with 6 hour payments.

Text below from their website:

Interesting, I wasn't aware of that. So it's more or less a choice between a liquid deposit and getting 4% or buying shares and getting 80x that but not being able to liquidate it at its full value at any point.

No you will not. Exchanges are not lending you any funds, you are simply depositing funds to the exchange so you can buy/sell coins.

Indeed, Vircurex does pay interests for your deposits, but I won't recommend anyone to do so for obvious reason.

The question is, can Playt.in be trusted with larger deposits or will they just disappear one day with our coins?

Don't leave your bitcoins in a "bitcoin bank". Your coins aren't insured unlike your fiat in your fiat bank.

The safest method to store bitcoins is cold storage, if you put your btc savings in other hands you can lose them all.

I can't answer this question myself but what I can say is that I've trusted them myself in the past. And certainly I'm not the only one. About 800 shares have been sold and one is worth 1.42BTC at the moment. They've been running their website for quite a while now and they're also active in the forums. The only time I had a problem (it was in their exchange) I sent a message through the forum and it was fixed the next day. I'd defenetly trust them again but it's up to you to decide if you would do the same.

If you want to earn some interest with your bitcoin, you could lend it out to others https://bitcointalk.org/index.php?board=65.0.
The risk should be pretty low, if you only do so with collateral.

The price of altcoins can be much more volatile then the price of BTC. There would still be the possibility that the borrower defaults and the price of your collateral crashes.

You also have the risk that the person handling your escrow scams you, even if this risk is low, it would dramatically impact your returns.

Lending BTC can be risky but the interest rate you earn is significant

Well you didn't get that well. BTC is not paying interests, since you don't lend them to anyone. But you can make money like this way:

1 buy btc at 500$
2 sell btc at 600$
3 buy btc at 550$
4 sell btc at 650$

or any other way that you make more than you paid for it.

i prefer save my bitcoin in my local wallet instead store it to exchanger/bank/anywhere who offer us interest ;D
yeah trading is good way to make more BTC...
... if you buy and sell at right time.

If you bought Bitcoins in 2009 and you sold it now, you would have made better interest, than ANY bank would have given you, on your money, over the same period.

Banks do not loan money, that you deposit, these days, they pay themselves and Sport sponsors and security services, and then loan from reserve banks, who print more money than they have, and then loan you money, at incredibly high interest rates, until you cannot pay your loans, and then they sell your house and get back some of the money, and the rest of the debt, are sold to "bonebreakers" at a profit, to gather profit from that... rant rant rant.  ;D

Just invest your money long term in Bitcoins, and get massive returns in 3 to 5 years from now... "If you look at the graphs, of the price of bitcoins, from 2009 until now, you would see a lot of fluctuation, but it's still a lot higher, than it was in 2009"

It can be very difficult to accurately predict the highs and lows of any market, let alone the bitcoin market

That's true. You should consider bitcoin a long-tern investment, and you don't need to get excited or worried for the daily ups and downs.

People lending out btc is usually looking for 110%-120% LTC collateral, and the loan is usually a short-term one.
Of course, there are some risk, but you are rewarded with interests. :)

LTC is usually generally safe collateral but any other alt has a very good chance that there would be a loss in the event of a default

You can earn interest on BTC deposits through Bitfinex. The funds are loaned to traders taking a short position. The risk you take is the solvency of Bitfinex. The rates are very low. About 1.5% p.a. But in a way, that is quite reassuring.

Nice to know that there are people taking short positions as well.  ;D

IMO, the margin trading is the main selling point of bitfinex. https://www.bitfinex.com/pages/howitworks#margin-trading

Just dice used to pay around 30% rate on bitcoin as an investment.

That's the average return rate, but too bad the opportunity is gone now. :(

i wouldnt trust anyone giving more than 10% interest/year.
there is just too much bad history, remember the pirate ?

I agree with you. I haven't found any site which is providing such kind of interest for the deposit of BTC.

Unless you want the site to operate on a frictional reserve system and lend out your coins you are not going to earn interest on them

Some sites pay interest, like mcxnow.

But it's safer to keep your coins yourself, otherwise there's a risk.

You need to control the private keys.

Well, the JD case is not really interest but investment returns.
And doog has proved his trustworthiness before and once again after JD stopped all betting a few days ago.

But, I do agree that many of the "investment programs" have turned out to be scams, such as Pirateat40 and TF...