Sure, miracles do happen all the time.

Indeed! If he does not have non-competition agreement. Zhou could should develop a new Bitcoinica in the next 4 days and many people would transfer deposits from old Bitcoinica to new one at the first opportunity.

LOL, Zhou is running a pro PR campain here (and winning this little PR war hands down). Bravo! Something to learn for many parties involved.

Yep, security experts are being compromised all the time. They are on forefront so they get hit more often. The fact of compromise is not that important as how they prepare for it, assess the risks and mitigate them on ongoing basis.

I dread the moment any of my servers get compromised some day, for the first time.

Now this all suddenly makes a lot of sense!

Another question. Does anyone know now many BTC denominated loans that were made slightly more than one year ago below 1$ have not been defaulted on (or restructured to be USD denominated)? Care to guess? 100%?  50%? 10% maybe.

What will happen with all these loan portfolios if (when actually) BTC exchange rate jumps 40-50% in one month?

OK you have convinced me. Will launch FF+tor and set's up a proper anonymous identity (or use a previously prepared one), will borrow at 280% per year (or more) and will invest into MMM at 50%-60% per month. Looking forward to paying up interest up until the death of MMM, let us all pray it will last a few more years. But biz model is very sound. Once MMM fails will set up a new identity or ten and invest into MMM III. Rinse and repeat.

Disclaimer: no I am not going to do that, just kidding. But others will, I bet.

ohh sure it could be whatever, there are loads of various hypes, or let's say a portfolio of HYPE's. Invariably the point still stands, our hypotetical GLBSE investors of BMMM invest by proxy into unknown risks that are 2-3 orders of magnitude higher than investing into some kind of MBS (morgage backed securities).

Per week per month or per year? Do you remember the days (in an OECD country) offering 6000% annual deposit rates?

BTW I am not saying that lenders or you specifically are doing something badly wrong. I am saying that it is very possible that a significant part of borrowed money ultimately ends up in a ponzi scheme and once that implodes you will face defaults.


Most of last six month MMM "investors" have been making a killing too.

OK, cool, here is new version of how one can invest into a ponzi scheme on GLBSE:

consider the following hypothetical GLBSE listed company.

Someone places BMMM IPO on GLBSE. The company does not disclose what they do, however they pay rather good dividends. Everyone is happy (for now).

What they do is the following, BMMM loans BTC to a number of effectively anonymous identities on the internet, these anonymous borrowers convert BTC's into USD's and "invest" it into a ponzi scheme http://en.wikipedia.org/wiki/MMM-2011 run by http://en.wikipedia.org/wiki/Sergei_Mavrodi that reportedly currently pays up to 50% per month of "dividends". BMMM pockets 30%, pays out 20% to their "investors". They also hope that with such "profitability" they will be able to accumulate enough money to buy out the shares once the "master ponzi" breaks down.

see also (google translate if needed) https://bitcointalk.org/index.php?topic=77316.0
and read up on to http://en.wikipedia.org/wiki/Stockholm_syndrome it might get applicable.

The above is a ponzi scheme by proxy which BTW is pretty close to what all the investment banks out there are doing with the central banks and ultimately the fed being the "master ponzi".

Note that I have added to previously posted scheme only what is highlighted above in bold. If so this is still a ponzi scheme by proxy or two. Kind of p2p version of ponzi scheming where some can claim that they have no effective knowledge of any wrongdoing and therefore avoid any liability.

If this is true, the end result is the same. Just wait until MMM collapses and see how all the bitcoin lenders go under overnight.

Yep and it took Ford exactly the same amount of time to make their #1 car as their #2 car and their #10000000 car.

gigavps, hmm, interesting, thanks.

However, I might be especially slow today, but again why would anyone in his right mind borrow at 1.5% a day? Except to invest into some ponzi scheme or just because of being completely irrational?

So I am happy to admit that there is

3. The issuer acts as a proxy and simply a conduit of some set of other irrational actors passing some huge risks to investors/gamblers. This is pretty close to 2. just one more proxy on top of it.

Any risks of Bitcoin going to 0 tomorrow do not really justify 1.5% a day or 10% a week interest rates. The only justification of that would be huge risk of default. Of course those could be diversified over a large number of borrowers and as such mitigated to some degree.

So pirate, are you paying 10% weekly dividend to lend it out? This would make sense potentially. However, doing it without disclosing the risks to investors is not nice, IMO.

Oh there are doubts what you are paying interest in. Or more accurately that you prefer to have 2-3 orders of magnitude higher cost of capital when denominated in BTC as compared to cost of capital denominated in USD. This much is clear and really indisputable.

My statement is still not refuted:


Is there a third possibility? If yes what it is? If not, is it 1 or 2?

P.S. I am aware of only one biz model where 10% per month cost of capital would make sense. It is a ponzi scheme.

guys in all your risk management discussions corn vs beans you completely miss the point of 2-3 orders of magnitude higher cost of capital on one as compared to another. It all would be nice an dandy if we were talking about 2-3 times differences, but not 2-3 orders of magnitude.

My point is very simple. When some company pays "investors" 10% per week when capital could be obtained otherwise at 2-50% per annum, no matter whether it is listed on NASDAQ or GLBSE or elsewhere, there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

Of course, I do not have to understand. But until I understand, Occam's razor suggests this https://bitcointalk.org/index.php?topic=82849.msg915121#msg915121 .

This does not explain desire to pay 2-3 order of magnitude higher interest. This also demonstrates that such GLBSE shares based on value of "pet rocks" would offload some unspecified but huge risks to "investors".

Also you completely ignored BTC risk mitigation options that ought to be by orders of magnitude less expensive than 6000% annual interest rate.

Basically you have failed to coherently answer the 3 questions which really make more sense in combination.

What you said is basically let's suppose BTC are as worthless as pet rocks and it makes sense for me to pay 6000% per annum on those pet rocks.

I am still at loss on why would one prefer to pay 2-3 orders of magnitude more interest only to mitigate currency exchange risk. Based on historical volatility of BTCUSD currency exchange risk is not that big. This in combination with biz prowess allowing one to generate such outlandish returns makes even less sense.

my posts are unofficial.   just leaking some info here

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Why those risks could not be hedged or otherwise mitigated cost efficiently?

Why would anyone want to invest any BTC on GLBSE into such a venture?

Does it increase risk 100-1000 times?