[BETA]Bitfinex.com first Bitcoin P2P lending platform for leverage trading

[Sukrim]

High five to my fellow lenders, vir is over 800% even with the dampened algorithm!

Meanwhile going long on BTC today meant 20% gain in one day or 7300% apr. Just to put things into perspective.

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[im3w1l]

History of "Loan Trades" would be pretty cool. As of now, I can only see an orderbook.

[drawingthesun]

So if Bitcoin dropped to $100 a lot of margin positions would close and the lenders would get their money back.

However, has MtGox lag been taken into account? If the price drops the MtGox lag will delay Bitfinex closing those positions and then suddenly all the lenders lose their money, and not because of a "black swan" event, but rather a 50% drop that may happen any day now. I fully expect Bitcoin to recover from such a event but all the lender USD will be destroyed because of MtGox lag.

Is this a valid concern?

[Sukrim]

It is a valid concern that is discussed on the last 2 pages here already. On the other hand, a 50% dip would still return some USD, so lenders could be partially refunded.

I am not sure how these platforms work internally in the end, but I think it might be possible to have "stop loss" safeguard selling offers for the long positions so you don't need to get in new offers at difficult times. As I don't use mtgox I'm not sure if you can set up an offer that gets executed if a price gets crossed (e.g. sell 2k coins if the price touches 180usd) but it would be a nice thing to have if it doesn't exist yet. On the other hand offers like this would make it even harder if there's pump and dump, as the action would increase on both ends (sell and buy).

Edit: aaand 750k active loans! Congratulations!

[oakpacific]

So if Bitcoin dropped to $100 a lot of margin positions would close and the lenders would get their money back.

However, has MtGox lag been taken into account? If the price drops the MtGox lag will delay Bitfinex closing those positions and then suddenly all the lenders lose our their money, and not because of a "black swan" event, but rather a 50% drop that may happen any day now. I fully expect Bitcoin to recover from such a event but all the lender USD will be destroyed because of MtGox lag.

Is this a valid concern?

Yes, it's, in fact, I remember Raphael somehow considered this the greatest threat to Bitifnex's financial position.

They are trying to create a unified orderbook grabbing orders from all major exchanges so as to maximize their liquidity.

[urwhatuknow]

So if Bitcoin dropped to $100 a lot of margin positions would close and the lenders would get their money back.

However, has MtGox lag been taken into account? If the price drops the MtGox lag will delay Bitfinex closing those positions and then suddenly all the lenders lose our their money, and not because of a "black swan" event, but rather a 50% drop that may happen any day now. I fully expect Bitcoin to recover from such a event but all the lender USD will be destroyed because of MtGox lag.

Is this a valid concern?

Yes, it's, in fact, I remember Raphael somehow considered this the greatest threat to Bitifnex's financial position.

They are trying to create a unified orderbook grabbing orders from all major exchanges so as to maximize their liquidity.

Guys

the more we all trade on Bitfinex the less we are exposed to this risk.
Transactions made on Bitfinex will never have a lag problem as we are taking care of them by ourselves.
Please try to consider this next time you place an order.
The more you tick the "Bitfinex only" option the more your money will be safe.
And you'll also save money on commission (0.1% instead of 0.5%).
As previously stated the daily volume traded on Bitfinex is currently stable around 20% of the total, but we need to take it up to 40% as soon as possible.
I count on you all, together we can make it!

Giancarlo
Customers Relations
The Bitfinex Team

[Sukrim]

I guess the issue is not too few people wanting to buy BTC on BFX, it's too few people selling BTC there. If you want to sell BTC, you either want to go short or just need something that can only be bought in USD/EUR/INR/...

If you need fiat money, the sooner you get it, the better. If you can give more confidence that you for example regularly send out bank transfers within 24 hours and they arrive after 48 hours on average in the US or EU, this might get more people to actually sell BTC on your platform. Also you could look into Ripple integration and for example trust Bitstamp in that regard, so one can move fiat money into and out of Bitfinex via Ripple. These could then be redeemed at Bitstamp and withdrawn to the SEPA area much cheaper than your current 20 USD fee.

Again that would take some time and development effort, but to make your internal exchange more attactive usually the hardest part is to move fiat legally and quickly in and out as fast and safe as possible.

As MtGox will cancel their USD codes, this might get even more urgent. On the other hand, 1-2 more exchanges as partners would also greatly spread and reduce the risks as well as allowing for better depth, less lag and more options to redeem money at exchanges (e.g. Bitstamp codes).

Anyways, in the meantime I still can only recommend to people to get more short positions and sell more coins internally, it will help everyone involved and might get you nice profits if you believe that a crash is imminent too!

[Razick]

Our margin trading feature is unique in the Bitcoin world. Basically, it allows you to borrow funds from lenders (see next feature) to trade bitcoins. If you make a profit, you get the profit and pay the depositor interests. If you make a loss, you reimburse the depositors the whole borrowed amount.
For example, let's say you want to open a long position for 100 bitcoins. That means you want to buy 100 bitcoins hoping to the price will go up. The system will borrow for you 100 * the bitcoin price US dollars (let's say 1300 USD) from lenders, at the best rates available. Your position will have a maximum period (defined by lenders), after which you will have to reimburse the 1300 USD (close the position). Each hour you will be charged an interests rate going to your(s) lender(s). If later you want to increase your position, you can borrow more funds, which will have there own maximum period.
At any time before the expiration date, you can close your position. This will reimburse your lender, and you will keep the profit.
The same goes for short position (selling bitcoins), where you borrow bitcoins instead of dollars.
If there is no lender available, you will not be able to open your position. Your order status will be "NO RESERVE ACTIVE", which means that it will be executed as soon as there is funds available.
The trading wallet is used for margin trading. It does not serves the purpose of buying or selling bitcoins, it serves only as margin requirements; that is, even if you have 1000 US dollars in this wallet, if you open a 10 BTC long position, you will borrow the needed USD. Funds in this wallet are to cover for eventual losses that may occurs. When the losses covers almost all your wallet balances, you may get a margin call and have your position force-closed to avoid further losses.

Margin trading is really dangerous, be careful.

[legendster]

i dont know if anyone already asked this, but how would you compare yourselves with btcjam.com ?

[legendster]

Hi everyone,

Our project has grown quite a lot since when it started. As it is still in active development, I'm moving it to the project development section, and changing the OP to explain what it is now:

Bitfinex offers 3 main functions, working together. There is 3 different types of wallet, each one having a dedicated function.

Meta-exchange
Bitfinex works as a meta-exchange. It allows you to acess the orderbooks of others main bitcoins exchanges to have the best liquidity possible, while keeping fees lows. You can see the global orderbook of bitfinex combining all orderbooks available (level 2 order book).

The three main functions of Bitfinex
Bitcoins exchange

The exchange part works like any regular bitcoins exchanges: you put your offer to buy or sell bitcoins, on the global orderbook. You can choose to execute your orders only on mtgox, or only on bitfinex, for example; that's the routing feature. When an order is matched against another, it is executed.
The exchange wallet type is used for this feature.

Margin trading

Our margin trading feature is unique in the Bitcoin world. Basically, it allows you to borrow funds from lenders (see next feature) to trade bitcoins. If you make a profit, you get the profit and pay the depositor interests. If you make a loss, you reimburse the depositors the whole borrowed amount.
For example, let's say you want to open a long position for 100 bitcoins. That means you want to buy 100 bitcoins hoping to the price will go up. The system will borrow for you 100 * the bitcoin price US dollars (let's say 1300 USD) from lenders, at the best rates available. Your position will have a maximum period (defined by lenders), after which you will have to reimburse the 1300 USD (close the position). Each hour you will be charged an interests rate going to your(s) lender(s). If later you want to increase your position, you can borrow more funds, which will have there own maximum period.
At any time before the expiration date, you can close your position. This will reimburse your lender, and you will keep the profit.
The same goes for short position (selling bitcoins), where you borrow bitcoins instead of dollars.
If there is no lender available, you will not be able to open your position. Your order status will be "NO RESERVE ACTIVE", which means that it will be executed as soon as there is funds available.
The trading wallet is used for margin trading. It does not serves the purpose of buying or selling bitcoins, it serves only as margin requirements; that is, even if you have 1000 US dollars in this wallet, if you open a 10 BTC long position, you will borrow the needed USD. Funds in this wallet are to cover for eventual losses that may occurs. When the losses covers almost all your wallet balances, you may get a margin call and have your position force-closed to avoid further losses.

Lending

Our lending feature goes hand to hand with the margin trading feature described above. If you don't feel like a trader and/or prefer safer investments, this feature is for you. Bitfinex allows you, using your deposit wallets, to lend bitcoins and/or dollars to traders. You can put offers with your chosen terms (which rates, for how long, and how much). When an offer is taken by a trader, the money in your wallet will be used to buy or sell bitcoins, and a loan will be opened. When the loan expires (the trader closes his position), bitcoins are bought or sold back and money is reimbursed to your wallet.

You don't have the exchange risk when you lend with bitfinex. The exchange risk is taken on by the trader, and, in case his position loses money, he will cover the loss with funds in his trading wallet. If by any chances losses are greater than what the trader can afford, the loss is on Bitfinex, we will cover for the missing amount.
You can then see how the risks are minimal, while the rates are great (bitcoins price being very volatile, traders can afford to borrow at a high premium)

Security

When it comes to security, we're always paranoid. We have unique security features in the bitcoin world, which are:

• A watch-only wallet (cold wallet) on the production server, to monitor bitcoins transactions without giving keys to spend them
• Trade only exchanges API keys
• Automatic backup of the database once a day
• Duplication of backup data automatically across 3 servers
• Paper backup of wallet and exchanges keys and passwords

Cold wallet:

Your bitcoins are stored in cold wallet only, and the servers only use watch-only wallet, powered by Armory, to monitor deposit and balances. We have a bitcoind (official daemon) running only to handle the blockchain transactions), and the wallet is handled by the Mav Armory Server script (open-source, you can find it here: https://github.com/thedawnrider/BitcoinArmory-Daemon).
All bitcoins withdrawals requests are processed manually, once a day, every business day.

Trade-only API Keys:

The API keys (like currently the Mtgox API key) are stored encrypted on one of the production server. This key provides only right to get balances and buy and sell bitcoins on Mtgox. That's why you are able to deposit instantly using mtgox codes, but the mtgox code withdrawals are handled manually.

Automatic backup of the database

Once a day, the database of the platform is backed up, encrypted and compressed as an archive. The passwords of users it contains are encrypted

Duplication of backup data

As soon as a new backup is ready (database, log files,...), it is sent to others servers in 2 several physical location.

Paper backup of wallet and exchanges keys

These crucial informations are printed on paper, which is kept with us in a physical wallet in bitfinex place. As well, the cold wallet is printed on paper, and Armory (the bitcoin client we use) allows to restore wallet from paper if needed.

Questions?
If you have others questions or suggestions to make, it will be a pleasure to receive them on contact@bitfinex.com!

Can you explain in a little bit MORE details on "how to borrow" using your website ?

[Remember remember the 5th of November]

@legendster

I can tell you from the very beginning, that when you borrow money on the website you CANNOT withdraw it, for security reasons obviously. So any ideas you might have, won't work.

[Sukrim]

You can only borrow funds that stay on the platform and are used for trading. That way you can go long by borrowing dollars or short by borrowing bitcoins. You cannot however withdraw borrowed funds, only the profits you make with these funds after closing your positions. On the other hand that means you'll get much better rates than on btcjam for example as the people lending to you can be sure you can't just run away and never pay them back. Also you can get your hands on USD, something that's not too easy otherwise.

Bitfinex is a trading platform mainly, lending is just there because the operators don't have that deep pockets themselves.

[myself]

Bitfinex is a trading platform mainly, lending is just there because the operators don't have that deep pockets themselves.

or maybe they also want to change how things are done and allow the little guy can make a decent return

[Sukrim]

Yes, that's of course also possible.
I also appreciate this fact that I'm allowed with compared to traditional trading amounts play money to gain lending interests that will at least allow me to have a nice holiday this summer. Still bitfinex is a trading platform, the lending feature is there to help traders who like more risk and more return - not to borrow money for investing it elsewhere.

[myself]

Still bitfinex is a trading platform, the lending feature is there to help traders who like more risk and more return - not to borrow money for investing it elsewhere.

and what you think happen whit the money from your saving account that give you 3% APY ? dont you thing that moneys goes to FOREX brokers ?
here is what FXCM charge traders of buying or selling certain pairs



forex is a 4-5 trillions USD market do you think all that money come from brokers and bank pockets and not from your saving account ?

[im3w1l]

Forced liquidations incoming? Is there any problem in executing them due to Gox lag?

[myself]

Is there any problem in executing them due to Gox lag?

other that lag there is no problem

[superbit]

I still have a lot of money being loaned out at really high rates, Bitcoin just dropped $80, so I expect every margin position to close now. How comes they are not closing? Are the traders positioned to expect this crash? I doubt it. Does lag account for our money still being used? Are positions being closed at the right time? We are sinking fast.

I'm a little baffled that no margin positions closed as well?  Any explanation?

[myself]

I still have a lot of money being loaned out at really high rates, Bitcoin just dropped $80, so I expect every margin position to close now. How comes they are not closing? Are the traders positioned to expect this crash? I doubt it. Does lag account for our money still being used? Are positions being closed at the right time? We are sinking fast.

I'm a little baffled that no margin positions closed as well?  Any explanation?

check the Public Trades History and look for forced executed orders

[drawingthesun]

I still have a lot of money being loaned out at really high rates, Bitcoin just dropped $80, so I expect every margin position to close now. How comes they are not closing? Are the traders positioned to expect this crash? I doubt it. Does lag account for our money still being used? Are positions being closed at the right time? We are sinking fast.

I'm a little baffled that no margin positions closed as well?  Any explanation?

I deleted my post because I ended up getting a quarter of my money back, Two POSSIBLE reasons the positions are not closing:
1) its lagging from Gox, Bitfinex can't close all positions fast enough, or...
2) The traders have enough money in their accounts to actually cope with this mess