2012-10-22 Fred Wilson's Bitcoin Bank Model

[gweedo]

http://www.businessinsider.com/how-to-be-in-business-forever-week-four-2012-10

So in thinking about how to create a sustainable Bitcoin Bank, I focused on a few key things:
1) keep the operating costs super low except in areas where there is a unique and important consumer value proposition
2) make it easy to access the bank and your balances within the context of low operating costs
3) keep the fees charged to customers as low as possible
4) allow third parties to build busineses on top of our business

[kjlimo]

Can a bank exist without trying to be an exchange, too?  I imagine the same number of rules apply either way, yes?

[securo]

I would really like to see these propositions. Great angle.

[kiko]

OP Please can you reverse the month and day in the title. Many thanks.

[BTCLuke]

You know, I think the quote applies to banks too:

"Those who give up freedom for security deserve neither."

I'd certainly never use a bitcoin bank... What a damn dumb idea!

[molecular]

http://www.businessinsider.com/how-to-be-in-business-forever-week-four-2012-10

So in thinking about how to create a sustainable Bitcoin Bank, I focused on a few key things:
1) keep the operating costs super low except in areas where there is a unique and important consumer value proposition
2) make it easy to access the bank and your balances within the context of low operating costs
3) keep the fees charged to customers as low as possible
4) allow third parties to build busineses on top of our business

What kind of bank are you talking about? One that will loan out (or even gamble with) customer funds or just a depository that pays no interest but charges for safekeeping of your funds?

[BTCLuke]

It is dumb, but in 5 years I bet we will have bitcoin bank, probably not called banks but I can see it happening. Look at https://bitcointalk.org/index.php?topic=159359.msg1956723 that is basically a bank.

Lending is entirely different. Of course we all need a little money that we don't possess from time to time; there's nothing wrong with taking and offering loans for interest.

What the link in the OP describes is a bank that simply secures your bitcoins. Nothing more.

Of course how secure would they be if the government decided to shut them down? (Which I'm absolutely sure they would.)

[StarfishPrime]

http://www.businessinsider.com/how-to-be-in-business-forever-week-four-2012-10

So in thinking about how to create a sustainable Bitcoin Bank, I focused on a few key things:
1) keep the operating costs super low except in areas where there is a unique and important consumer value proposition
2) make it easy to access the bank and your balances within the context of low operating costs
3) keep the fees charged to customers as low as possible
4) allow third parties to build busineses on top of our business

hmm... that sounds pretty much exactly like Coinbase.com as it exists today:

1) Probably low, since they can operate on a 1% fee for conversion in/out of USD
2) ACH transfer to/from any US bank account
3) 1% USD-BTC conversion fee. Free BTC in/out, free BTC transfer to any other Coinbase user
4) Free API for 3rd party platform integration

Regarding BTC lending: Maybe in a few years when things stabilize, but no traditional lending model is remotely viable with current rate exchange flutuations. What could you charge in interest? Let's see... maybe 7%/week?... Anyone remember BTCST? lol. Or how about 0%? Anyone ever get their 'investment' back from the sharia-based Islamic Bank of Bitcoin? (yes, there actually was one)

[davidgdg]

I could see one use for a bitcoin bank which is making instant payments. At present it would be difficult to use BTC to pay for (for example) gasoline because of the time taken for confirmations. One solution is to pay using physical BTC but an easier solution might be BTC charge or credit cards so that the vendor gets a guaranteed payment in BTC by the bank and the bank then deducts the BTC from the buyer's BTC account.

[bitbook.biz]

You know, I think the quote applies to banks too:

"Those who give up freedom for security deserve neither."

I'd certainly never use a bitcoin bank... What a damn dumb idea!

It is dumb, but in 5 years I bet we will have bitcoin bank, probably not called banks but I can see it happening. Look at https://bitcointalk.org/index.php?topic=159359.msg1956723 that is basically a bank.

Have any of you tried coinlenders? Any thoughts on their trustworthiness or idea of their size?

[Nagato]

I think Bitcoin Banks are inevitable, keeping your wallet secure,understanding that your money did not disappear and went to a new change addresses, is beyond the ability of your average joe.

A bank could hide all that and present you with a balance, offer sending to email addresses/facebook accounts, etc.. We already have them with shared wallets/hybrid wallets/exchanges being used as banks.

Once the value of bitcoin stabilises in the future and loans are feasible, you will start to see bitcoin banks offering fixed deposits with interest payments and largely operating on a full-reserve model (FRB will be too risky for large amounts with a sound currency)

[BTCLuke]

I think Bitcoin Banks are inevitable, keeping your wallet secure,understanding that your money did not disappear and went to a new change addresses, is beyond the ability of your average joe...

...you will start to see bitcoin banks offering fixed deposits with interest payments and largely operating on a full-reserve model (FRB will be too risky for large amounts with a sound currency)

I want to say that you're on crack and that the banks will make them less secure, not more... But my extremely low opinion of the sheeple at large simply won't allow me to do it.

Especially with interest bearing accounts, they'll do it because it looks like an advantage, and because it feels familliar to them. They'll be lemmings and then one day one or more governments will steal it all from them.

Not me though. Never, ever, ever ever ever. I pity the fool...

[Nagato]

I don't see why a well run "bank" operating on a full reserve model cannot work. Sure there will be many attempts and those incapable of securing their customer funds or operating on fractional reserve will go bust, but eventually some well run "banks" will emerge. There is always a risk in depositing money in the bank, the difference is that the risk is socialised today via central banks printing whereas in the bitcoin world, losses will be borne by the depositors ONLY.

Personally i would never keep majority of my bitcoin holdings in a bank or online wallet