Bitcoin banks?

[ardana123]

If bitcoins were to become a widely used fiat alternative, wouldn't people still store them in banks offering storage, products and savings interest adapted to bitcoin? I could imagine a lot of people not feeling safe leaving all their bitcoins on a wallet on their computer or on a usb stick in a vault or whatever...
So wouldn't that give the same end result like we have today? Centralization of the bitcoin supply in banks, the government being able to freeze bitcoin accounts...

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[empoweoqwj]

You are right - services to store bitcoins 'more safely' will emerge - may even be called bitcoin banks - crucial difference is they will not be under *any* government control. They are just private keys after all. Government can and will control fiat. They cannot control bits and bytes.

[LorenzoMoney]

You are confusing several concepts.
Centralization of fiat means that a central, national bank controls the supply and interest rate of that currency.
Even if a commercial bank began accepting deposits of bitcoin, the supply of bitcoin would not be controlled by any one entity. The value of a commercial bank dealing in bitcoin is that they could then supply loans in bitcoin and could then also, supply interest bearing accounts to depositors. (Because they would in essence, become brokers for loans made with your deposit.)
Despite the bank holding your bitcoin, you still would be able to transfer your bitcoin in and out of a commercial bank and would be able to transfer your bitcoin anywhere in the world.  At the moment, bitcoin is like gold in that merely holding in in storage does not yield any interest.
If some group or groups of individuals create a commercial bank which offers traditional banking services except for deposits of bitcoin, that would not be a centralization of bitcoin. It would merely be one of many similarly existing services. For example, there are already bitcoin businesses which accept deposits of bitcoin and pay interest. There already are bitcoin stock exchanges, which provide shares of bitcoin companies and pay dividends.
The reason fiat banks is to aggregate money to create a source for loans, to keep physical money safe (storing cash in tins cans in your garden is not safe), and to provide business and personal loans.
Since bitcoins have no physiciality, there is no need to store them in a physical vault and a bank is not needed. Bitcoin are not any safer stored in some bank account than they are stored in a wallet on your computer. You still need to remember a password and ID in both cases. The only reason for a formal, commercial bitcoin bank is to aggregate capital to provide loans to businesses who would make money and pay interest to the bank, and then the bank pays interest to you.  That sort of bank does not centralize bitcoin. The reason bitcoin cannot ever really be centralize is because anyone can transmit bitcoin anywhere without need for a bank. It is peer to peer.

The difference between bitcoin and regular banks would be that you would no longer need checks. A check is merely an instruction to a bank on how to transfer your money. Banks do not really exist to protect your money and keep it safe. They exist to aggregate money in order to provide loans to other people in order to make money.

The idea of capitalism is that someone with additional extra capital can invest their money to make money. That is, you make money by virtue of having so much money that you have surplus to invest.


In fact, having a legal, commercial bank that would accept bitcoin deposits and give out bitcoin loans would be good for bitcoin as a whole since it would encourage development of bitcoin based businesses and help transition from a fiat based economy, to an economy in which people are paid in bitcoin and in which people think of prices in terms of bitcoin instead of fiat.

[blacksmithtm]

Centralization is not bad if its voluntary

[LorenzoMoney]

You are right - services to store bitcoins 'more safely' will emerge - may even be called bitcoin banks - crucial difference is they will not be under *any* government control. They are just private keys after all. Government can and will control fiat. They cannot control bits and bytes.

Governments can control taxes. Imagine a successful bitcoin bank. People from all over the world make deposits and get interest because the bank makes loans to business who pay interest.

Governments then tell the bank, You can exist, but you must pay corporate taxes in the country where you have offices and all depositors must pay taxes in the country in which they live.

A government can control bits and data. It happens all the time. Whether they should, and how to circumvent those restrictions is another issue. But, once those bits and bytes become "money"  or are organized in a specific way, government does and can intervene.  

SMS messages cost less to send than email, both are mere data, yet cell phone companies charge more for SMS than email transmissions.

All photos are just bits and bytes, but a photo of a copyrighted painting is protected in a way that other bits and bytes are not.

The examples go on.

Governments may not be able to control bitcoin itself, but the moment bitcoin needs to be converted to fiat, it can become subject to control and taxes.

[empoweoqwj]

Interest would be in bitcoins not fiat.

But who knows what laws governments will dream up in the face of virtual currencies. I guess we will find out.

[franky1]

putting the bitcoin into a third party service such as a bank is countering the point of decentralisation. and here is why.

1) trusting any third party to look after your funds requires trust, insurances, and full disclosure of that persons life, and legal contracts to ensure of limitation of losses.

2) for safety i would never say trust a third person to look after your funds. instead there are products that do not touch other people in which you can store your private keys on for safe storage: BitSafe, USB memory stick, paper..... need i say more

3) there will be services to make transactions of pocketmoney amounts easier such as escrow services which can ensure payments to merchants by having it pre-paid into an escrow service to get the confirms. and later in the day spend at a whim throughout the day with 0 wait time. EG deposit under 1btc while taking morning shower. which will then be ready to spend at starbucks by the time you get there, saving you waiting.... But storing your life savings of bitcoin, definitely don't trust it in a third person.

if you want to see the risks of the 'bank' model where even the owner revealing their name and address.. simply research Trendon Shavers AKA Pirate@40.

if you are not a licenced, regulated service then do not expect anyone to trust you as a bank.

[wopwop]

Using banks is the exact opposite of what Satoshi tried to achieve with Bitcoin

[ruggedman_dan]

Interest would be in bitcoins not fiat.

But who knows what laws governments will dream up in the face of virtual currencies. I guess we will find out.

Bingo.

This is most important overall. Once coins become widely adopted and accepted forms of payment, that's when the game changes. The governments will take notice and conjure up specific laws aimed at virtual currencies. Right now it is just a cutesy little thing we are doing. But give it a few years and things are going to be different, and probably not for the best.

But to the original point of the thread, I think it is inevitable that we will see coin banks in the future. Humans are programmed to believe their money is safer in the hands of others. I know there are the Bitcoin purists out there that say banks are against Bitcoin period, but as our economy grows so will the number of people using coins that prefer to have them in a bank's care. And someone WILL seize the opportunity to make a profit by filing the need in the market. It is just the way things work.

[keelba]

I've had a recurring vision for the past several weeks about this topic. I keep imagining that in the not-too-distant-future Bitcoin will be everywhere and everyone will have some. At that point, anyone driving a nice car, living in a nice house, wearing nice clothes, or perhaps visiting places only the wealthy visit, such as a country club, would become a target. You would not have to know how many bitcoins someone owns, you would only have to observe how he lives. Thieves could then mug these people on the streets, kidnap them, ransom their children, or break into their homes and force them to unload their digital wallets. The only protection I could think of to prevent this is some kind of vault. If thieves know my money is stored safely in a vault and I have no access to it unless I personally walk into the vault, then there would be far less incentive to try ambush me when I am vulnerable. Right now I feel secure because most people don't even know what Bitcoin is and there is no way to know who has a lot and who doesn't have any. Even if you lived a fancy lifestyle right now, people would assume that the money to pay for all of it was kept safely in a bank under the current system.

I don't like the idea of this, either. I don't want to have to trust my money to a third party. Perhaps there is a way around this but, for now, I see this as a very, very, big issue once the world converts to Bitcoin and this vulnerability necessitates third party vaults. It would be like the wild west and everyone would have to carry a gun to protect his own bitcoins. Maybe someday, someone will find an alternative solution to this problem other than third parties and I hope they do.

[doom309]

Using banks is the exact opposite of what Satoshi tried to achieve with Bitcoin

agreed, the whole idea of bitcoin was to "individualise" banking, to be your own bank

[usscfounder]

The new P2P exchange application I am designing uses virtual servers that can act as an P2P bank for user accounts.  It is decentralized yet has the benefits and speed of centralization:

https://bitcointalk.org/index.php?topic=209269.0

[MarkLyford]

the idea of being my own bank has always appealed to me, I have always wanted to own my own, the closest I got was owning half a pawn borking company. Bitcoin  you can be your own bank. Although saying that the UK government are talking about setting up their own exchange, thats the first step to becoming a bank maybe

[Fizpok]

Let's say the bank gives us BTC loans. To return them, you need to bring to bank more bitcoins then you took. Where are you going to get them (no inflation)? I mean, it is possible on a local scale, but if you want entire economy to work that way, you will run out of BTC soon.

[ranlo]

putting the bitcoin into a third party service such as a bank is countering the point of decentralisation. and here is why.

1) trusting any third party to look after your funds requires trust, insurances, and full disclosure of that persons life, and legal contracts to ensure of limitation of losses.

2) for safety i would never say trust a third person to look after your funds. instead there are products that do not touch other people in which you can store your private keys on for safe storage: BitSafe, USB memory stick, paper..... need i say more

3) there will be services to make transactions of pocketmoney amounts easier such as escrow services which can ensure payments to merchants by having it pre-paid into an escrow service to get the confirms. and later in the day spend at a whim throughout the day with 0 wait time. EG deposit under 1btc while taking morning shower. which will then be ready to spend at starbucks by the time you get there, saving you waiting.... But storing your life savings of bitcoin, definitely don't trust it in a third person.

if you want to see the risks of the 'bank' model where even the owner revealing their name and address.. simply research Trendon Shavers AKA Pirate@40.

if you are not a licenced, regulated service then do not expect anyone to trust you as a bank.

Yeah, I would have a hard time trusting banks with the money. You never know what will happen to them. Even with FDIC, people are wary of depositing more than the insured USD into accounts because any bank can crash at any time. It means people will definitely not trust a bank that isn't insured.

[BTCnewbie]

Don't trust banks. Put your wallet on a usb stick and hide it under your mattress
Just like the old days, but instead of cash stashed under mattresses it will be usb sticks now.