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Author Topic: Bitcoin Bank pays interest ? O.o  (Read 9305 times)
d3wo
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June 23, 2011, 07:10:03 PM
 #1

Is this site for real ?
I've got the links from google news.

flexcoin.com

Quote
We’re the first Bitcoin bank as far as we understand.   
All our account holders that have bitcoins in their account, will receive interest paid on any newly mined coins.
Flexcoin.com is an active miner as well.   
So anything we get we distribute to our clients.
So not only is it a place to store your bitcoins so that you can use it from any of your devices, you also get interest from mined coins as well.

with interest.... hmm.... 
sounds interesting...

an explanation from official owner would be nice Smiley

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June 23, 2011, 07:12:07 PM
 #2

Look scam to me!

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DamienBlack
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June 23, 2011, 07:16:46 PM
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I'm going to vote total scam. They have nothing to invest the bitcoins into to get you interest. Selling them for another currency (in an attempt to create interest) would be too risky. I don't see how they can do what they say. I could be wrong.

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June 23, 2011, 07:33:54 PM
 #4

I'm going to vote total scam. They have nothing to invest the bitcoins into to get you interest. Selling them for another currency (in an attempt to create interest) would be too risky. I don't see how they can do what they say. I could be wrong.

Yeah - I could probably take a bunch of people's Bitcoins and buy/sell them all day and generate dividends for them...

... or one bad swing could happen and I could lose a fuckton.

Nothing about this even remotely says they won't just ride off into the sunset with money after liquidating the Bitcoins on the open market.

^_^
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June 23, 2011, 07:45:53 PM
 #5

I thought about doing something like this myself but with loans to, you cant expect people to give you there btc without giving them a chance to trust you.
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June 23, 2011, 07:53:38 PM
 #6

Yup, the financial infrastructure you need for a bitcoin bank to work is explained here.

http://forum.bitcoin.org/index.php?topic=19130.0

It doesn't exist, so a bitcoin bank won't work.


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gigi
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June 23, 2011, 08:41:22 PM
 #7

Guys, there is a simple legit way to generate interest on Bitcoin without risk: borrowing it for shorting.

The bank borrows 100 BTC to some party for a month for 3 BTC. It gives 2.5 BTC to the person depositing the BTC and keeps 0.5 BTC as fee.

Sombody wants to short BTC. It borrows 100 BTC, paying 3 BTC for this privilege to the bank. It sells the 100 BTC. One month later it buys the BTC back (hopefully for a lower price) and gives it back to the bank. The profit covers the commission.

The central banks do this with gold for example, earning interest with zero risk. This assumes no counter-party risk, but this is what contracts are for. Of course, in Bitcoin world everything flies, no contracts needed Smiley
DamienBlack
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June 23, 2011, 08:47:40 PM
 #8

Guys, there is a simple legit way to generate interest on Bitcoin without risk: borrowing it for shorting.

The bank borrows 100 BTC to some party for a month for 3 BTC. It gives 2.5 BTC to the person depositing the BTC and keeps 0.5 BTC as fee.

Sombody wants to short BTC. It borrows 100 BTC, paying 3 BTC for this privilege to the bank. It sells the 100 BTC. One month later it buys the BTC back (hopefully for a lower price) and gives it back to the bank. The profit covers the commission.

The central banks do this with gold for example, earning interest with zero risk. This assumes no counter-party risk, but this is what contracts are for. Of course, in Bitcoin world everything flies, no contracts needed Smiley

How would the back find someone trustworthy people to loan to? I suppose they could have some USD in escrow and have a way to force them out of their position if they are reaching their escrow limit. But all in all, it requires a lot more infrastructure than we have at the moment.

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Yankee (BitInstant)
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June 23, 2011, 08:53:12 PM
 #9

Look scam to me!

I would put money into a site thats run on Wordpress

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June 23, 2011, 08:53:54 PM
 #10

Of course, in Bitcoin world everything flies, no contracts needed Smiley

I keep hearing variations on this theme -- like no contracts or security or regulation is possible with bitcoins. It is, and I imagine many transactions eventually being kept in a regulated and insured bitcoin bank for example or very detailed legally binding contracts written between involved parties. There is nothing about bitcoin that prevents such legally binding contracts from being formed and enforced.

As far as a bitcoin bank, there are a variety of ways such a bank could generate an interest rate. Certainly speculating in other markets could be part of it and there is a possibility that the bank could take a loss. Same with lending bitcoins out at interest but having enough total capital to cover a "bank run". I would not entrust my coins in a bitcoin bank unless it was clear what our legal arrangement would be and what their liability would be in case of loss of my funds and how that would be enforced though.
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June 23, 2011, 09:03:53 PM
 #11

You could absolutely run a bank, but I would only put my money in it if it did NOT use fractional reserve practices

I.e. there are two types of accounts at this hypothetical bank, one type that is essentially a checking account, generates no interest and the depositor actually pays a small fee to have it sit there (maybe .2% or 10BTC, whichever is less monthly) - The bank then secures the funds, insures the deposit (if the bank gets robbed, the bank is responsible for replacing deposits since protecting them is its primary job here), and collects the fee for holding the money.  This money is NOT lent out.

The other type of account would be the time-deposit account, as described by someone earlier - Basically by depositing your money for a given legnth of time, you are lending it to the bank who pays you interest for it (This could be as high as 10%, depending on competition for investable BTC vs. number of projects/individuals seeking loans), and then the bank lends it out to one or many participants, again for a length of time no longer than the term of the deposit.  The bank charges a higher percentage than it pays the depositor(s), and at the end of the agreement the debter pays back the bank who pays back the borrower with everyone in the chain getting interest for their involvement.   If the loan(s) go bad, the bank takes the hit because their primary role in this capacity is to investigate and vouch for the lenders they loan money to.   This means you wouldn't be able to just ask for a loan and get one, but rather would need to either provide some collateral or have a very established reputation with the bank and a history of paying back on time.

So many of these problems are solved because it is in everyones best interest to make sure things go smoothly - Nobody gets a free lunch, but everybody benefits in a way that reflects real costs.

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June 23, 2011, 09:12:39 PM
 #12

How would the back find someone trustworthy people to loan to? I suppose they could have some USD in escrow and have a way to force them out of their position if they are reaching their escrow limit. But all in all, it requires a lot more infrastructure than we have at the moment.

you don't have to trust anyone, all you really need is a liquid market, and quick automatic liquidation of positions.
one exchange already announced to implement it. at high rates though...and they dont have liquidity yet so you probably have to expect very high margin rates.
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June 23, 2011, 10:31:44 PM
 #13

It's not a scam guys...  I own that site.. we threw up wordpress just to put in a place holder.  It should be up in Beta July first (that's when the SSL / Firewall / Security) should be tested...  all passwords / usernames will be encrypted.. ect ect..

"interest"  is nothing more however than a cluster of servers that are mining... and people that use that as their online wallet IE: online bitcoin bank do get the dividends from it.   It's my way of saying thanks for using the free service.

I want to STRESS ... though we are focusing on security.. it will still be in Alpha / Beta for a bit..  I'm trying to build a real company on bitcoins,  so reputation does matter... and it has company backing by Yooter Interactive.. ..   so if you want to test it..  use a small amount of coins...  I'll put a notice on the site when it's out of Beta.

Honestly I think it's the first time a tax paying company is putting up real money to build something for bitcoins.

Enjoy....    (crossing fingers it's secure by July 1st.)




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elggawf
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June 23, 2011, 10:33:58 PM
 #14

So the profit comes from where?

^_^
the founder
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June 23, 2011, 10:35:48 PM
 #15

So the profit comes from where?

Honestly,  I'm thinking that eventually someone will either 1 ) buy it... or B) it's adopted widely and I can put ads on the site....  I don't intend on charging people.

but I already threw thousands into it.


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DamienBlack
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June 23, 2011, 10:36:34 PM
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My apologies for suggesting it is a scam without further evidence. I look forward to hearing more details.

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June 23, 2011, 10:37:49 PM
 #17

No worries... dude it's the first freaking bitcoin bank that is paying people "interest"...   everyone's first instinct is that it's a scam until they read that it's from mining that the dividends are being paid.


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June 23, 2011, 10:39:04 PM
 #18

This is easily done with a pyramid scam, I pay interests using the last guy's deposit and so on, until my bank has enough coins and I'll hire some hacker and "puff"   Roll Eyes

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June 23, 2011, 10:41:41 PM
 #19

The profit can come from advertising. Just throw a banner and try to grow your customerbase as large as possible and add as many attractive features as you can to attract eyeballs.

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June 23, 2011, 10:42:37 PM
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This is easily done with a pyramid scam, I pay interests using the last guy's deposit and so on, until my bank has enough coins and I'll hire some hacker and "puff"   Roll Eyes

It could, but this isn't...  I'm just paying dividends on mining on top of giving people a central location to buy/ sell / trade coins...  what happened is someone sent my bitcoins to my work address... and I was a home... and I couldn't access them....  so I thought this would help... I saw a service that did that.. and figured I could improve with adding interest to it.

So bingo... in a matter of a week we'll have the first bitcoin bank.

Look just test the thing when it's live... use a small amount of coins and see if it works right...  give feedback... tons of it...  the goal is to build a fully functional bitcoin bank...


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