Bitcoin Bank pays interest ? O.o

[elelegzet]

Interest and deflation... 1% should be very-very high then...

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[cunicula]

What makes you so sure there will be deflation?
Money supply of bitcoin has an upper bound.
The user base of bitcoin does not have a lower bound.

[Gandlaf]

The user base of bitcoin does not have a lower bound.

Interesting, negative bitcoin users???

[the founder]

what he's saying is that there could be 21 million bitcoins, and no one using them.... which is possible.. and would also mean that this project failed.
I don't think that's a likely outcome... 

One thing I learned over the years... geeks always win... maybe not a first.. but in the long run they will.

[cunicula]

Agree with you, but think that new geeks will come up with a superior platform, and that the new geeks win.
Still holding on to my coin, however, while I wait for the new geeks.

[d3wo]

Banks that have office would be nice 
If that is possible ofcourse... 

[qed]

What makes you so sure there will be deflation?
Money supply of bitcoin has an upper bound.
The user base of bitcoin does not have a lower bound.

You can argue as much as you want, just go check the bitcoin exchange rate history.

[the founder]

ok it's taking invites now... and yes we have offices outside of Philadelphia, PA.
http://www.flexcoin.com

[tymothy]

Potentially cool stuff. The site should explain the types of security that are in place. Could you possibly get an insurance company to guarantee the deposits in the event your site is hacked?

[the founder]

Potentially cool stuff. The site should explain the types of security that are in place. Could you possibly get an insurance company to guarantee the deposits in the event your site is hacked?

We could...    we just need to find a third party that would insure the deposits...  the FDIC would laugh at us.

LOL

[error]

ok it's taking invites now... and yes we have offices outside of Philadelphia, PA.
http://www.flexcoin.com

No https?!

[the founder]

HTTPS will be up for banking... this is literally just the invite process...  HTTPS has trouble ranking in Google.

[the founder]

If anyone has any questions regarding it,  just ask

[GeniuSxBoY]

If anyone has any questions regarding it,  just ask

What do you have as far as insurance?

[the founder]

We are looking for a counter party to insure it...  anyone have any advice?

[nhodges]

HTTPS will be up for banking... this is literally just the invite process...  HTTPS has trouble ranking in Google.

If you are doing it wrong: http://www.seomoz.org/ugc/seo-for-https-with-s-like-secure

:]

[tfeagle]

If anyone has any questions regarding it,  just ask

I'm guessing that your company uses service providers that are physically located within the continental USA.  Do you have mirrored systems on different continents, in the event of a disaster?  If the USA FBI accidentally took the rack containing your BitCoin repository...could you resume normal operations within a reasonable amount of time?  And without the loss of anyone's coins? 

[JoelKatz]

So the profit comes from where?

The profit comes from bringing together the people who bank with you (who make money if bitcoins go up and lose money if bitcoins go down) and the people who want to take a short position on bitcoins (who make money if bitcoins go down and lose money if bitcoins go up). You just have to trade bitcoins and move money.

Here's an oversimplified example:

Say someone wants to put 100 bitcoins away for a month. He hopes to get 2% (APR) interest. That means that someone has to provide him with about 100.2 bitcoins in a month for his 100 bitcoins today. So he gives you 100 bitcoins, you promise to give him 100.2 bitcoins next month.

Say someone else thinks bitcoins will go down. They want to sell 100 bitcoins today and buy 102 bitcoins next month (hoping to keep the positive difference in USD), the extra two bitcoins are his transaction fee. Of course, they don't have any bitcoins because they think they're going down.

How can you make both these guys happy and make money?

Answer:

1) The second guy gives you a secured note for the maximum expected cost of 102 bitcoins next month.
2) You take the first guy's 100 bitcoins and sell them for USD. You invest those USD.
3) You wait a month and buy 102 bitcoins for USD. You use the USD from the second guy's note.
4) You give the first guy his 100.2 bitcoins.
5) You give the USD from the first sale to the second guy.
6) You made 1.8 bitcoins and the interest on the USD for 1 month less the cost of the two USD<->bitcoin exchanges.

If the bitcoin ever shoots up so high there's a risk the note cannot buy the 102 bitcoins, you immediately buy at least 100.2 bitcoins and your deal with the second guy terminates, him forfeiting the note. He can make the note as big as he wants to ride out bumps, or as small as he wants to cap his losses, it's his choice. (You still keep up to 1.2 bitcoins if you buy fast enough.) This also allows the second guy to set the maximum amount he can lose if he guessed wrong and bitcoins go up.

[Phinnaeus Gage]

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.

I hope it solves the "easy-for-grandma" issue.

As far as the profit goes, perhaps a quarter (2 bits) fee for all transaction over $25. That ways it's only 1% or lower. Promise to never increase the fee. All transactions below $25 will be free. And if it ends up being gamed (3 transactions for a $74 item), let 'em think they found a loophole.

[dennis_sweden]

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"  

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...

How will flexcoin use the Bitcoins? The FAQ does not give any information on this subject. What safeguards are there against flexcoin making bad investments and being unable to give deposits back? I am not accusing flexcoin of operating any scam - however, further information would be useful to understand how flexcoin operates.

EDIT THIS QUESTION HAS ALSO BEEN POSTED IN THREAD http://forum.bitcoin.org/index.php?topic=23733.0