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

[Ichthyo]

For the not so smart people -- like myself -- I typically need some time, while I'm asking myself: what is actually really the problem here?

Why the heck has Bitfinex a problem, which wouldn't be there when it was just a BTC stock exchange?
What would happen in the latter case? Then if everyone wants to go long, at some point, all the money provided by the lenders would have been used, and trading would come to a stop altogether. Users would be pissed likewise, but then the answer would be: just put more fiat money on the platform and provide liquidity.

Thus, considered from that side, we do have actually the same problem. Just we have two exchanges, with limited bandwidth in between. Thus, people are sucking up the liquidity on Bitstamp, and trading there comes to a halt. So what is the problem? My guess is, it is actually a problem of perception. When you have only one exchange, you can communicate the limited liquidity and people will understand. But in the case of Bitfinex, it looks so easy (and works so well under normal circumstances) when both exchanges are linked. But we are lacking a sensible way to make people feel that limited bandwidth.

Now, according to liberal theory, people dislike (and fight against) rules , but they are easy to "buy" when there is an incentive, and when they can feel a feedback. Thus we should search a solution to make that liquidity level tangible and perceptible all the time. Not only when it is too late, and funds are used up, but all the time.

Some arbitrary ideas to make that happen (probably there are a lot of better ways, just my fantasy is lacking).

• have a display all the time, similar prominent as the exchange rate.
• that is: make that liquidity level a state variable, which can be easy grasped, like e.g. a percent value or such
• to create the feedback: add a premium for trading on Bitstamp. And tie that premium dynamically to aforementioned variable. That variable and the resulting premium is applied in real time, at the moment the opening trade is executed.
• that is: money on Bitstamp is not gone immediately, but instead it becomes more expensive and thus slows down the excessive use and makes using the internal exchange really interesting for traders, since it moves their orders ahead in the order book. And there is an additional risk for traders to use Bitstamp, which isn't there on the internal exchange

Just my two cents whatsoever -- personally more interested in the discussion and the process of working out solutions

[sangaman]

I too would like to know where to find my referral code. I can't find it anywhere. Nor can I find any info about what the referral bonuses are except that the person referred gets a 10% discount for 30 days.

[urwhatuknow]

For the not so smart people -- like myself -- I typically need some time, while I'm asking myself: what is actually really the problem here?

Why the heck has Bitfinex a problem, which wouldn't be there when it was just a BTC stock exchange?
What would happen in the latter case? Then if everyone wants to go long, at some point, all the money provided by the lenders would have been used, and trading would come to a stop altogether. Users would be pissed likewise, but then the answer would be: just put more fiat money on the platform and provide liquidity.

Thus, considered from that side, we do have actually the same problem. Just we have two exchanges, with limited bandwidth in between. Thus, people are sucking up the liquidity on Bitstamp, and trading there comes to a halt. So what is the problem? My guess is, it is actually a problem of perception. When you have only one exchange, you can communicate the limited liquidity and people will understand. But in the case of Bitfinex, it looks so easy (and works so well under normal circumstances) when both exchanges are linked. But we are lacking a sensible way to make people feel that limited bandwidth.

Now, according to liberal theory, people dislike (and fight against) rules , but they are easy to "buy" when there is an incentive, and when they can feel a feedback. Thus we should search a solution to make that liquidity level tangible and perceptible all the time. Not only when it is too late, and funds are used up, but all the time.

Some arbitrary ideas to make that happen (probably there are a lot of better ways, just my fantasy is lacking).

• have a display all the time, similar prominent as the exchange rate.
• that is: make that liquidity level a state variable, which can be easy grasped, like e.g. a percent value or such
• to create the feedback: add a premium for trading on Bitstamp. And tie that premium dynamically to aforementioned variable. That variable and the resulting premium is applied in real time, at the moment the opening trade is executed.
• that is: money on Bitstamp is not gone immediately, but instead it becomes more expensive and thus slows down the excessive use and makes using the internal exchange really interesting for traders, since it moves their orders ahead in the order book. And there is an additional risk for traders to use Bitstamp, which isn't there on the internal exchange

Just my two cents whatsoever -- personally more interested in the discussion and the process of working out solutions

Thanks a lot for the suggestions.

Let me outline a few points:

1) Whenever we finish money on BSTP, BTC start trading with a spread on BFX. Giving an incentive to people that will force them to sell on BSTP when they can sell for more money on BFX is the typical example of game theory: individuals act in a selfish way and simply don't do it, unless "the house" will compensate for the difference.
Now everyone knows this is impossible to be done ( we make 0.1% commission, how can we compensate for a 3-5% spread?).
Do you have any idea of how to do it without causing a loss on our side?
Are we trying to defeat gravity?
It takes a lot of energy and people are not willing to pay for it.

2) In a very illiquid situation like the one we are facing (people keep lots of coins and little cash) we need to take a daily decision about how to share our liquidity.
Once the wire is out of our bank account it is gone and we have to wait 1 or 2 working days before it hits BSTP account.
We don't margin our liquidity, we are not a bank and we do not intend to become one.
Probably (nobody knows the truth, but vox populi vox dei) the liquidity crisis that Gox is facing is due to the fact that back in March/April they went on margin (i.e used their customers money to buy BTC) in the past and they lost big time.
We don't want to take this risk.
We allow customers to spend one dollar only when this dollar is actually there.
We care a lot about our customers money and we will never put it in danger to allow a few traders to make another quick buck.

Moreover this is a problem you have only if you allow trading on multiple platforms.
The more people trade on ours, the less money we will need on a "separate" account, all would get smooth up to the paradoxical point where all our customers will only have BTC and then nobody will be able to buy one Satoshi anymore because the fiat liquidity will be finished.

We are progressing:back in June two third of our volume was made on BSTP, now we are down to one third.
We are heading in the right direction, but it will take a little more time.

I wish we could do something about it more than what we already do, but we can't.

Any concrete detailed proposal will be analyzed, but let me stress it once more: it must make sense and be feasible.

Showing a BSTP liquidity indicator is something we are working on, but Raphael is giving priorities and this week we are migrating our servers, so it would probably be for next week

I hope this helps

Have a good evening, afternoon, morning folks

Giancarlo
Bitfinex Team

  

[urwhatuknow]

I too would like to know where to find my referral code. I can't find it anywhere. Nor can I find any info about what the referral bonuses are except that the person referred gets a 10% discount for 30 days.

Sangaman

please PM me your username and I will add you to our referral program.

Thanks

Giancarlo
Bitfinex Team

[Han]

The Great Bitfinex Game!

1) Bitfinex will pay a bounty of 1 BTC for anybody that comes out with an idea that actually makes sense in order to improve our liquidity on Bitstamp
2) Anybody that will post an idea that is flawed, doesn't make sense, will never work for the reasons I will be honored to explain or just say things like " why don't you transfer to Bitstamp more money if 2 millions a day is not enough" will have to pay 1 BTC cent to the address:
1J14J1ZR11CsFKXyhneXpfVBp34ovQuh7C

All the coins collected by this game will be donated to www.seansoutpost.com , a homeless outreach in Florida accepting bitcoins.



Giancarlo
Bitfinex Team
 

This is beyond the scope of your question, but why not use Btc-e as yet another pool of liquidity? Have you found Btc-e operators to be untrustworthy?

[DeaDTerra]

The Great Bitfinex Game!

1) Bitfinex will pay a bounty of 1 BTC for anybody that comes out with an idea that actually makes sense in order to improve our liquidity on Bitstamp
2) Anybody that will post an idea that is flawed, doesn't make sense, will never work for the reasons I will be honored to explain or just say things like " why don't you transfer to Bitstamp more money if 2 millions a day is not enough" will have to pay 1 BTC cent to the address:
1J14J1ZR11CsFKXyhneXpfVBp34ovQuh7C

All the coins collected by this game will be donated to www.seansoutpost.com , a homeless outreach in Florida accepting bitcoins.



Giancarlo
Bitfinex Team
 

Here's an actual suggestion
You could theoretically use Ripple as a way to provide liquidity on Bitstamp.
By purchasing BitstampUSD with Bitcoins or other means and then depositing these into your account.
At the moment it is not possible in large scale, but it could be worth looking into.
Just a suggestion.

Ps. Not sure if the actual liquidity it would provide is so low that it is not worth the effort but it could be worth looking into.

//DeaDTerra

[superbit]

Speaking of the referral program, as there any possible way that there could be a referral fee for opening up new lending accounts.  I have helped numerous friends setup 2FA, learn how the site works, helped them get some USD to lend out on the site, etc...

It would be nice if there could be a referral fee on the interest that they earn.  It doesn't have to come out of your cut, but right now you guys take 10%, maybe it could even be a variable that the person setting up the account sets and is agreed upon with who they set the account up for.

I know for sure of the 4 people I setup, they would be happy to pay 10% of their earned interest for all the work I did getting them up and running.  I would not make this a referral code system, but more of an invite system where I set the parameters of my interest cut and then send them an invite to their email.

They sign up with the link and it's good to go.

[Sukrim]

You could theoretically use Ripple as a way to provide liquidity on Bitstamp.
By purchasing BitstampUSD with Bitcoins or other means and then depositing these into your account.
At the moment it is not possible in large scale, but it could be worth looking into.
Just a suggestion.

Ps. Not sure if the actual liquidity it would provide is so low that it is not worth the effort but it could be worth looking into.

The liquidity is not there at the moment, but if you put in the orders in large quantities, they will be noticed. Liquidity is a chicken-egg problem and can only be solved if you actually do something against it.
Ripple is a small community which has its benefits too - if you put in a learge announcement, that you are going to make the market on Bitstamp USD and really follow up on this, anyone active in Ripple trading will know.

Anyways, the bigger issue I see is that it might be a bit hard to justify buying USD.Bitstamp with BTC - after all they want to transfer only USD, and not do trades (they could easily sell BTC on Bitstamp for more USD - the problem is that they are not theirs!). Working with a local gateway (there are 3 or 4 major Chinese Gateways offering CNY IOUs) might work though, especially if you then make the market by offering exchange rates towards Bitstamp.USD that are competitive. It might at least be worth a shot - in general either they do it behind closed doors or they are really too risk averse when it comes to trying out a few new things like trading a couple 1000 USD on Kraken or Ripple or re-opening the MtGox bridge once more for selling fiat to have more depth on that end...

[Ichthyo]

Why the heck has Bitfinex a problem, which wouldn't be there when it was just a BTC stock exchange?
...
My guess is, it is actually a problem of perception.
Iin the case of Bitfinex, it looks so easy when both exchanges are linked. But we are lacking a sensible way to make people feel that limited bandwidth.

Now, according to liberal theory, people dislike (and fight against) rules , but they are easy to "buy" when there is an incentive, and when they can feel a feedback. Thus we should search a solution to make that liquidity level tangible and perceptible all the time. Not only when it is too late, and funds are used up, but all the time.

• have a display all the time, similar prominent as the exchange rate.
• that is: make that liquidity level a state variable, which can be easy grasped, like e.g. a percent value or such
• to create the feedback: add a premium for trading on Bitstamp. And tie that premium dynamically to aforementioned variable. That variable and the resulting premium is applied in real time, at the moment the opening trade is executed.
• that is: money on Bitstamp is not gone immediately, but instead it becomes more expensive and thus slows down the excessive use and makes using the internal exchange really interesting for traders, since it moves their orders ahead in the order book. And there is an additional risk for traders to use Bitstamp, which isn't there on the internal exchange

Whenever we finish money on BSTP, BTC start trading with a spread on BFX. Giving an incentive to people that will force them to sell on BSTP when they can sell for more money on BFX is the typical example of game theory: individuals act in a selfish way and simply don't do it, unless "the house" will compensate for the difference.
Now everyone knows this is impossible to be done ( we make 0.1% commission, how can we compensate for a 3-5% spread?).
Do you have any idea of how to do it without causing a loss on our side?
Are we trying to defeat gravity?

Things are relative, you know.
Of course you can't pay people a bonus for selling on Bitstamp.
But you can demand a compensation for the problems people are causing by excessively buying at Bitstamp.

My reasoning is that the problem is perception: what your platform offers is brilliant; actually it looks too easy to people. It looks so natural that traders think it just must be this way and they have a right for exploiting all those arbitrage possibilities. That's why I am proposing to let people "feel" the strain. Whenever there is excessive buying on Bitstamp, this would decrease a certain visible indicator and at the same time make buying on Bitstamp automatically more and more expensive. Selling on Bitstamp and trading on the internal exchange would not be affected. (And the other way round when the liquidity problem is somewhere else) This way, the Ask side of Bitstamp would be moved up in the combined orderbook, which creates the incentive to sell at that higher rate. Of course you make an additional gain margin this way, which needs to be spend in a way which feels justified to the users. You could e.g. pick up the other proposal and let lenders participate on that additional margin, on the condition that they agree to lock their money for at least xx days (so you can send it to Bitstamp and use it there for some time).

The basic idea is to create a continuous feedback loop. So that money on Bitstamp won't be exhausted entirely, since buying on Bitstamp becomes exessively overpriced. This way the system would regulate itself. You would just need to define that automatic, controlling factor such, that it truthfully reflects the efforts, costs and limited bandwidth of the real-world connection between Bitfinex and Bitstamp.

[Ichthyo]

This is beyond the scope of your question, but why not use Btc-e as yet another pool of liquidity? Have you found Btc-e operators to be untrustworthy?

This was discussed at length this spring here in the forum. The operators of Bitfinex pointed out that the legal problems are prohibitive. Bitfinex wants to operate by the rules, and BTC-e in Russia just has too much gray areas. Same with any bitcoin exchange in China.

[Sukrim]

Kraken seems to be one of the most promising partner opportunities. This won't help with the Bitstamp situation directly, but might reduce risk.

[LOADING.READY.RUN]

Just found a new command named "Claim" next to my open margin position -- what exactly does it do?

Anyway, the repeated margin call mails today are nuisance. My margin position is between 5-10% profit and I keep receiving them every half hour. Well, it's part of migration week I suppose, just wanted to let you know...

[Ichthyo]

My margin position is between 5-10% profit and I keep receiving them every half hour.

Just for sake of completeness (you are probably aware of that): the margin warning / margin calls are not directly linked to the possible unrealised profit for your position. Rather, they are related to the current value of your collateral (your "margin balance") in relation to the amount of money you actually need to keep your position covered. Of course there is an indirect connection (insofar you need more money to keep an loosing position alive).

But it is perfectly possible that you have an incredible profitable position and still get a forced liquidation. This is especially true when the collateral in your account consists of a large fraction of bitcoins. Since a sudden drop in the market value can effectively reduce the value of your collateral to such an extent that you can't keep your position alive anymore.

If there is the danger of an imminent drop in the absolute bitcoin value, then it might be a good idea to exchange part of your collateral into USD. Of course, you need some "headroom" of additional margin for such an operation: you'll transfer a small portion of your bitcoin into the exchange account, sell it off there, and transfer the USD back into the trading account.


Bottom line: if you think these warning mails are false alarm, I'd recommend that you just check the current numbers in your account manually to verify that you have actually more than the minimum reserve (which is 10% for 1:1 and 13% for 1:2.5) above what is necessary to cover your position

[nrd525]

What is the risk in Slovenia?

[ninjaboon]

Speaking of the referral program, as there any possible way that there could be a referral fee for opening up new lending accounts.  I have helped numerous friends setup 2FA, learn how the site works, helped them get some USD to lend out on the site, etc...

It would be nice if there could be a referral fee on the interest that they earn.  It doesn't have to come out of your cut, but right now you guys take 10%, maybe it could even be a variable that the person setting up the account sets and is agreed upon with who they set the account up for.

I know for sure of the 4 people I setup, they would be happy to pay 10% of their earned interest for all the work I did getting them up and running.  I would not make this a referral code system, but more of an invite system where I set the parameters of my interest cut and then send them an invite to their email.

They sign up with the link and it's good to go.

Same here. I was thinking of starting some Bitcoin classes on mining, trading and it would be a great way to monetize my time.

[qxzn]

My reasoning is that the problem is perception: what your platform offers is brilliant; actually it looks too easy to people. It looks so natural that traders think it just must be this way and they have a right for exploiting all those arbitrage possibilities. That's why I am proposing to let people "feel" the strain. Whenever there is excessive buying on Bitstamp, this would decrease a certain visible indicator and at the same time make buying on Bitstamp automatically more and more expensive. Selling on Bitstamp and trading on the internal exchange would not be affected. (And the other way round when the liquidity problem is somewhere else) This way, the Ask side of Bitstamp would be moved up in the combined orderbook, which creates the incentive to sell at that higher rate. Of course you make an additional gain margin this way, which needs to be spend in a way which feels justified to the users. You could e.g. pick up the other proposal and let lenders participate on that additional margin, on the condition that they agree to lock their money for at least xx days (so you can send it to Bitstamp and use it there for some time).

The basic idea is to create a continuous feedback loop. So that money on Bitstamp won't be exhausted entirely, since buying on Bitstamp becomes exessively overpriced. This way the system would regulate itself. You would just need to define that automatic, controlling factor such, that it truthfully reflects the efforts, costs and limited bandwidth of the real-world connection between Bitfinex and Bitstamp.

This sounds pretty groovy to me.

[arbitrage001]

The Great Bitfinex Game!

1) Bitfinex will pay a bounty of 1 BTC for anybody that comes out with an idea that actually makes sense in order to improve our liquidity on Bitstamp
2) Anybody that will post an idea that is flawed, doesn't make sense, will never work for the reasons I will be honored to explain or just say things like " why don't you transfer to Bitstamp more money if 2 millions a day is not enough" will have to pay 1 BTC cent to the address:
1J14J1ZR11CsFKXyhneXpfVBp34ovQuh7C

All the coins collected by this game will be donated to www.seansoutpost.com , a homeless outreach in Florida accepting bitcoins.



Giancarlo
Bitfinex Team

Huge opportunity for people who do arbitrage between bitstamp/btc-e and bitfinex and leading some of your customers to wire money to bitstamp and btc-e rather your company.

1) You can offer rebate and discount for people to sell coin when your exchange run out of money. Or outright offer big miner free commission to sell coin if their monthly sale volume exceed certain threshold.

2) Extend temporary credit to customer you trust, customer who have wire in more than 50-100k per month for 3+ months should be on your company trust list.  The key to this facility is let them short bitcoin when the "premium" on coin is high. They can wire money to other exchange to cover the short in 1-2 days.


3) Offer equity/bond for your exchange, the money you raise can be used to wire to bitstamp. If it is equity, your company suffer same loss as investor if bitstamp run away with your money (of if the government decided to steal it).  Your risk is mitigated in a sense.

[capoeira]

The Great Bitfinex Game!

1) Bitfinex will pay a bounty of 1 BTC for anybody that comes out with an idea that actually makes sense in order to improve our liquidity on Bitstamp
2) Anybody that will post an idea that is flawed, doesn't make sense, will never work for the reasons I will be honored to explain or just say things like " why don't you transfer to Bitstamp more money if 2 millions a day is not enough" will have to pay 1 BTC cent to the address:
1J14J1ZR11CsFKXyhneXpfVBp34ovQuh7C

All the coins collected by this game will be donated to www.seansoutpost.com , a homeless outreach in Florida accepting bitcoins.



Giancarlo
Bitfinex Team
 

best option:

discard old concept, start growing internal volume and be an internal only exchange


EDIT: you are now big enough for this.....PLUS: all the fiat you send to Bitstamp you can invest than in further expantion.

[Sukrim]

If this ever happens, please pre-announce it - because then I want to get out of there as fast as possible.

[aminorex]

There isn't enough market making.  Offer rebates to liquidity providers.