Buy bitcoin with cash deposits at most banks in the USA with Bitcoin-Brokers

[NewLiberty]

no offense but the site seems terrible. it might as well be a text box and asubmit button as you just ask everyone to submit a query through the help desk 

Agree, the website is the weakest link.  The service however is excellent.
If it were the opposite, there would be much anger rather than simply doubt.

[sayulita]

no offense but the site seems terrible. it might as well be a text box and asubmit button as you just ask everyone to submit a query through the help desk 

Agree, the website is the weakest link.  The service however is excellent.
If it were the opposite, there would be much anger rather than simply doubt.

I think we can all agree that there wasn't much effort put into coding, and designing and a whole bunch of other stuff. Frankly, I didn't see the need for it. Coding and designing has absolutely nothing to do with brokering bitcoins.

Instead, I placed all my energy in creating efficiencies in the entire ordering process. I tried to establish the most convenient methods for both the buyer and the seller to facilitate their side of the transaction.

Simultaneously, I felt that I needed to place the rest of my energy on creating efficiencies in the entire customer service side of the equation. There has not been a single customer who can say that they have had to wait more than a matter of minutes for any request of any type whatsoever during the hours of 5:00am PST and 11:00pm PST since day #1.

Admittedly, this has come at the cost of a fancy design and other bells and whistles which can be found elsewhere. Oh well.

With that being said...........over 99% of the entire inventory sold out again today. So if anybody has any bitcoins which they need converted into cash deposits into their bank account you are more than welcome to list them for free at Bitcoin-Brokers.

Thanks.

[sayulita]

Certainly this seems like a nice escrow service charging 2% to the buyer.

Unfortunately, the fact that the bitcoins need to be transferred to a wallet owned by a person or persons who are not clearly identified leads to substantial risk for both buyer and seller. There would be no way for either party to legally go after the owners of that wallet in the event the site simply goes down and the BTC are moved elsewhere.

I need to step in here for one second and point out a key detail which is absent in your statement.

Indeed, Bitcoin-Brokers does act in many ways like an escrow service. For Sellers to have their bitcoins listed on the website, those bitcoins need to be transferred into Bitcoin-Broker's wallet first. This is for the protection of the buyer. This ensures that the seller cannot simply hamper the transfer of bitcoins after the buyer has made a cash deposit into the seller's bank account.

Here are a couple key differences between an escrow service and Bitcoin-Brokers:

Bitcoin-Brokers eliminates the need for a buyer to find a seller.

Bitcoin-Brokers eliminates the need for a seller to find a buyer.

Bitcoin-Brokers eliminates the need for the buyer and the seller to come to terms on any part of the transaction. The terms of the entire transaction are set by Bitcoin-Brokers for both parties going into the deal. This eliminates any need to try to find the "other half" of the equation regardless if you happen to be a buyer or a seller. It also eliminates the entire "negotiation process" between parties. Settlement prices are set at current MtGox rates, and both parties receive equal representation and treatment in case anything out of the ordinary occurs with the transaction.

Total cost to the buyer 2%

Total cost to the seller 0%

[bitpop]

Why don't you fund orders yourself until you grow?

[sayulita]

Why don't you fund orders yourself until you grow?

If Bitcoin-Brokers funded the order it would destroy the ability for the business to remain impartial in every transaction because by virtue of what you suggested Bitcoin-Brokers becomes party to the transaction which it oversees. It immediately places Bitcoin-Brokers in the position of the fox guarding the henhouse (that's the expression isn't it? too lazy to Google it.)

As far as until I grow.....this business is 2 weeks old. I am very pleased with where it stands now in relation to where it stood 14 days ago.

It's not about growth at any price. Its about doing it right and bringing a predictable stable framework to a chaotic environment.

[bitpop]

Yeah but you could keep buyers happy. There's nothing shady about buying bitcoins for your buyers if you don't have enough sellers yet.

[sayulita]

Yeah but you could keep buyers happy. There's nothing shady about buying bitcoins for your buyers if you don't have enough sellers yet.

Bitcoin-Brokers has a 2% fee. What % did bitcoin drop in value today? Assuming Bitcoin-Brokers held just $25,000 in bitcoins, an approach to business as you have suggested would have netted Bitcoin-Brokers a loss of thousands of dollars just today alone.

I think I will keep it just the way it is.

[justusranvier]

I think the fee you're charging is too low to attract the number of sellers you're looking for. Based on the trades that occur on LocalBitcoins.com, buyers are willing to pay 5%-10% above spot in order to buy bitcoins via bank deposits.

If you charged enough to pay the seller 2% above spot, it would be worth their time to provide a steady supply of coins for sale because then they could use the deposited funds to buy more coins on Coinbase (1% fee) and recycle those back to your site.

[bitpop]

True sellers have more risk here

[sayulita]

I think the fee you're charging is too low to attract the number of sellers you're looking for. Based on the trades that occur on LocalBitcoins.com, buyers are willing to pay 5%-10% above spot in order to buy bitcoins via bank deposits.

If you charged enough to pay the seller 2% above spot, it would be worth their time to provide a steady supply of coins for sale because then they could use the deposited funds to buy more coins on Coinbase (1% fee) and recycle those back to your site.

You sir, are reading my mind. I love being able to offer bitcoins to buyers at 2% above spot. I think it is about as good of a deal as can be found considering the timeframe for funding, ease of use etc.

Yet I also know that there are people who would trade off an extra few % points to have access to greater amounts of bitcoins any day of the week.

Now just for the sake of argument...this is just a hypothetical situation (caveat caveat caveat). Is there a world that exists whereby the existing framework which is offered at Bitcoin-Brokers can coexist with a second tier service?


When I say second tier service, I mean a premium is paid to the sellers to open up either a predictable arbitrage opportunity, or simply enough incentive to encourage additional sellers to opt to make use of the service. Considering that sellers could sell and effectively be paid in cash the minute the sale occurs, what sort of framework do people need to see to open up a recurring predictable profitable arbitrage environment?

Perhaps like a hybrid car which offers both, and each one kicks into play under different supply versus demand moments with the buyer always having the option if they wish to buy or not.

For example, lets assume that there are 100 bitcoins listed for sale at Bitcoin-Brokers which can be purchased at current rates, just the way things work right now. Once and only once all of those bitcoins are sold, do the second tier bitcoins become an option for the buyer. The sellers who insist upon being paid the premium will not have any of their bitcoins sold until the first tier sellers have sold theirs first. Once those first tier bitcoins are sold out, under the way the business operates right now, no sales can occur, afterall, we are sold out.
 
Hey...its Saturday and its raining....the mind wonders these sorts of things over the first coffee for the day.

PS-Bitcoin-Brokers would still only take a 2% fee, so don't worry, this isn't the early hints at a rate increase.

[NewLiberty]

You might even have both higher and lower than spot market pricing.
If someone wanted IMMEDIATE sale, they might accept lower price in fiat to jump to the head of the line.
To get one of the low priced sales, you might require a buyer to have a much shorter time to close the sale.

Your income comes on volume no matter what price.

[sayulita]

Here is a hypothetical idea which might contain the solution..... Third cup of coffee for the day....brain is starting to wake up.

Everybody has always seen the spread between the MtGox rates and the BTC-e exchange rates. Right now for example the price of bitcoin on MtGox is $70, and BTC-e is $67. At current rates there exists approximately a 4% spread between these 2 prices.

BTC-e allows clients to withdraw bitcoins as a withdrawal method. This means that a BTC-e client could gain access to bitcoins at a price whereby they could capture the spread between MtGox rates and BTC-e rates if they were able to buy at BTC-e rates and immediately sell at current MtGox rates.

Yet the only way that this can be achieved is "if" and only "if" the market prices remained static. The client would need to be guaranteed that their sell price is locked in when they buy the bitcoins, otherwise they expose themselves to market movements which could easily turn against them on downward days like we have been witnessing recently.

So how do we achieve this?......"waiter.....4th cup of coffee please".....okay where was I?

We transfer the market risk onto the buyer and lock the seller in with a guaranteed profit.

For those of you who have purchased bitcoins from Bitcoin-Brokers this will look familiar, for those of you who have not ordered bitcoins from Bitcoin-Brokers.....yet, this is what  quote looks like when you request one.

Transaction ID # 111111
The current MtGox rate for your bitcoins is $  100.00 /BTC
Bitcoin-Brokers fee on this transaction is 2%
The net amount of this bitcoin transaction is  1 bitcoins
The net amount of bitcoins that you will receive will be 0.98
The exact total of your order is $100.00

To purchase these bitcoins simply visit any branch of Wells Fargo

Hand the teller a cash deposit for exactly $100.00

and request that payment be deposited into the account of:

John Doe
Account number :123456789
ABA Routing number: 123456789

Quotes under the way the current system operates will present the buyer with locked in rates, and with a locked in amount of bitcoins which will be delivered  for  a specific amount of money.

If the first tier system of bitcoins is sold out, then the buyer could access the second tier BTC-e market. Yet to do this, the buyer would need to agree to a floating quote. They would be instructed to make a cash deposit, as they would with the first tier method, except they would not know exactly how many bitcoins they would receive before they make the deposit. They would know the ballpark amount, but not the exact amount.

This is how it "could" work:

The buyer would be presented with the banking information of the seller as they normally are. Buyer makes a cash deposit into the bank account of a seller. The buyer supplies Bitcoin-Brokers with the proof of deposit, and Bitcoin-Brokers confirms the deposit with the seller just like normal.

Seller would log into their BTC-e account, and make the purchase of bitcoins at current rates. The seller would then screen capture or something to show to Bitcoin-Brokers the exact purchase price of the bitcoins. Seller would then immediately transfer 96% of those bitcoins to Bitcoin-Brokers for the deposit which has ALREADY been made into their account. This locks the seller in with a guaranteed 4% profit on the transaction regardless what the market does.

Bitcoin-Brokers would take the same 2% fee in the form of bitcoins, and essentially forward 98% of the bitcoins which were transferred to Bitcoin-Brokers by the seller.

Simply buy out of BTC-e at current rates, and be guaranteed a 4% profit on every transaction....not bad. Every trader's dream right? Guaranteed 4% on every trade. I can just imagine all the traders who are reading this and salivating at the idea. $10,000 worth of sales per day earns you $400...where do you sign up right?

There is only one possible problem with this scenario (which is running through the minds of buyers who are reading this right now). Since the bitcoins have not been transferred to Bitcoin-Brokers to hold safely, how does the buyer expect any guarantee that after they have funded the bank account of the seller that they will receive bitcoins? Afterall, what is to stop the seller of bitcoins from simply allowing a cash deposit to be made into their bank account, and then simply choosing to not transfer any bitcoins?

Simple.....to become a seller at the 2nd tier level with Bitcoin-Brokers, each seller would be required to place a "bond" on themselves in the form of bitcoins. Whatever amount of bitcoins that the seller transfers to Bitcoin-Brokers as a bond would represent the maximum transaction size that Bitcoin-Brokers would allow.

Thus, when the buyer deposits enough money into the seller's bank account to purchase the bitcoins, even if the seller failed to buy the bitcoins from BTC-e, or if the buyer dies, or if the buyer falls into a coma or anything else, Bitcoin-Brokers will still be able to transfer the bitcoins to the buyer by tapping into the "bond" of the seller.

[NewLiberty]

It looks like in the new proposal, bitcoin-broker will also need to act as the guarantor for the 2nd tier.  Just in case the seller does not transfer the bitcoin, bitcoin-broker will have to do so.  (And use up the sellers' deposit).
How you manage to insure your capability to be that guarantor is up to you, but the more visibility you give to it the better.
If you are using a deposit as the guarantee, that also gives you some risk as the deposit holder (not to be hacked, robbed, etc).  In the end, the guarantee is only as good as the trust placed in you (buyers can not see the deposit, we have to trust that you have it).

It can be a very good model.  Holding deposits might have some other risks and maybe some benefits.  It is good creative thought.

Since you offered it for opinions, personally I like what you are doing now and would like to see it more solid and improved and grow before making changes to the model that make new things or more complicated for you.  Many business fail from trying to do too much.  If it is very well inside your comfort to try it, then go for it.

[sayulita]

Many business fail from trying to do too much.  If it is very well inside your comfort to try it, then go for it.

It would be very easy to implement. Yet, just because it can be done doesn't mean it will be. Just chewing the proverbial bitcoin fat with fellow bitcoiners on a lazy Saturday.

[justusranvier]

This is how it "could" work:

The buyer would be presented with the banking information of the seller as they normally are. Buyer makes a cash deposit into the bank account of a seller. The buyer supplies Bitcoin-Brokers with the proof of deposit, and Bitcoin-Brokers confirms the deposit with the seller just like normal.

Seller would log into their BTC-e account, and make the purchase of bitcoins at current rates. The seller would then screen capture or something to show to Bitcoin-Brokers the exact purchase price of the bitcoins. Seller would then immediately transfer 96% of those bitcoins to Bitcoin-Brokers for the deposit which has ALREADY been made into their account. This locks the seller in with a guaranteed 4% profit on the transaction regardless what the market does.

Bitcoin-Brokers would take the same 2% fee in the form of bitcoins, and essentially forward 98% of the bitcoins which were transferred to Bitcoin-Brokers by the seller.

Simply buy out of BTC-e at current rates, and be guaranteed a 4% profit on every transaction....not bad. Every trader's dream right? Guaranteed 4% on every trade. I can just imagine all the traders who are reading this and salivating at the idea. $10,000 worth of sales per day earns you $400...where do you sign up right?

There is only one possible problem with this scenario (which is running through the minds of buyers who are reading this right now). Since the bitcoins have not been transferred to Bitcoin-Brokers to hold safely, how does the buyer expect any guarantee that after they have funded the bank account of the seller that they will receive bitcoins? Afterall, what is to stop the seller of bitcoins from simply allowing a cash deposit to be made into their bank account, and then simply choosing to not transfer any bitcoins?

There's a simpler way a seller could do this using the existing site features:

1) Wire $10,000 to BTC-e.
2) Deposit $10,000 worth of bitcoins with Bitcoin-Brokers
3) Every time you get a sale on Bitcoin-Brokers execute a market order for the same dollar amount on BTC-e
4) Before you run out of bitcoins on BTC-e send another wire transfer from the bank account you're receiving deposits to.
5) Before you run out of bitcoins on Bitcoin-Brokers replenish your account there with the ones you bought on BTC-e.

Seller earns the spread between Mt Gox and BTC-e minus wire fees.

[sayulita]

It looks like in the new proposal, bitcoin-broker will also need to act as the guarantor for the 2nd tier.  Just in case the seller does not transfer the bitcoin, bitcoin-broker will have to do so.  (And use up the sellers' deposit).

Bitcoin-Brokers would have to act as the guarantor, but not any more so than what it happening right now. Bitcoin-Brokers already guarantees current buyers that every transaction results in bitcoins in their wallet. This is achieved easily by collecting the bitcoins in advance from the seller. Buyers are only directed to fund the accounts of sellers who have already escrowed their bitcoins. That's why the buyer always is guaranteed to receive bitcoins with Bitcoin-Brokers.

And "yes", Bitcoin-Brokers would be there to complete the transaction on behalf of the seller, with the seller's escrowed bitcoins in case the seller suddently disappeared.  

[sayulita]

This is how it "could" work:

The buyer would be presented with the banking information of the seller as they normally are. Buyer makes a cash deposit into the bank account of a seller. The buyer supplies Bitcoin-Brokers with the proof of deposit, and Bitcoin-Brokers confirms the deposit with the seller just like normal.

Seller would log into their BTC-e account, and make the purchase of bitcoins at current rates. The seller would then screen capture or something to show to Bitcoin-Brokers the exact purchase price of the bitcoins. Seller would then immediately transfer 96% of those bitcoins to Bitcoin-Brokers for the deposit which has ALREADY been made into their account. This locks the seller in with a guaranteed 4% profit on the transaction regardless what the market does.

Bitcoin-Brokers would take the same 2% fee in the form of bitcoins, and essentially forward 98% of the bitcoins which were transferred to Bitcoin-Brokers by the seller.

Simply buy out of BTC-e at current rates, and be guaranteed a 4% profit on every transaction....not bad. Every trader's dream right? Guaranteed 4% on every trade. I can just imagine all the traders who are reading this and salivating at the idea. $10,000 worth of sales per day earns you $400...where do you sign up right?

There is only one possible problem with this scenario (which is running through the minds of buyers who are reading this right now). Since the bitcoins have not been transferred to Bitcoin-Brokers to hold safely, how does the buyer expect any guarantee that after they have funded the bank account of the seller that they will receive bitcoins? Afterall, what is to stop the seller of bitcoins from simply allowing a cash deposit to be made into their bank account, and then simply choosing to not transfer any bitcoins?

There's a simpler way a seller could do this using the existing site features:

1) Wire $10,000 to BTC-e.
2) Deposit $10,000 worth of bitcoins with Bitcoin-Brokers
3) Every time you get a sale on Bitcoin-Brokers execute a market order for the same dollar amount on BTC-e
4) Before you run out of bitcoins on BTC-e send another wire transfer from the bank account you're receiving deposits to.
5) Before you run out of bitcoins on Bitcoin-Brokers replenish your account there with the ones you bought on BTC-e.

Seller earns the spread between Mt Gox and BTC-e minus wire fees.

And the award for best solution goes to..........

That could work!

[justusranvier]

And the award for best solution goes to..........

That could work!

The problems start to show up when you consider that transaction volumes large enough to make this worth the effort are very likely to cause banks to close one's account.

[sayulita]

And the award for best solution goes to..........

That could work!

The problems start to show up when you consider that transaction volumes large enough to make this worth the effort are very likely to cause banks to close one's account.

Good point. I do not know what sort of limitations are in place on individual accounts with respect to people making cash deposits on a daily, monthly etc basis.

There are sole proprietors using their personal bank accounts as a deposit option for clients paying their invoices; I know the banks start breaking out the paperwork for cash deposits north of 10K at a time, but beyond that I have no idea. I suppose each bank has its own set of rules.

[KyrosKrane]

I'd also point out that this breaks the peer to peer paradigm you have going. That exposes you to legal risk because now you're the one sending funds and buying coins. You're no longer a disinterested escrow service, you now have your own money in play. I'm certainly not a lawyer, but you probably want to speak to one about the laws and regulations involved for yourself, the buyer, and the seller.