Starfish BCB - Loans and Deposits

[sadpandatech]

What country are you in. And what bank are you refering to?  I'd like to read the fine print for myself because if it's true, myself and many others I know with sizeable deposits would love to bank there and earn interest, and be insured...

I dont know of any bank deposito that does not earn interest. AFAIK only a rented safe doesnt.
http://en.wikipedia.org/wiki/Deposit_insurance#By_EU_country

I have read the 'wiki'. which is not to serve as a replacement for the actual definitions as laid forth in the EU-DGD or any other guidlines or regulations they may have reguarding Euro banking. The term 'deposits' is not all inclusive of everything and there are quite a few, if all very purposly vague exclusions for what is considered to be a covered deposit.

Some of them can be read here;
http://webcache.googleusercontent.com/search?q=cache:TxSz0bklYOQJ:www.efdi.eu/scarica.aspx%3Fid%3D141%26Types3DDOCUMENTS+does+european+deposit+garuntee+cover+interest+bearing+deposits&cd=6&hl=en&ct=clnk&gl=us

[sadpandatech]

Either way, I think we're all getting off track here.

Some things we can all agree on;
In order for Bitcoin Banks to operate effectively they will require some of the same institutional measures that our real world banks have.
Currently there are no good ways to calculate the risks to a bank for a given debtor.
We need impartial insurance mechanisms in place to cover certain deposits with BTC Banks.
etc, etc.

What we are doing wrong now;
We are taking the 'only' standing 'Bank' in BTC land and sitting them down at the table and pointing fingers for the lack of all the things WE need for banks to work here.
We are assuming that it should be the responsibilty of the only institution at said table to account for these things.

What we should be doing;
Having this very needed discussion about lending/banking in BTC in it's own space where it can be discussed openly and most importantly unbiased of the only one example we have right now.

[imsaguy]

Maybe in your country? I specifically checked, I get around 5%/year and I am fully covered by the insurance.

Have you checked to see how large their trust fund is?  The FDIC covers accounts to $250k, but actually only has assets of like $10B which means if there was a system run on the system, it would go dry and people wouldn't necessarily get their money right away. (that or the US Government would simply print more bills)  The things that work outside of bitcoin don't always translate well into bitcoin.

[sadpandatech]

Maybe in your country? I specifically checked, I get around 5%/year and I am fully covered by the insurance.

Have you checked to see how large their trust fund is?  The FDIC covers accounts to $250k, but actually only has assets of like $10B which means if there was a system run on the system, it would go dry and people wouldn't necessarily get their money right away. (that or the US Government would simply print more bills)  The things that work outside of bitcoin don't always translate well into bitcoin.

The EDG sections on funding were even more fuzy reading than the exclusions even. so who knows. ;p

[peasant]

There is a bank run going on. Maybe I am stupid, but how would a legit BTC bank honor timely withdrawals without a Federal Reserve or central bank to step in and become the lender of last resort?

The question is whether there's *only* a bank run going on. There may also be an equity crisis that is masquerading as a bank run.

For example, say someone borrowed from Patrick to invest in Pirate. They may now be slow on interest payments or even making interest payments fully to Patrick out of banked Pirate profits. But that loan will probably go bad unless the debtor opts to pay the principle out of their personal funds. So Patrick may be thinking "I have X bitcoins out there in loans that are current and so will pay on schedule", but he may never see the principle back on those loans.

Things may be much worse than Patrick thinks they are, even if he is 100% completely honest. (Though naive, it's not like lots of people didn't tell him this would happen.)

Maybe the disagreement is on the definition of scam? If you are expecting a level of guarantee that can only be had with FDIC insurance and central bank backing I think you are asking for too much. I don't think most people here would want to socialize the risks associated wiht BCT lending.

A clear statement from Patrick indicating his equity, liquidity, and obligations would go a long way towards setting reasonable expectations and allow his depositors to track whether he's meeting those expectations.

Isn't most coin lend out at 10% a week? I don't see why someone would borrow from patrick to invest in pirate and get -3% a week profit. Now if it's like hashkings situation where he took insured funds and invested them in pirate for a 6% profit then yes. I think just too many people got spooked and pulled out, now things are gridlocked. At least in patricks situation, unless he wasn't being honest.

[imsaguy]

At least in patricks situation, unless he wasn't being honest.

[Puppet]

There may also be an equity crisis that is masquerading as a bank run.

Things may be much worse than Patrick thinks they are, even if he is 100% completely honest. (Though naive, it's not like lots of people didn't tell him this would happen.)

Exactly. A few posts up I read Patrick has 1000 BTC at hashking, and "isnt worried about it"..  Hashking is a broke scammer who invested all his money (and money that wasnt his) with pirate. Who knows how much more such toxic debt Patrick holds? He may not know himself, but my guess is a lot of it went directly or indirectly to pirate through a myriad of schemes, bonds and "insurances", and that only just began to unravel.

[peasant]

Then i misunderstood. I wasn't aware that patrick lent out to other operators, and i don't see why he would unless it was to invest in PPT. I thought we were talking about operators lending out to individuals.

[Rassah]

I wish we didn't even have these "banks." We don't need them. Bitcoins are already safely stored via private keys, so no need for safe vaults, and if you want to invest or earn money from others investing, just make a service like Lendingclub.com and take a percentage from that. If you are going to dump all the risks of your "bank" onto your users, at least let them chose the level of risk they are comfortable with. A bitcoin-based lendingclub will allow people to borrow none if needed, will allow people to invest if they want to, and will be A HECK of a lot more accurate at determining true rates of returns on loans. What we have now (the 2%+ per week) is wish full thinking, hiding behind insolvent banks and stressed out, shady bank operators.

[JoelKatz]

Then i misunderstood. I wasn't aware that patrick lent out to other operators, and i don't see why he would unless it was to invest in PPT. I thought we were talking about operators lending out to individuals.

Individuals can invest in PPT too.

[imsaguy]

I wish we didn't even have these "banks." We don't need them. Bitcoins are already safely stored via private keys, so no need for safe vaults, and if you want to invest or earn money from others investing, just make a service like Lendingclub.com and take a percentage from that. If you are going to dump all the risks of your "bank" onto your users, at least let them chose the level of risk they are comfortable with. A bitcoin-based lendingclub will allow people to borrow none if needed, will allow people to invest if they want to, and will be A HECK of a lot more accurate at determining true rates of returns on loans. What we have now (the 2%+ per week) is wish full thinking, hiding behind insolvent banks and stressed out, shady bank operators.

How do you really know what the people on lendingclub are going to do with your money?  How would you translate that over to bitcoin?

[IveBeenBit]

Exactly. A few posts up I read Patrick has 1000 BTC at hashking, and "isnt worried about it"..  

Link? I searched this thread and found no mention of Patrick having any exposure to HK.

[imsaguy]

Same as it works on Lendingclub: people who wish to borrow post an explanation if why they want money, how they plan to repay, and any ratings they have (OTC or something easier to use would work well in place of a credit score). If they are untrustworthy, their interest rate would be way high. And if their loan doesn't get filled, then they have no business borrowing. On the other hand, if they have good ratings and are good at paying back, their interest would be low.
From the investor's side of view, they will lend out to a lot of borrowers, spreading their risk as much as possible. In the end, if they lend at 2% per week to a bunch of people, but only half actually pay back, then we all know that the actual market rate out there is closer to 1%. And if someone wants to lend to some people who are high risk and are will into pay 12% a week, well, then it's those specific lender's problem, not everyone else's.
What is missing is really just a well organized website to facilitate this.

So you're proposing something that is/was already happening, using ratings that people deride as being gameable (otc ratings), with the only noticeable different being a well organized website?

[Bjork]

Just as an update, I also received a pretty large (partial) repayment.  I 100% believe that Patrick intends to, and will, pay what is owed.  Maybe it's time to start the bets?  Somebody call Matthew

[Puppet]

Exactly. A few posts up I read Patrick has 1000 BTC at hashking, and "isnt worried about it"..  

Link? I searched this thread and found no mention of Patrick having any exposure to HK.

Sorry, different thread:

As an example, I have 1000 coins with HashKing that I don't worry about,

[JoelKatz]

As an example, I have 1000 coins with HashKing that I don't worry about,

Yeah, Patrick seems to be an honest fool. When he wises up, he'll still be trustworthy. Hopefully, it only took one lesson.

[PatrickHarnett]

blah blah blah two pages of stuff

Update for today:
I sent out some payments last night.  Several of 100 and a couple smaller and a couple larger - not a strict pro-rating based on withdrawal requests, but I considered it important to get them out to people.

I have several additional withdrawal requests received overnight, so they will get added to the queue.  They will be paid as funds are returned.  For clarity, the interest rate change is Friday and will be 0.25%/week because it makes the payments a little easier.  If you would like to move onto weekly interest payments, please pm.

I do suspect some people were using loans from me to invest in Pirate.  Others were investing in mining equipment and that is possibly as illiquid, but it is similar to the beginning of the year when people were borrowing for gambling.

and, I am sorry that I am not able to execute the withdrawals in a timely fashion and that so many people are caught up in this.  Irrespective of the other events, I have responsibility to those that have placed trust with me, and despite my best efforts I have failed to meet the standards required.

[Rassah]

So you're proposing something that is/was already happening, using ratings that people deride as being gameable (otc ratings), with the only noticeable different being a well organized website?

Exactly. If the ratings system sucks, someone else can come up with a better one (use eBay ratings or something). If someone wants to borrow but doesn't provide reputable rating sources, they can pay higher interest rates. And if someone doesn't do their research and invests in only one risky person and loses all their money, oh well. It won't affect everyone else.
The well organized website can provide the service of sorting loan applicants based on their risk, assign them an interest rate if it's not done bidding style, make it easy to split your investment across a whole bunch of borrowers within your chosen categories, process and distribute payment receipts, and do collections of defaulted loans if needed.
This forum doesn't come close to any of that.

[Severian]

As an example, I have 1000 coins with HashKing that I don't worry about,

Ouch.

[PatrickHarnett]

As an example, I have 1000 coins with HashKing that I don't worry about,

Ouch.

And a lot happens in a week.  Yes, it sucks, and it was due to be repaid on 10 October, but that is not the current time frame.