Who Pays What?

[gabbynot]

I'm an eagle-eyed investor. Please change all ratings to FFF, for the sake of accuracy.

Thank you Mosrite.  However, you're also to stupid to understand the rating metrics and grades used in the real world, let alone the ones used as general guidance here.  When you can provide some reasons for your recommendation, then someone might take you more seriously.

Let me give you some; AFAICT, you do zero verification of claims made by those lender. Most of them probably wouldnt let you, because then it would become quite clear what they are doing.  I do mean verify what they hold in their wallets, GLSBE portfolio, identity of their creditors  etc. Correct me if Im wrong, but you seem to give a rating based pretty much solely on what they  tell you.  Since most of them are scams, they will lie, and you are rating the lies, not the lenders. The  the only thing  that does is provide false credibility. If you can not verify their claims, an F is indeed what you should give. Its up to them to prove they are worthy of a better rating.

Obviously I will be interested to see your collected assessments of the people in this section then.

Exactly.  PH's ratings certainly aren't the official forum's ratings or anything.  If someone has a better plan & the time to implement it, then no one is stopping them.

[peasant]

Yes, and also if anyone wants to take deposits and fully submit there identity they can do so also.

[nrd525]

A good history is often a good predictor of the future. For instance, I've found Ebay seller ratings to be reliable (though I have never tried buying from someone with a low rating or a small number of ratings).

The big difference between Ebay and running a bank is that typically each Ebay sale is very small and thus the amount you can scam is small (unless you build up your rating with lots of tiny sales and then try to pull off a big scam).  Unfortunately with a bank or corporation/project that can run away with all the funds, there is a very high incentive to scam.

[P4man]

Obviously I will be interested to see your collected assessments of the people in this section then.

You mean all the 1% per week "securities"? I trust none of them, not one tiny bit. Nor should anyone as long as they do not open their books and wallets so to speak.

Now unlike me,  you have taken it upon yourself to rate them, and I actually think thats a good idea; I can imagine legitimate businesses not wanting to disclose everything to everyone, so there is a good argument to be made that someone like yourself, who  would need to be trusted by both parties, would obtain privileged access to information to make meaningful assessments, allowing legitimate businesses to prove themselves to be more trustworthy than the scammers. That means you would  judge the facts (or lack thereof), not the scammers lies.

[P4man]

Now when i see someone that guarantees no losses and they default then i'll call it a scam.

ROFL. A bit late then, no?

[peasant]

Yes it's late, but it's also proof. You have the right to call them a scam at that point. Calling everyone a scammer because you don't like how they do business isn't proof. They don't have to prove anything if people are gonna keep giving them coins, with no recourse. People can choose how they want to use their coins, and the risks are more than clear enough. If you really hate all those 1% shops make a ton of fake accounts and claim they scammed you. You will achieve your goal much faster. Pre-crime isn't very effective if your just gonna accuse everyone of committing a crime, and hope you hit a target.

[P4man]

Yes it's late, but it's also proof. You have the right to call them a scam at that point. Calling everyone a scammer because you don't like how they do business isn't proof.

The point is not to prove they are scams. You cant prove that. Nor do you have to. The point is to rate businesses which can demonstrate they are (most likely) NOT scams, which can demonstrate reserves, income, identity etc above ones which can not demonstrate any of that at all.

As it is now, its trivially easy to set up a ponzi on GLSBE, and get Patrick to rate you AAA. What then is the meaning of it? Its meaningless. Dont even bother.

[nimda]

Yes it's late, but it's also proof. You have the right to call them a scam at that point. Calling everyone a scammer because you don't like how they do business isn't proof.

The point is not to prove they are scams. You cant prove that. Nor do you have to. The point is to rate businesses which can demonstrate they are (most likely) NOT scams, which can demonstrate reserves, income, identity etc above ones which can not demonstrate any of that at all.

As it is now, its trivially easy to set up a ponzi on GLSBE, and get Patrick to rate you AAA. What then is the meaning of it? Its meaningless. Dont even bother.

Only Patrick's money-backed ratings matter, really. That's the best way to do ratings that have meaning -- they're worth something.

[danieldaniel]

time for a new invite only forum... oh so glad its in the works...

Where do we sign up? 

Emphasis mine...

I know, I can still ask for an invite.

omg invite only forum OMG.

GIVE ME INVITE NOW.
/rage

[peasant]

Yes it's late, but it's also proof. You have the right to call them a scam at that point. Calling everyone a scammer because you don't like how they do business isn't proof.

The point is not to prove they are scams. You cant prove that. Nor do you have to. The point is to rate businesses which can demonstrate they are (most likely) NOT scams, which can demonstrate reserves, income, identity etc above ones which can not demonstrate any of that at all.

As it is now, its trivially easy to set up a ponzi on GLSBE, and get Patrick to rate you AAA. What then is the meaning of it? Its meaningless. Dont even bother.

The way it is now is how people want it, except for that minority calling everyone a scam that offers 1%. They are slandering purely on the fact that they don't like how they do business. I don't agree with that, unless they have proof. I pretty much agree with most of what your proposing. Just not the part of forcing anyone to open their books, and the blind accusations without proof you won't get. When people stop giving them money things will change. I know i would probably invest large amounts if i had a concrete guarantee. Slander isn't the solution, and that's what makes team Ponzi just look like trolls. Things should change through competition not slander.

[PatrickHarnett]

I'll add a small comment that I expect to be dismissed or ignored by critics that really don't understand this part of the bitcoin market. 

People pay 1% per week (and higher) on deposits because it their next cheapest source of funding - and that happens to be the market rate in this economy.  They happen to be able to generate higher returns, and thus leverage their positions.

It is a simple matter to observe large companies and banks making huge profits, but they still take more and more in deposits.  For US companies, the rate they pay is currently low, but the arguments in this forum suggest corporates shouldn't have any debt if profitable.  That, however, does not maximise returns.  Also, for those with short memories or a US centric view, around 1980, the standard bank benchmark rate was 15%.  In today's market for start-up companies, equity can cost between 30% and 50% per year and that was the expected level of return demanded by one of the investors in the electricity company I worked on (other investors only needed 20-30%).  Bitcoin is coming down to those levels as expected.

And off-topic for a moment, the arbitrage opportunities I'd play with would use the 10% differential that currently exists.  Those that claim it's not possible are obviously not looking.

[bitcoinBull]

People pay 1% per week (and higher) on deposits because it their next cheapest source of funding - and that happens to be the market rate in this economy.  They happen to be able to generate higher returns, and thus leverage their positions.

There's no evidence that any of these deposit-takers can generate high returns. Just the monumental historical precedence of pirate. And it wasn't that long ago! Stop living in HYIP la-la land.

[PatrickHarnett]

People pay 1% per week (and higher) on deposits because it their next cheapest source of funding - and that happens to be the market rate in this economy.  They happen to be able to generate higher returns, and thus leverage their positions.

There's no evidence that any of these deposit-takers can generate high returns. Just the monumental historical precedence of pirate. And it wasn't that long ago! Stop living in HYIP la-la land.

If you keep your eyes closed, you'll continue to avoid the evidence.  Haven't you noticed eight months of lending where people offer to pay superior rates, or the many posts from people confirming that they have paid much higher rates.  And the point I was making was about the cost of capital, rather than the returns.

[Mosrite]

People pay 1% per week (and higher) on deposits because it their next cheapest source of funding - and that happens to be the market rate in this economy.  They happen to be able to generate higher returns, and thus leverage their positions.

There's no evidence that any of these deposit-takers can generate high returns. Just the monumental historical precedence of pirate. And it wasn't that long ago! Stop living in HYIP la-la land.

If you keep your eyes closed, you'll continue to avoid the evidence.  Haven't you noticed eight months of lending where people offer to pay superior rates, or the many posts from people confirming that they have paid much higher rates.  And the point I was making was about the cost of capital, rather than the returns.

Many ponzi schemes have gone on for years. Madoff, the Cuban brothers in Costa Rica, etc. No entity can ever pay consistent, market-crushing returns, without endgendering super high risk, or being an out and out scam.

[Rassah]

BEST case scenario: these higher-than-normal market rates are only possible because Bitcoin is still a developing economy, akin to a rapidly growing start-up company. Eventually it will slow down to the pace of the overall global economy. Once that starts to happen, rates will start to go down. At that point, you better hope people are comfortable with rate decreases, because one too many "investors" pulling their money out to go invest with someone paying slightly higher will result in a bank run.

Only way I can think of avoiding this is
1) DO NOT promise fixed rates, and get people used to them fluctuating based on your returns (even if they vary by 0.01%). Not only will this make it easier to lower rates if you have to, but the changes in the rate will at least give "investor" some signal as to how your business is going
2) Be open about your holding as much as you can. At the least, tell people how much you have in reserves v.s. how much you have lent out. This will at least give them an idea of how risky you are should a bank run occur.

[PatrickHarnett]

BEST case scenario: these higher-than-normal market rates are only possible because Bitcoin is still a developing economy, akin to a rapidly growing start-up company. Eventually it will slow down to the pace of the overall global economy. Once that starts to happen, rates will start to go down. At that point, you better hope people are comfortable with rate decreases, because one too many "investors" pulling their money out to go invest with someone paying slightly higher will result in a bank run.

Only way I can think of avoiding this is
1) DO NOT promise fixed rates, and get people used to them fluctuating based on your returns (even if they vary by 0.01%). Not only will this make it easier to lower rates if you have to, but the changes in the rate will at least give "investor" some signal as to how your business is going
2) Be open about your holding as much as you can. At the least, tell people how much you have in reserves v.s. how much you have lent out. This will at least give them an idea of how risky you are should a bank run occur.

+1 (finally someone recognises the basics).

For the newbies trolling the lending section, they might be interested to know rates have roughly halved in the past six months.  Personally I've already done one reduction and was planning a second before deciding to change the future direction of StarfishBCB. 

[Brunic]

BEST case scenario: these higher-than-normal market rates are only possible because Bitcoin is still a developing economy, akin to a rapidly growing start-up company. Eventually it will slow down to the pace of the overall global economy. Once that starts to happen, rates will start to go down. At that point, you better hope people are comfortable with rate decreases, because one too many "investors" pulling their money out to go invest with someone paying slightly higher will result in a bank run.

Only way I can think of avoiding this is
1) DO NOT promise fixed rates, and get people used to them fluctuating based on your returns (even if they vary by 0.01%). Not only will this make it easier to lower rates if you have to, but the changes in the rate will at least give "investor" some signal as to how your business is going
2) Be open about your holding as much as you can. At the least, tell people how much you have in reserves v.s. how much you have lent out. This will at least give them an idea of how risky you are should a bank run occur.

+1000

This post is a must-read and have to go in the hall of fame of great post.

Don't forget that in the last 10 months, BTC went from 7.7 millions BTC to 9.8 millions. Also, the price is around 4 to 5 times the price in last November. In a moment of crazy growth, crazy things can happen.

[Grinder]

This post is a must-read and have to go in the hall of fame of great post.

It's also basically what some of us have been saying for quite some time now: Real businesses can't promise a permanent interest rate that is this good.  I guess it just had to be said by someone you hadn't already decided is stupid. Oh well, as long as you finally get a clue it's all good.

[DeaDTerra]

This post is a must-read and have to go in the hall of fame of great post.

It's also basically what some of us have been saying for quite some time now: Real businesses can't promise a permanent interest rate that is this good.  I guess it just had to be said by someone you hadn't already decided is stupid. Oh well, as long as you finally get a clue it's all good.

It is the way that it's said in that changes the meaning of it. We all agree that it's not sustainable forever but that doesn't mean it can be legit and not a ponzi right now. You might not be able to pay x% a week for ever because it's not sustainable but that doesn't meant that right now if you are doing it you are a ponzi. That's basically what 90% of the people that discuss this say, they have this weird argument that because it's not sustainable for all future it must be a ponzi, which is of course not always the case.
//DeaDTerra

[Rassah]

This post is a must-read and have to go in the hall of fame of great post.

It's also basically what some of us have been saying for quite some time now: Real businesses can't promise a permanent interest rate that is this good.  I guess it just had to be said by someone you hadn't already decided is stupid. Oh well, as long as you finally get a clue it's all good.

I know that. But it's not because the market rates are higher than normal that these business are necessarily "ponzi". The market is expanding at an insane speed right now, causing those insane rates. Nobody has promised those rates forever. The ones who think these rates are going to last more than 1 year are the one crying "scams" everywhere.

+1 to what DeaDTerra said.

It's not really the market expanding as just people willing to borrow. I haven't seen too much economic activity in Bitcoin to warrant a 3% /week investment rate ON TOP of the 8% a month deflation growth. If it's true that the reason people are borrowing is because they see Bitcoin going up, want to have it NOW, and prefer to borrow at 3% for a week while their money transfers instead of preying 4% to instant deposit places, then that's a pretty shaky business to be based on, since a reversal of Bitcoin growth or a new instant deposit service with lower fees will instantly kill borrowing incentive. Likewise, as I mentioned, a huge spike in Bitcoin prices will likely cause borrowers to default.
Due to all this, I would say the high rates are warranted, since high risk = high rates. This, however, does not mean that none of these HYIPs are NOT ponzis, either. We just don't know until they become more transparent. And in the end, the choice is really between a ponzi scam, and a 1980's style Savings and Trust, both of which have histories of great financial collapse.