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Author Topic: A day in the life of a pirate.  (Read 28272 times)
Vladimir
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May 24, 2012, 04:03:00 AM
 #181

I'll go back to my nice stable financing business (where I'm charging 280% per year and have good customers and low default risk).

OK you have convinced me. Will launch FF+tor and set's up a proper anonymous identity (or use a previously prepared one), will borrow at 280% per year (or more) and will invest into MMM at 50%-60% per month. Looking forward to paying up interest up until the death of MMM, let us all pray it will last a few more years. But biz model is very sound. Once MMM fails will set up a new identity or ten and invest into MMM III. Rinse and repeat.

Disclaimer: no I am not going to do that, just kidding. But others will, I bet.






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drakahn
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May 24, 2012, 04:07:04 AM
 #182

... the same thing, but with bitcoins?

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May 24, 2012, 04:09:55 AM
 #183

If I don’t pay back btc loans what happens?

teflone will visit your house.
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May 24, 2012, 04:10:17 AM
 #184

If I don’t pay back btc loans what happens?

teflone will visit your house.


Or Uncle Vinny *shudder*

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May 24, 2012, 04:15:42 AM
 #185

I'm not paying interesting interest (see I'm just tired) in fiat, it's in Bitcoins.  My lenders do whatever they want with the profits I pay out.

Oh there are doubts what you are paying interest in. Or more accurately that you prefer to have 2-3 orders of magnitude higher cost of capital when denominated in BTC as compared to cost of capital denominated in USD. This much is clear and really indisputable.

My statement is still not refuted:

Quote
there are only two possibilities:

1. The issuer is acting irrationally.
2. The issuer is offloading to "investors" some enormous risks. As such these are not really "investors", but simply gamblers. And they should be really not so much concerned about return on capital as about return of capital.

Is there a third possibility? If yes what it is? If not, is it 1 or 2?

P.S. I am aware of only one biz model where 10% per month cost of capital would make sense. It is a ponzi scheme.

I'm really not sure what's so hard to understand. His business requires holding on to a ton of bitcoins. It's more bitcoins then he's comfortable risking in his own portfolio. So he would want to offload that risk to people and share the profits with them. So it's a win-win situation.

So why does he prefer to borrow btc at such a high rate versus borrowing usd at a lower rate? notme answered it pretty well. Borrowing btc means he returns btc and borrowing usd means he returns usd. So there's no currency risk involved in holding the capital. (They is still currency risk involved if bitcoin price shoots up when he's trying to exchange usd back to bitcoins.)

Now think of it in reverse. If you had amazing business idea that can for sure make 10% a week on an almost unlimited amount of usd capital, would you want a usd loan that costs 5% a week? Or would you want a btc loan that costs 5% a month. Sure you would make a lot more with the btc loan. But what happens when btc prices shoots up to $30? You're left holding usd that you need to convert back to btc to return to your lenders. You would have to have increased your capital 6x in order to return that loan. Now that's a risky loan for the lenders!

So the smart thing for pirate to do is to take however many bitcoins he feels comfortable owning and put that into his business. As his business demands more bitcoins than he has, he should borrow the rest. It's true that he won't make as much from the bitcoins he borrows, but then he has no risk on them either.

I used to question why pirate would need to borrow so many bitcoins and not use his own. But now that I understand why, I believe that pirate's lending is legit and not a ponzi scheme. Well the only other thing is I think he may be paying too much (7% a week) to his lenders when most other people are only paying half as much. He could probably reduce it to 5% a week and still be able to get as many lenders as he needs. But maybe he is not greedy and want to share the wealth.

What collateral is used to secure these loans? When I get a signature loan at a bank the collateral is my Equifax score. If I don’t pay it back I will never buy anything on credit again (oversimplified). If I don’t pay back btc loans what happens?

Well when I have done loans on the forum. The only 'collateral' I used was 'Trust' specifically using the WoT. I offered a rate on the forum far below what others charge. 1-3%/mo.  

If you don't pay back the loan, nothing happens to you from my stand point. But this is what happens because you didn't, you will have trouble getting other loans and other people borrowing rates will increase to counteract your bad debt.

So when people get mad at lenders like Patrick and others, they are misplacing their anger. It should be directed at the people that didn't payback their loans.

I don't bemoan others rates, especially for short term loans. Would I like to see rates come down? Sure. Will they? That depends on whether people payback the loans.

Coincidently, you can give Fiat(USD) loans with BTC as collateral if you wish. You could have a completely parallel market with BTC as an underlying security and no one would even have to know.

It is a truly unique concept that hasn't been around for a long time.

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May 24, 2012, 04:25:09 AM
 #186

Another question. Does anyone know now many BTC denominated loans that were made slightly more than one year ago below 1$ have not been defaulted on (or restructured to be USD denominated)? Care to guess? 100%?  50%? 10% maybe.

What will happen with all these loan portfolios if (when actually) BTC exchange rate jumps 40-50% in one month?



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May 24, 2012, 04:31:55 AM
 #187

Could you clarify please. What would be an example of an operation where having USD liabilites as opposed BTC liabilities is by 2-3 orders of magnitude more risky?

Why those risks could not be hedged or otherwise mitigated cost efficiently?
If you were running pirate's business, where would you go to mitigate exchange rate risk cost effectively?

As far as I know, they would all involve counterparty risk. How would pirate be feeling right now if he had used solely Bitcoinica to hedge? Pirate has absolutely no counterparty risk. Investors need to trust him. He doesn't need to trust anyone else to make good on an option contract.

Now, I'm not saying whether the avoidance of this counterparty risk is worth the amount pirate is paying. In fact, I have said before he could easily lower his rates and still get a good deal of funds.

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May 24, 2012, 04:41:04 AM
 #188

Another question. Does anyone know now many BTC denominated loans that were made slightly more than one year ago below 1$ have not been defaulted on (or restructured to be USD denominated)? Care to guess? 100%?  50%? 10% maybe.

What will happen with all these loan portfolios if (when actually) BTC exchange rate jumps 40-50% in one month?



The only thing that would affect my profits would be a huge spike in price over a very short period of time.


Any idea when this spike will happen ? Smiley




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May 24, 2012, 04:49:15 AM
 #189

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So, you think that’s what Pirate is doing?

I dunno what Pirate is doing. I have formed my opinion from a question I asked in public a long time ago, knowing what I know about markets and his overall idea. Basically, I have formed my own opinion and believe I know exactly what he is doing.

Here is my problem: If you figure out a correlation, you don't tell anybody otherwise it doesn't work anymore. Or if it does, it does so less profitably.

I propose 'what ifs' that are not negative or nefarious in nature where others simply go to the negative. Sometimes, if it walks like a Duck, quacks like a Duck, it's a Goose.

I try to defend those that are getting attacked without evidence. Lynch Mobs run rampant around here. Sometimes it turns out they were right so people use that to squash others.

Why is Pirate being attacked? Because he is making an impact on the market and the way it operates and people can't figure out how it is being done. They are not attacking the HYIP guy that stopped paying people because he didn't affect the market in a big way so they don't care.

Vlad brought up Occam's Razor which most take to mean: "other things being equal, a simpler explanation is better than a more complex one." not only is this incorrect it definitely wouldn't apply to finance if it was correct. Imagine apply it to CDS', etc...

In practice, the application of the principle often shifts the burden of proof in a discussion.[1] The razor asserts that one should proceed to simpler theories until simplicity can be traded for greater explanatory power. The simplest available theory need not be most accurate. Philosophers point out also that the exact meaning of simplest may be nuanced. ~wikipedia

BTW: IF I was to set up a business model, I would design it so 'others' would come to false conclusions by utilizing reliance on the above in order to protect the model and market share.




Corporations have been enthroned, An era of corruption in high places will follow and the money power will endeavor to prolong its reign by working on the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed. ~Abe Lincoln 1ApJdWUdSWYw8n8HEATYhHXA9EYoRTy7c4
PatrickHarnett
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May 24, 2012, 04:53:36 AM
 #190

I'll go back to my nice stable financing business (where I'm charging 280% per year and have good customers and low default risk).

OK you have convinced me. Will launch FF+tor and set's up a proper anonymous identity (or use a previously prepared one), will borrow at 280% per year (or more) and will invest into MMM at 50%-60% per month. Looking forward to paying up interest up until the death of MMM, let us all pray it will last a few more years. But biz model is very sound. Once MMM fails will set up a new identity or ten and invest into MMM III. Rinse and repeat.

Disclaimer: no I am not going to do that, just kidding. But others will, I bet.



That special low rate involved escrowed equipment with high resale value - if you want me to fund your purchase, I'll have it held until fully paid off - and yes, that's 2%/week.  If you default, I resell it for full price.  Smiley
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May 24, 2012, 04:57:53 AM
 #191

Another question. Does anyone know now many BTC denominated loans that were made slightly more than one year ago below 1$ have not been defaulted on (or restructured to be USD denominated)? Care to guess? 100%?  50%? 10% maybe.

What will happen with all these loan portfolios if (when actually) BTC exchange rate jumps 40-50% in one month?




I can answer that one too: I don't care.  I transact in bitcoins independent of other currencies.  I gave up worrying about price movements long ago, because 10%/day wasn't high enough for me to worry about.  (I used to trade electricity on my own account as a commodity and have yet to find anything as volatile.)

I have done some large loans and seen the price increase/fall 50% - I tended not to notice.
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May 24, 2012, 05:05:26 AM
 #192

Vlad brought up Occam's Razor which most take to mean: "other things being equal, a simpler explanation is better than a more complex one."

I think the most likely and simplest explanation, given pirate's know proclivities, is that he has a time machine, goes back in time to the 18th Century and captains a privateer. He needs investor money not just to to enable the purchase and maintenance of the privateer and the hideous expense of time travel, but also when he and his crew face life and death every day he'll want to have been prepared as much as possible, using as much money as he could.

However, he can afford to repay at such a high interest rate because he can attack the same Spanish Galleons again and again, and sell the same gold over and over. Such is the beauty of time travel.

I think others have brought up similar reasons for the necessity of investors when the profits are so large; I think mine is the simplest and most realistic by far.

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May 24, 2012, 05:09:06 AM
 #193

Well when I have done loans on the forum. The only 'collateral' I used was 'Trust' specifically using the WoT. I offered a rate on the forum far below what others charge. 1-3%/mo.  

If you don't pay back the loan, nothing happens to you from my stand point. But this is what happens because you didn't, you will have trouble getting other loans and other people borrowing rates will increase to counteract your bad debt.

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May 24, 2012, 05:10:05 AM
 #194

lol, someone in a time machine going somewhere else than 2009 with future mining technology and constantly keeping just under most users radar (zomg, mysteryminer is a time travelling pirate manipulator?)

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May 24, 2012, 05:41:27 AM
 #195

lol, someone in a time machine going somewhere else than 2009 with future mining technology and constantly keeping just under most users radar (zomg, mysteryminer is a time travelling pirate manipulator?)

Well, I agree that that would be logical, but not if you're "a pirate 200 years late". In 2009, opprtunities to make people walk the plank and say things like "Argh! Ye lubber etc" were severely limited.

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May 24, 2012, 05:57:44 AM
 #196

If I don’t pay back btc loans what happens?

teflone will visit your house.


That's enough to make me pay back the loan. Add Randy Folds and I'll double the interest I return.  Grin
And with his sister added, you'll be begging for them to take your money.  Grin

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May 24, 2012, 06:08:00 AM
 #197

lol, someone in a time machine going somewhere else than 2009 with future mining technology and constantly keeping just under most users radar (zomg, mysteryminer is a time travelling pirate manipulator?)

Well, I agree that that would be logical, but not if you're "a pirate 200 years late". In 2009, opprtunities to make people walk the plank and say things like "Argh! Ye lubber etc" were severely limited.

I guess "somewhere else than 2009" did seem a bit exclusive, but not really what i meant, just that the bitcoin profits wouldn't come from piracy, chances are he's running the same program with pirate booty, the original guy fawkes was him in a v for vendetta mask(just to claim 'first') and he was there the night satoshi drowned

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May 24, 2012, 06:28:43 AM
 #198

Regular bitcoin interest rates in the lending sub forums are 10-15% a MONTH. This is because of bitcoins unknown future.

Id say its primarily because of the huge risk for the borrower to get scammed and never see his coins back.

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May 24, 2012, 06:32:37 AM
 #199

lol, someone in a time machine going somewhere else than 2009 with future mining technology and constantly keeping just under most users radar (zomg, mysteryminer is a time travelling pirate manipulator?)

Well, I agree that that would be logical, but not if you're "a pirate 200 years late". In 2009, opprtunities to make people walk the plank and say things like "Argh! Ye lubber etc" were severely limited.

I guess "somewhere else than 2009" did seem a bit exclusive, but not really what i meant, just that the bitcoin profits wouldn't come from piracy, chances are he's running the same program with pirate booty, the original guy fawkes was him in a v for vendetta mask(just to claim 'first') and he was there the night satoshi drowned

While we're brainstorming here, drakahn, and still keeping in mind Occam's razor, he could have invested in steam devices with his pirate booty, and developed the first difference engine rather early. From there it's only a matter of years before he introduces coal-coin mining on distributed steam powered difference engines and corners the market on cryptocurrency. Without the ability to reign in his expanding wealth, he soon controls the world.

You really want to contribute coins to Pirate's quest for world domination?

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May 24, 2012, 06:35:05 AM
 #200



Id say its primarily because of the huge risk for the borrower to get scammed and never see his coins back.

Yes, this is correct. If not, everyone who plans to hold coins long-term would be lending them out. Clearly, they are not. A large fraction of loan requests are complete or partial scams (e.g. the borrower gambles and defaults if the bet fails to pay out). Thus the high interest rate.

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