Bryan Micon's List of BTC Ponzi Schemes that should not be listed as "Lending"

[Vandroiy]

That's the problem with simple maths.  You end up having to use more 'unsimple' maths eventually.  Even basic interest will involve exponents.

I think this is the main point here. Anyone who really understands the exponential function and looked at BS&T growth should see the problem. The upcoming "change" does not seem to stop the exponential debt growth, even though it is breaking sanity checks by the day.

A legitimate scenario, even if it were possible, should see increasing forced withdrawals, massive interest cuts or both by now. Reality, however, sees bonus payments for people who don't withdraw too much. I would label the current process "final departure from reality".

[Kluge]

That's the problem with simple maths.  You end up having to use more 'unsimple' maths eventually.  Even basic interest will involve exponents.

I think this is the main point here. Anyone who really understands the exponential function and looked at BS&T growth should see the problem. The upcoming "change" does not seem to stop the exponential debt growth, even though it is breaking sanity checks by the day.

A legitimate scenario, even if it were possible, should see increasing forced withdrawals, massive interest cuts or both by now. Reality, however, sees bonus payments for people who don't withdraw too much. I would label the current process "final departure from reality".

Those bonus payments also require users do not deposit too much per time frame.

[Vandroiy]

Those bonus payments also require users do not deposit too much per time frame.

Interesting -- do they not allow compounding either? Remember that compounding interest is the primary source of supposed coins in there by now, so that would be an important question.

With Bitcoinmax, it's simple to deposit at any time though. So I doubt the rule reduces inflow much.

[Kluge]

Those bonus payments also require users do not deposit too much per time frame.

Interesting -- do they not allow compounding either? Remember that compounding interest is the primary source of supposed coins in there by now, so that would be an important question.

Bitcoinmax seems to have lots of deposits and get a bonus regardless though, so the rule wouldn't really stop people from depositing more.

If you take the top public tier rate instead of the unpublished rate, you are not subject to the limits, AFAIK. I'm not familiar with BitcoinMax, so if they provide <7%/wk, it may be beneficial for them/him/whoever to take on more deposits and take the slightly lower max published rate. It could be possible that Pirate only states you can't deposit more than the limit, but then waives that requirement -- I wouldn't know. I also don't know whether or not Pirate allows compounding on "bonus" accounts.

[imsaguy]

If you take the top public tier rate instead of the unpublished rate, you are not subject to the limits, AFAIK. I'm not familiar with BitcoinMax, so if they provide <7%/wk, it may be beneficial for them/him/whoever to take on more deposits and take the slightly lower max published rate. It could be possible that Pirate only states you can't deposit more than the limit, but then waives that requirement -- I wouldn't know. I also don't know whether or not Pirate allows compounding on "bonus" accounts.

See, that's part of the problem..  there are a bunch of underinformed people making a bunch of assumptions and then conclusively making decisions on those assumptions and then feeling the need to "protect"/warn others, who may or may not actually be more informed than the original parties.

The account bonus is based on the account balance not moving up or down more than a certain threshold each month.  Interest payments aren't accounted against that bonus, whether paid out or reinvested.  Bitcoinmax is only paying 6.9%, which means the operator(s) make .1% and may not be planning on the bonus.  In addition, Bitcoinmax might be working with a slush fund so that the pirate balance remains untouched much of the time, and instead uses their own funds to buffer the inflows and outflows.  Obviously a person would have to calculate the bonus vs the missed interest opportunity to see which is more profitable.

[Shadow383]

2-The market is not responding to trades that would make up 30000+ BTC/week in profit. I mean shit, if you perfectly timed literally every market movement on Gox you wouldn't make that, and especially in the environment of the past few weeks you'd be making a USD profit, not a BTC one. Pirate is not the only big mover in these markets either, so if the whole volume of our largest exchange wouldn't support the transactions required to keep him going what would?

Let us start by defining what you mean by 'the market.'

I'd like to hear your view before I tell you about the much bigger market so I can see if I need to use Sagan's Pale Blue Dot.

If you were trying to make 30000BTC in profit every week you'd need to be making trades on a regular basis, probably daily, of 100K+. If you timed the market really well you'd still need to be making trades in the region of 500-800K BTC per week, and nowhere has a player with that kind of volume (or even close to) right now.

A full decade before Madoff got shut down, an investigator worked out that to meet his stated profits doing the options trades he claimed to be doing, his trade volume would be much larger than the entire exchange volume in those markets, and yet nobody had any evidence of someone trading at anything like those levels anywhere.
It's very much the same argument here. I don't see how any of the major markets could provide enough arbitrage opportunities or any such thing to service liabilities like BTCST has at the interest rates they have.

Interest payment 26000BTC ? Nice you are also in the speculation camp who feel 100% certain their non-facts of what is included at each payment is definitely interest only which is seriously laughable. These payments do not correlate to what they speculate it must be be and now it seems you use this same false information as your evidence.

I actually started a thread trying to work out the net exposure to BTCST - if others are "better informed" about the amounts in various accounts I'd love to get some figures:
https://bitcointalk.org/index.php?topic=98225.0

Looking at the PPTs on the forum and the GLBSE instruments alone, there's a minimum of BTC230k there, without taking account of privately owned BTCST accounts of unknown value.

So it seems likely that much of that 26000BTC is interest.

In addition, Bitcoinmax might be working with a slush fund so that the pirate balance remains untouched much of the time, and instead uses their own funds to buffer the inflows and outflows.  Obviously a person would have to calculate the bonus vs the missed interest opportunity to see which is more profitable.

I think their buffer's relatively small - last week the MtGox hot-wallet ran dry and Pirate couldn't pay them until a day late, and they had very limited capacity to meet withdrawals until they got the coins through. Would make sense to run the buffer as small as possible.

[CoinCidental]

"To have a large volume. The more he have BTC, the more he can get profit. If he offered 2%/week, he would have strong competition around the forum and many people would invest elsewhere. He would be unable to accumulate the large inventory he have right now. At 7%, he's at the top of the world, he's the ultimate fund and cannot be touch. And like I said, pirate is not making profit in BTC, but in USD, that's important. The 3% profit he makes is in USD. Let's say pirate move 125 000 BTC every week. He makes 10% profit on it, that's 12 500 BTC. If he takes only 3%, he makes 3750 BTC. But since it's in USD, he can make around 37 500$ each week. He makes this money while being almost immune to BTC volatility.

I don't know the exact number, it's just to show how the little 3% that pirate can be really profitable. And like The Joint said before, I'm also sure at 99% of what pirate is doing. That 1% can go a long way, and I can't argue on it, since I don't know. I only hope it gives you another perspective of how pirate can make his money. "

youre either blindly defending pirate or you cant see the wood from the trees
hes taking 3% for himself  but repaying a compounding 7% for the priviledge of borrowed coins

also since the coin price is rapidly rising ,buying back the new 25% higher priced  coins is going to eat into his 3% rapidly

[Vladimir]

Brunic, read first few sentenceses of your post and had to stop. Too much BS and I call it.

for example,

Also, pirate make his profit in USD, not in BTC.

yea right. Have you seen USDBTC chart lately?

[wachtwoord]

also since the coin price is rapidly rising ,buying back the new 25% higher priced  coins is going to eat into his 3% rapidly

Which is why Pirate said that a sudden price spike can hurt him.

[imsaguy]

There are 50,400 BTC mined each week.  Where do they go?

[Shadow383]

There are 50,400 BTC mined each week.  Where do they go?

To the miners.
Rhetorical question?

pirate is not making profit in BTC, but in USD, that's important. The 3% profit he makes is in USD.

Cheers for having a go at my questions, but if you're right on this point then pirate is almost certainly insolvent given the recent price movements.

[wachtwoord]

Profit taking in USD != keeping all the principal in USD

[CoinCidental]

also since the coin price is rapidly rising ,buying back the new 25% higher priced  coins is going to eat into his 3% rapidly

Which is why Pirate said that a sudden price spike can hurt him.

So paying interest of 3400% per year cant hurt Pirates operation ,but rising bitcoin prices could ............

[miscreanity]

1-Nobody who is actually making >7% a week on here would keep issuing such a huge amount of extra debt. Why on earth would you finance yourself at 3400% APR when there would be plenty of demand even in the BTC world for an annual rate one-twentieth of that?

Velocity is increased, as can be seen by the gradual uptrend in Bitcoin days destroyed.

2-The market is not responding to trades that would make up 30000+ BTC/week in profit. I mean shit, if you perfectly timed literally every market movement on Gox you wouldn't make that, and especially in the environment of the past few weeks you'd be making a USD profit, not a BTC one. Pirate is not the only big mover in these markets either, so if the whole volume of our largest exchange wouldn't support the transactions required to keep him going what would?

There are other components than just BTCS&T.

3-Every time a thread like this gets opened, a dozen retailers of pirate investment schemes turn up and try to bury it. I know it's easy to not ask too many questions when you're making a nice little cut off the side - hell, Bernie Madoff gave his feeder funds about 90% of everything he ever took in fees, but this isn't a party that can go on for much longer. It's grown to the size now where I really do think we're approaching the limits of what should even be considered possible. So, last week's interest payment was 26000BTC. Seeing the amount that's going in and the amount that's compounding this week should be more like 30k. Do tell, where has BTCST made over 30k in profits this week? This isn't a big market, and a player that big should make some serious waves when they move their weight around, which they'd have to do a lot of to bring in that kind of cash each week.

Not bury - point out the highly probable flaws in the Ponzi reasoning. There are certainly other operations that may be much more likely to be Ponzi-related. Deeper scrutiny into all of Pirate's operations suggests that it is legitimate.

4-Why pay 7%? If the business model wasn't just "bring in more deposits", you could find finance on these forums at 2% a week. Even at that level it would be tough for an operation as large as this one to be profitable, so why? Is Pirate some kind of philanthropist, giving back over a million dollars in interest every month for no good reason at all? I mean really?

See the first rebuttal, and the A day in the life of a pirate thread. In short, by paying out the majority of profits, there's no way any competition would be able to keep pace with Pirate unless adopting the same practice, which is unlikely to be able to achieve 7% returns with only one method of generating profit.

[imsaguy]

There are 50,400 BTC mined each week.  Where do they go?

To the miners.
Rhetorical question?

Nope.  Perhaps Pirate's tapped into some of the largest miners for a supply of coins that would never appear in Gox volume?  Perhaps Pirate is mining (I'm not talking about gpumax)?

[Frankie]

also since the coin price is rapidly rising ,buying back the new 25% higher priced  coins is going to eat into his 3% rapidly

Which is why Pirate said that a sudden price spike can hurt him.

So paying interest of 3400% per year cant hurt Pirates operation ,but rising bitcoin prices could ............

Quoted for truth/hilarity.

[miscreanity]

also since the coin price is rapidly rising ,buying back the new 25% higher priced  coins is going to eat into his 3% rapidly

Which is why Pirate said that a sudden price spike can hurt him.

So paying interest of 3400% per year cant hurt Pirates operation ,but rising bitcoin prices could ............

Quoted for truth/hilarity.

Note the distinction. Rising prices allow Pirate's operation to continue; sharply rising prices put the operation at risk. This is the same as saying that so long as Bitcoin keeps growing, everything is all well and good; if a bubble forms, he may have to halt interest payment or the business entirely.

Let's put it another way: a nuclear reactor is able to produce power so long as the reaction is under control. If the reaction accelerates to criticality, it has to be shut down or risk melting down.

One more analogy: a man-made reservoir can hold a certain amount of water, and the dam can handle a certain amount of flow. If there's more than the reservoir can contain and it's building up faster than the dam can allow through, the structure is in danger of being destabilized.

Still not working? Maybe a visual aid will help.



Water normally flows out of the sink through the drain at the bottom, but if the water is on full-blast and the drain isn't capable of getting rid of the flow fast enough, the sink could overflow. See that hole in the sink, just under the faucet? That's an extra outlet to allow excess flow to be drained in case the main drain isn't working properly or is overwhelmed. If the flow continues to be too fast for both primary and backup drains, you still get overflow.

Same thing with Pirate's operation.

[Frankie]

These patronizing koans remind me of the Apocryphal Gospel of St. Thomas.

"The disciples said to miscreanity: Tell us what the business of Pirate is like. He said to them: It is like a grain of mustard-seed, smaller than all seeds; but when it falls on the earth which is tilled, it puts forth a great branch, and becomes shelter for the birds of heaven."

[CoinCidental]

So ,a 20% rise in bitcoin prices is more dangerous to pirates operation than keeping investors in it at 3400% ?

some of you guys need to get new calculators


of course rising prices is bad since pirate  has to buy the coins he uses for interest payments every monday but would it not be a lot more simple to cut the INSANE  interest payments first and foremost ?

ok ,pirate has some other businesses ,but as someone noted on another thread ,the last business that payed these kind of returns was www.facebook.com

does anyone believe pirates secret  business is growing at a scale faster than facebook was /did  ?

[Vladimir]

Relax, everyone with a brain here believes that pirate's op is a ponzi. It is just a bunch of shills is trying their best (which is not much) to convince new marks to part with money.