Is there a Bitcoin bank, which gives interest on my deposit? Bitcoin Stack Exchange

Без кейворда

Please Take Note: Flexcoin has been hacked and is no longer operating.

Original Post shown below:

Right now, the closest thing you can find to a bank is Flexcoin. If you keep your money there, you will receive a variable interest (they call it discount for legal matters) every month. They also have a user defined cold storage service available for those who want to keep their funds offline.

Here is how it works. Every time you withdraw money from Flexcoin, you pay a fee:

Flexcoin to Flexcoin = FREE

Bitcoin to Flexcoin = FREE

Flexcoin to Bitcoin = 0.01 BTC or one half of one percent of the transaction amount (whichever is greater)

Cold Storage Transaction Fee (outbound) = 0.02 BTC or one percent of the transaction amount (whichever is greater)

Cold Storage Transaction Fee (inbound) = 0.01 BTC or one half of one percent of the transaction amount (whichever is greater)

This fee is used to pay miner fees and keep the service running. The rest of it is distributed among clients:

70% of the fees collected are disbursed to the account holders as discount payments on any fees already paid or any potential future fees, based on the following formula…

(your account balance / total balance of all flexcoin accounts) * ((all fees collected – miner fees) * 0.7)

Here are two bitcointalk threads about the discount payments for the very first two months.

As a final note, I would like to say that I personally think that this kind of service is not very useful right now because the Bitcoin price is too unstable. For example, yesterday the price dropped 15%. Any interest you might earn becomes irrelevant in this script.

In theory, such a thing could be created. Ten Bitcoins today is worth more than ten Bitcoins tomorrow. If you don’t see why, just ask yourself this: Would I rather have ten Bitcoins today or ten Bitcoins tomorrow.

Obviously, you’d rather have the ten Bitcoins today. Why? Because you can hold them for a day and have the ten Bitcoins tomorrow. Plus, you have the extra benefit of anything you’d choose to do with them today rather than holding them until tomorrow.

However, to set up such a bank right now, you’d have to use the following method:

You convert the Bitcoins to whatever national currency had the highest interest rate.

You loan out that money or place it in bonds or other secure investments.

At the end of the term, you buy back Bitcoins to pay back the depositor.

The problem, of course, is that the value of Bitcoins could shoot up while the currency is loaned out. To protect against that, a bank that used this model would have to suggest offsetting cut-offs to cover that loss. Basically, that means it permits other counter-parties to buy a derivative that goes up if Bitcoins go down and down if Bitcoins go up.

This way, if the price of Bitcoins goes down, the bank makes extra money buying back the Bitcoins at a lower price, but it has to pay out on the cut-offs. If the price of Bitcoins goes up, the bank loses money buying back the Bitcoins, but makes it up on the cut-offs.

If the bank itself offers the cut-offs, it actually makes extra profit on the cut-offs either way. It makes some profit on the loan and some on the cut-offs. (Whether Bitcoins go up or down cancels out. Any extra profit on the loan, due to Bitcoins going down, is made up with a loss on the cut-offs. Any extra profit on the cut-offs, due to Bitcoins going up, is made up with a loss on the loans. If Bitcoins stay the same, the bank makes its puny commission profit on both the loan and the cut-offs.)

There are undoubtedly people who believe that, long-term, Bitcoins will step by step drop to near-zero value, and they would like to buy cut-offs on that basis. However, the cut-offs would likely have to be more short-term unless the loans were long term. So making the details work could be fairly a challenge.

To my skill, nobody offers this yet.

I don’t think a bank suggesting that would/should be trusted right now, because the bonds market is too shallow.

The way I see it, we have to see a large increase in the bonds market beforehand. There will be a lot more bonds, some riskier/boarderline scams, and some more “serious” (e.g. Gavin or Mt. Gox issuing for a bond would very likely not be treated as a scam by . almost anyone). The interest rates of these various bonds will vary.

After this market materizlies, some trusted 3rd party can come and slide & dice these loans into something more structured. E.g. if within a year we had a range a bonds, with interest rates running from 2% to 10%, then a big player (“bank”), trusted by the community, can come and suggest a safe interest rate of 1%. He would then invest in the bonds with some risk distribution, and make an arbitrage. Some bonds will default, but that’s ok, because the overall portfolio of the bank should usually increase over time by more than 1%.

I know many people who accept Bitcoin Loans and promise a come back, which in finance is known as bond. The problem is: Can you trust them?

At the moment no serious emitter is available, in the near future MtGox and Tradehill will begin suggesting such services. and it seems like no candidate is available in the near future. Mtgox and Tradehill will launch Options soon, which are slightly different than Bonds, in the fact that there is no assured comeback.

If you are interested in investing in a embark up drop me a mail to straccia.mi@gmail.com

My co-founder and I run the site Bitbond where you can finance Bitcoin loans (Bitbonds) of other people who present their funding project on our marketplace. That way you can earn interest on your Bitcoins. Technically this resembles a bank since we also suggest a secure wallet.

It is lightly possible to commence a Bitcoin based bank. You would simply take Bitcoin deposits and grant loans to other customers who will pay interest on these loans making a margin from the interest rate spread. Then you would have what you ask for, an account where you earn interest on your deposits.

I just don’t believe this is a good thing. One of the main reasons why the fiat banking system is in such hefty trouble is that they take brief term money (their client’s deposits) and lend it out long term (for loans, mortgages etc.). When people who lent money to the bank through their deposits want to withdraw their money earlier and in a larger extent than expected, banks get into phat trouble.

There used to be a golden rule of banking that basically said to match maturities. Long term loans should be refinanced long term. But fiat banks don’t stick to this rule anymore for a long time. It’s just more profitable to take cheap brief term deposits and put them in long term assets. But it makes the entire financial system drown.

So to cut it brief. Yes a Bitcoin bank is lightly possible but we, the users of Bitcoin, are better advised to stick to the golden rule of banking. That’s what happens at peer to peer lending.

There cannot be a bank that pays interest on BTC, because there cannot be a bank that lends BTC. No one would borrow an appreciating currency, and no one would lend against collateral that depreciates relative to the real value of the outstanding debt.

Banks make money by lending in a currency that the parties expect to depreciate modestly over time. The nominal interest rate compensates for the expected inflation, effectively amortizing the real loan over time. That is an adequate outcome, because the underwriting data on which the loan was based becomes stale over time, raising the statistical risk associated with the loan; the declining real balance, along with appreciating nominal collateral, offsets this risk.

Absent a depreciating currency, there is no banking. (And, if there is no banking, there is no economy, which is why bitcoin cannot be a currency but only a means of transmitting currency).

Very first of all, you should have a good response to the non-trivial question:

If I deposit one BTC in a “bank” and expect to get more than one BTC back, where did that extra (interest) come from? You don’t expect an ounce of gold to increase in mass.

If you are like most people, you do not understand that banks do not lend money! When you get a so-called loan in a bank what the bank provides is a “promise to pay” (Google ‘checkbook money’ and ‘fractional reserve banking’), it provides credit – not money.

Credit, which is the same as debt, can be infinite in supply and as long as the more people (or states or corporations) keep adding to the total debt quicker year after year than the rate of interest the system can stay solvent. However, if people take out too few loans to service the interest on old loans the system collapses (in a so-called ‘deflationary spiral’). By the way, contrary to popular understanding the ‘deflationary spiral’ phenomenon has little or nothing to do with “people hoarding money”, but everything to do with shrinking money supply (debt).

One Excellent feature of Bitcoin is that people can lightly hold their own money in their own wallets (ie. NOT deposit the BTC in banks or online wallets). This prevents the banks from issuing “promise to pay BTC” in the usual fraudulent (but legalized!) way that regular banks do.

Morale – be careful what you wish for. Interest-giving BTC accounts is the kind of thing that would lead me and many others to give up on Bitcoin because once you accept promise-to-pay BTC as real BTC, the supply cap is no longer twenty one million, but infinite – and Bitcoin will go the way of the fiat currency. (Die)

Real, sound, currencies like precious metals or BTC do not give interest – and for exactly the same reason. This is a good thing that we should all fight for.

Is there a Bitcoin bank, which gives interest on my deposit? Bitcoin Stack Exchange

Без кейворда

Please Take Note: Flexcoin has been hacked and is no longer operating.

Original Post shown below:

Right now, the closest thing you can find to a bank is Flexcoin. If you keep your money there, you will receive a variable interest (they call it discount for legal matters) every month. They also have a user defined cold storage service available for those who want to keep their funds offline.

Here is how it works. Every time you withdraw money from Flexcoin, you pay a fee:

Flexcoin to Flexcoin = FREE

Bitcoin to Flexcoin = FREE

Flexcoin to Bitcoin = 0.01 BTC or one half of one percent of the transaction amount (whichever is greater)

Cold Storage Transaction Fee (outbound) = 0.02 BTC or one percent of the transaction amount (whichever is greater)

Cold Storage Transaction Fee (inbound) = 0.01 BTC or one half of one percent of the transaction amount (whichever is greater)

This fee is used to pay miner fees and keep the service running. The rest of it is distributed among clients:

70% of the fees collected are disbursed to the account holders as discount payments on any fees already paid or any potential future fees, based on the following formula…

(your account balance / total balance of all flexcoin accounts) * ((all fees collected – miner fees) * 0.7)

Here are two bitcointalk threads about the discount payments for the very first two months.

As a final note, I would like to say that I personally think that this kind of service is not very useful right now because the Bitcoin price is too unstable. For example, yesterday the price dropped 15%. Any interest you might earn becomes irrelevant in this screenplay.

In theory, such a thing could be created. Ten Bitcoins today is worth more than ten Bitcoins tomorrow. If you don’t see why, just ask yourself this: Would I rather have ten Bitcoins today or ten Bitcoins tomorrow.

Obviously, you’d rather have the ten Bitcoins today. Why? Because you can hold them for a day and have the ten Bitcoins tomorrow. Plus, you have the extra benefit of anything you’d choose to do with them today rather than holding them until tomorrow.

However, to set up such a bank right now, you’d have to use the following method:

You convert the Bitcoins to whatever national currency had the highest interest rate.

You loan out that money or place it in bonds or other secure investments.

At the end of the term, you buy back Bitcoins to pay back the depositor.

The problem, of course, is that the value of Bitcoins could shoot up while the currency is loaned out. To protect against that, a bank that used this model would have to suggest offsetting cut-offs to cover that loss. Basically, that means it permits other counter-parties to buy a derivative that goes up if Bitcoins go down and down if Bitcoins go up.

This way, if the price of Bitcoins goes down, the bank makes extra money buying back the Bitcoins at a lower price, but it has to pay out on the cut-offs. If the price of Bitcoins goes up, the bank loses money buying back the Bitcoins, but makes it up on the cut-offs.

If the bank itself offers the cut-offs, it actually makes extra profit on the cut-offs either way. It makes some profit on the loan and some on the cut-offs. (Whether Bitcoins go up or down cancels out. Any extra profit on the loan, due to Bitcoins going down, is made up with a loss on the cut-offs. Any extra profit on the cut-offs, due to Bitcoins going up, is made up with a loss on the loans. If Bitcoins stay the same, the bank makes its puny commission profit on both the loan and the cut-offs.)

There are undoubtedly people who believe that, long-term, Bitcoins will little by little drop to near-zero value, and they would like to buy cut-offs on that basis. However, the cut-offs would likely have to be more short-term unless the loans were long term. So making the details work could be fairly a challenge.

To my skill, nobody offers this yet.

I don’t think a bank suggesting that would/should be trusted right now, because the bonds market is too shallow.

The way I see it, we have to see a large increase in the bonds market beforehand. There will be a lot more bonds, some riskier/boarderline scams, and some more “serious” (e.g. Gavin or Mt. Gox issuing for a bond would very likely not be treated as a scam by . almost anyone). The interest rates of these various bonds will vary.

After this market materizlies, some trusted 3rd party can come and slide & dice these loans into something more structured. E.g. if within a year we had a range a bonds, with interest rates running from 2% to 10%, then a big player (“bank”), trusted by the community, can come and suggest a safe interest rate of 1%. He would then invest in the bonds with some risk distribution, and make an arbitrage. Some bonds will default, but that’s ok, because the overall portfolio of the bank should usually increase over time by more than 1%.

I know many people who accept Bitcoin Loans and promise a comeback, which in finance is known as bond. The problem is: Can you trust them?

At the moment no serious emitter is available, in the near future MtGox and Tradehill will begin suggesting such services. and it seems like no candidate is available in the near future. Mtgox and Tradehill will launch Options soon, which are slightly different than Bonds, in the fact that there is no assured come back.

If you are interested in investing in a commence up drop me a mail to straccia.mi@gmail.com

My co-founder and I run the site Bitbond where you can finance Bitcoin loans (Bitbonds) of other people who present their funding project on our marketplace. That way you can earn interest on your Bitcoins. Technically this resembles a bank since we also suggest a secure wallet.

It is lightly possible to begin a Bitcoin based bank. You would simply take Bitcoin deposits and grant loans to other customers who will pay interest on these loans making a margin from the interest rate spread. Then you would have what you ask for, an account where you earn interest on your deposits.

I just don’t believe this is a good thing. One of the main reasons why the fiat banking system is in such big trouble is that they take brief term money (their client’s deposits) and lend it out long term (for loans, mortgages etc.). When people who lent money to the bank through their deposits want to withdraw their money earlier and in a larger extent than expected, banks get into giant trouble.

There used to be a golden rule of banking that basically said to match maturities. Long term loans should be refinanced long term. But fiat banks don’t stick to this rule anymore for a long time. It’s just more profitable to take cheap brief term deposits and put them in long term assets. But it makes the entire financial system drown.

So to cut it brief. Yes a Bitcoin bank is lightly possible but we, the users of Bitcoin, are better advised to stick to the golden rule of banking. That’s what happens at peer to peer lending.

There cannot be a bank that pays interest on BTC, because there cannot be a bank that lends BTC. No one would borrow an appreciating currency, and no one would lend against collateral that depreciates relative to the real value of the outstanding debt.

Banks make money by lending in a currency that the parties expect to depreciate modestly over time. The nominal interest rate compensates for the expected inflation, effectively amortizing the real loan over time. That is an suitable outcome, because the underwriting data on which the loan was based becomes stale over time, raising the statistical risk associated with the loan; the declining real balance, along with appreciating nominal collateral, offsets this risk.

Absent a depreciating currency, there is no banking. (And, if there is no banking, there is no economy, which is why bitcoin cannot be a currency but only a means of transmitting currency).

Very first of all, you should have a good response to the non-trivial question:

If I deposit one BTC in a “bank” and expect to get more than one BTC back, where did that extra (interest) come from? You don’t expect an ounce of gold to increase in mass.

If you are like most people, you do not understand that banks do not lend money! When you get a so-called loan in a bank what the bank provides is a “promise to pay” (Google ‘checkbook money’ and ‘fractional reserve banking’), it provides credit – not money.

Credit, which is the same as debt, can be infinite in supply and as long as the more people (or states or corporations) keep adding to the total debt swifter year after year than the rate of interest the system can stay solvent. However, if people take out too few loans to service the interest on old loans the system collapses (in a so-called ‘deflationary spiral’). By the way, contrary to popular understanding the ‘deflationary spiral’ phenomenon has little or nothing to do with “people hoarding money”, but everything to do with shrinking money supply (debt).

One Fine feature of Bitcoin is that people can lightly hold their own money in their own wallets (ie. NOT deposit the BTC in banks or online wallets). This prevents the banks from issuing “promise to pay BTC” in the usual fraudulent (but legalized!) way that regular banks do.

Morale – be careful what you wish for. Interest-giving BTC accounts is the kind of thing that would lead me and many others to give up on Bitcoin because once you accept promise-to-pay BTC as real BTC, the supply cap is no longer twenty one million, but infinite – and Bitcoin will go the way of the fiat currency. (Die)

Real, sound, currencies like precious metals or BTC do not give interest – and for exactly the same reason. This is a good thing that we should all fight for.

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