Topic: Bitbank proposal (Read 2159 times)

I made a post asking for ideas on a p2p network of atm machines. The atm machines don't convert from existing fiat to crypto, but simply tokens just for the purpose of exchanging to and from crypto. This is like your idea, but physical, as opposed to accounting entries (of tokens really). Essentially they're the same thing. Maybe a better word would be notes instead of tokens.

Maybe ripple handles the accounting entry side of note issuing?

Im not a big fan of FRB either. I'm convinced note issuing on crypto reserves is unavoidable though. It solves at least a couple of big problems perfectly which can't be solved in any other way. With that service comes FRB as note issuing is the necessary tool for it.

So therefore, I think a p2p network to issue us our inert, networkless cash whether physically or as accounting entries is very important to implement soon, otherwise note issuing will be co-opted by the existing institution that has done it for centuries. One day they're going to say about crypto: if you can't beat them, join them.

I don't think FRB of crypto reserves will be anything like the total bullshit "monetized government debt" reserves like we got now. Crypto reserves would keep a bank (or p2p network) even more honest than physical gold as long as they want to actually stay in business.

The demand for the crypto reserve specie will constantly be much higher than gold, because it is actually needed anytime you buy something online. Banksters will not be able to multiply the money supply anywhere close what they do on gold reserves.

That being said, it does not prevent them from printing too much money anyway and making us hostage to bail them out by either devaluing our notes or having a bunch of us stuck with unredeemable notes. Therefore i think it is hugely important that some kind of decentralized, free software, p2p network be implemented to issue us our notes or accounting entries, one to one, no money multiplication, no FRB.

Anyway here is the post, thanks for reading:
https://bitcointalksearch.org/topic/a-case-for-notes-to-foster-anonymity-and-adoption-191175

A lot of people assume that bitcoin banking means fractional reserve model, and paying interest. But I think the real use case is convenience (including off-chain clearing, as you suggest) and security (backed by financial guarantees). So far no one has come up with an insurance system that makes me feel safe to keep my crypto hoard on anyone else's machine for very long. A trustworthy bitcoin cold storage vault would probably involve financial guarantees, insurance and reinsurance, as well as technical oversight and security testing. For that I might be willing to pay a fee.

For as long as bitcoins cannot be forged, no.

I will have to strongly agree with this.

People are focusing too much on the need for BitCoin handle the 'last mile' of the financial transaction.

I however think that its actually strength in not in this area.  Right now it is a store of wealth (due to its deflationary structure) and a means to transfer a huge amount of currency across borders.

To add any other capabilities really may require an alternative currency.

I wasn't aware of that and will check it out, thanks!

I wasn't suggesting a centralized entity, but a localized one: any number of local banks using bitcoin in a manner similar to you describe for those other trusted entities (silkroad, bitmit, bitpay, etc.), but using standardized open source bitbank software.  Also, I wouldn't suggest keeping all your coins there, just enough to make transactions.  Finally, you can use dollars if you like, but they are of course denominated in a fiat currency that not everyone trusts.  In fact, the dollar could be headed for a crash.  So my proposal is merely a theory for "new digital dollars" that it seems useful to discuss.

Good idea, if you are seeking to make it available as a plugin or a web library.
Exchanges already do something similar by having internal accounting systems and doing block chain transactions when withdrawals are made.

Why not possible?

1. Bank receives deposits from its customers for a total of 100,000 BTC.
2. It invests 80,000 BTC from that amount (buying other companies shares, lending to people and companies, etc).
3. It actually keeps only 20,000 BTC of customers deposits and if customers would suddenly like to withdraw their 100,000 BTC, it wouldn't be possible.

Would FRB be possible on bitcoins? (maybe that should be a topic itself)

Centralized bank-like entity for bitcoin is really absurd idea and I hope it will never happen. It's just against the idea of bitcoin.
OP, why not just using dollars?

We already have trusted entities (silkroad,bitmit,bitpay,etc) who manage aggregated wallets and perform instant micro transactions without using blockchain. It's really convenient to buy/sell goods, but it would be stupid to keep all your bitcoins there.

FRB on BitCoin will happen whether we want it or not. BitCoinica was probably the first to use FRB.

These are reasonable points.  In particular, what would their motivation be?  Either charging some kind of fee for transactions, which would make them less attractive (although still faster than doing it yourself), or else perhaps using their Bitcoin support as a form of advertising and hope it leads to other kinds of business.  On the other hand, providing the actual software would cost them very little.

The Ripple network is asking these same questions -- why run a validating node?  (https://ripple.com/wiki/FAQ#Who_will_run_validating_nodes.3F)  Their answers are to have a say in how the network is run, do business on the network, support currency choice, support the underbanked, or provide a public service.  The only financial reason is for those who do business on the network, meaning that they may lose a little money by running a Ripple server but it is part of the cost of doing business and selling goods or services for Ripple coins.

This would take some of the pressure off of the max block size limit issue and make it easier for regular people to run validating nodes. This has the disadvantage of merely evolving our banking system rather than revolutionizing it. It also seems hard to me for the bitbanks to have much motivation to provide these services without being able to makeover by lending (hard to lend when price is unstable).

OP, No.

Aside from my proposal, what I imagine would happen in the near future is actually a profusion of new, different, specialized banking models with unknown security risks.  Sort of like the altcoin explosion, where everyone is making their own altcoin.  At least with a major bitbank project they can standardize their software and study the risks in detail.

As to whether you would trust them with your bitcoin, normal financial prudence suggests that you not put all your eggs in one basket.  So don't put all your money in Bitcoin (or in any one currency such as the US dollar for that matter), and don't trust all your coins to one bank, regardless of how good their sales pitch is!  That is the diversification principle.

Actually, even if 90% of your bitcoins are in cold storage, nothing prevents you from spreading the last 10% over any convenient bitbank.  Each bank would get a few percentage points and you could use them for frequent, minor, transaction-free purchases.  Banks are quite nice for the convenience but you shouldn't store all your money in them.  Even fiat banks get robbed or can have their savings confiscated -- look at Cyprus.

So if the most frequent small purchases are done with a bitbank system, that still involves considerable savings of energy without much additional risk.  Money in cold storage doesn't move around much and is thus not a stress on the network.  It certainly doesn't change the fundamental nature of the bitcoin system.

hmm a service that links businesses/exchanges/and other altcoins.....

Ripple.

as for the main purpose of holding your investments. id suggest to everyone DONT THROW ALL YOUR FUNDS into third party services.

fiat banking institutions do not have a problem with bitcoin, neither does fincen or FSA etc. the problem is all of these bitcoin third party services have a problem reading the regulations, following them or atleast paying the licences/insurances to protect peoples investments.

so dont blame banks for shutting down services. blame greedy and lazy exchanges for not caring about looking after their customers and just wanting their profits, and then when getting shutdown for not insuring their customers investments are secure, blaming the banks instead of themselves.

if you want to become a bank atleast get the paperwork down legitimately

Ripple does look interesting.  I signed up for their e-mail announcements.

Even though some Bitcoin users may want it, the majority would not want this to happen, However I believe it's going to happen in the near future if we like it or not. Personally I think it has it's upsides but also has it's down falls which kind of scares we away from this idea.

Oh I think they should rather be scared than appreciate. This is others' people money business and they need to have everything as secure as possible. If they don't understand something (because of lack of resources), they won't try to take shortcuts. You have no guaranties with open source software, heck, you are even aware that it was created and is maintained by someone who is not paid to do so. You don't know how secure it is.  You don't know how long it will be maintained and if it won't be abandoned next month. Until the software is mature enough and mainstream enough (think Linux, Apache, etc - this is a pretty small club), you just don't make millions of your customers money depend on it.


In bitcoin world, I don't need banks to conduct transactions. In real world when you want to send money to someone, you need an intermediary - wether it will be a bank, a Western Union or a postal service where you put cash into an envelope. I don't need a bank for bitcoin transfer. While that off-blockchain ledger might help bitcoin system in overall, it won't help me personally so I have no reason to use banks to transfer my bitcoins and no one will have. Their transaction volume will come from people storing coins with them in the first place and then sending them.

(well, there might be a reason to use off-ledger transfers on day, which is payments; I can imagine number of transactions being so high one day, that you'd need to include 1 BTC fee to be sure that the miners take your transaction within the next few blocks; off-ledger, bank-processed transfers might actually become cheaper one day when it comes to small to mid value transactions)

So I think for now there's storing and securing my coins what's left in terms of reasons why I might want to use a bank instead of taking care of myself. They would need to provide more secure and/or more convenient way to store and use bitcoins for their services to be desired. And that's why I thought about them about secure storage facilities in the first place.

I think that this would be the biggest reason of bitcoin banks existence - secure storage and convenient usage (and easier exchange, but banks wouldn't like to jump into bitcoins to limit themselves to be only money changers). The average Joe is not able to properly secure his bitcoins. Even members of this forum are regularly hacked out of their bitcoins, and they are well above average tech savviness. This is where banks can step up and show people the secure and convenient way of owning and using bitcoins. Also taking responsibility for technical failures. Which leads us to:


It is a step backwards if you can properly secure your coins on your own. If there will be a “Hello, we are Bitcoin Xtra Secure Vault Limited, Belize registered, and we just created a bitcoin bank so that you can safely store your bitcoins, we encourage your deposits” bank which came out of the blue, I wouldn't trust them with my savings and I'd prefer my uninsured cold storages over their uninsured not-really-sure-what. As far as I know that bank might be a 3-person operation with more boldness than experience or knowledge.

Now, when it comes to real-world banks, especially the bigger ones, I could trust their IT, their being insured, their being big enough so that an average-sized theft won't have an impact and will be refunded, etc. They are already handling so much money that they know how to do it properly and if they decide to implement a new protocol, I believe they do it right. Until that happens, I am handling my bitcoins on my own.

There is a long road before that might happen, but I believe it's viable in ten years perspective. You might have your BTC, LTC, etc, accounts just next to your USD accounts and they all would use the same banking interface, so you really won't feel much difference. Except knowing that there are no chargebacks for sent coins.