Does Something Like the DigitalCoin Free Bank Exist for Bitcoin?

empoweoqwj

hero member

Activity: 518

Merit: 500

Quote from: stompix on December 13, 2013, 11:19:24 PM

Quote from: pand70 on December 13, 2013, 11:02:27 PM

Quote from: empoweoqwj on December 13, 2013, 09:48:32 PM

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

The .io domain is fine and in fact is preferred by many tech startups. The problem is that any business that requires trust is DOA for a big part of the community because of all those incidences.

I remember somebody posting a project a few weeks after the fortress collapsed.
Most of the advices were "Do not use the .io domain".

Certainly taints the .io "brand", in the bitcoin space at least. Personally I would have 2nd (3rd) thoughts about going near a bitcoin site now if it used .io. You never know whose Fortress it is ....

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: pand70 on December 13, 2013, 11:02:27 PM

Quote from: empoweoqwj on December 13, 2013, 09:48:32 PM

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

The .io domain is fine and in fact is preferred by many tech startups. The problem is that any business that requires trust is DOA for a big part of the community because of all those incidences.

I remember somebody posting a project a few weeks after the fortress collapsed.
Most of the advices were "Do not use the .io domain".

pand70

sr. member

Activity: 476

Merit: 250

Quote from: empoweoqwj on December 13, 2013, 09:48:32 PM

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

The .io domain is fine and in fact is preferred by many tech startups. The problem is that any business that requires trust is DOA for a big part of the community because of all those incidences.

empoweoqwj

hero member

Activity: 518

Merit: 500

Quote from: stompix on December 13, 2013, 09:56:51 PM

Quote from: empoweoqwj on December 13, 2013, 09:48:32 PM

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

And especially one that claimed to be a Fortress , right?
Let's see bitcoin hitting 10 000 , and no site will be left un"hacked".

hahaha. you got it bro. He's single handedly giving the ".io" domain a bad name. Feel sorry for any genuine dudes running bitcoin domains from .io

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: empoweoqwj on December 13, 2013, 09:48:32 PM

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

And especially one that claimed to be a Fortress , right?
Let's see bitcoin hitting 10 000 , and no site will be left un"hacked".

empoweoqwj

hero member

Activity: 518

Merit: 500

Quote from: pand70 on December 13, 2013, 09:44:05 PM

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

Recent evidence suggests you shouldn't trust anyone running any kind of bitcoin "storage" service, they seem to get "hacked" very easily, especially those using the ".io" domain Wink

pand70

sr. member

Activity: 476

Merit: 250

The only problem here is that you should trust the guy issuing the options.
You don't want the site to get "hacked" or something during a huge price dip Roll Eyes

empoweoqwj

hero member

Activity: 518

Merit: 500

It makes no economic sense. You cannot have "something for nothing". There is no way to guarantee price stability. If you want to hedge against bitcoin going down, you *have* to pay for it somehow.

dance4x

full member

Activity: 143

Merit: 100

Quote from: stompix on December 13, 2013, 08:31:18 PM

Yeah , that's the problem , what happens when both of them want their coins .
The mechanism might work but something smells , and It does quite badly.

Also having a bank , isn't that against bitcoiners principles ? Leaving your coins in the hand of a third party?

I don't think the point is to act as a traditional bank. The point is to offer the ability to invest in digicoin with less risk. If the depositors understand that they are having someone hold their money and are just making an investment, I still don't see the problem.

The only problem I see is that they could eventually run out of digicoins to sell. Then again, they would be able to replenish their reserves once the options contracts ran out.

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: dance4x on December 13, 2013, 08:18:53 PM

Quote from: stompix on December 13, 2013, 08:02:24 PM

Quote from: dance4x on December 13, 2013, 07:34:58 PM

Quote from: stompix on December 13, 2013, 07:24:33 PM

Yeah , that's the way central banks work

They aren't printing their own coins. People with DigitalCoins are depositing them into the bank. There is also nothing stopping other people from starting their own bank.

If people are depositing them into the bank , how the hell do you sell those coins to somebody else?

Btw. I'm starting to agree with you on this one:
This is starting to hurt my brain.

Bob deposits 100 digicoin into the bank. Alice buys those 100 digicoin for $100 (the market rate) +5% (so $105 total). The price of digicoin in dollars goes down, and Alice wants to return the 100 digicoins and exit her investment. Bob now has his original digicoins plus $5.

In a situation where the price of digicoin in dollars goes up, I guess Bob just gets the benefit of selling at a rate 5% above the current market price.

Yeah , that's the problem , what happens when both of them want their coins .
The mechanism might work but something smells , and It does quite badly.

Also having a bank , isn't that against bitcoiners principles ? Leaving your coins in the hand of a third party?

dance4x

full member

Activity: 143

Merit: 100

Quote from: stompix on December 13, 2013, 08:02:24 PM

Quote from: dance4x on December 13, 2013, 07:34:58 PM

Quote from: stompix on December 13, 2013, 07:24:33 PM

Yeah , that's the way central banks work

They aren't printing their own coins. People with DigitalCoins are depositing them into the bank. There is also nothing stopping other people from starting their own bank.

If people are depositing them into the bank , how the hell do you sell those coins to somebody else?

Btw. I'm starting to agree with you on this one:
This is starting to hurt my brain.

Bob deposits 100 digicoin into the bank. Alice buys those 100 digicoin for $100 (the market rate) +5% (so $105 total). The price of digicoin in dollars goes down, and Alice wants to return the 100 digicoins and exit her investment. Bob now has his original digicoins plus $5.

In a situation where the price of digicoin in dollars goes up, I guess Bob just gets the benefit of selling at a rate 5% above the current market price.

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: dance4x on December 13, 2013, 07:34:58 PM

Quote from: stompix on December 13, 2013, 07:24:33 PM

Yeah , that's the way central banks work

They aren't printing their own coins. People with DigitalCoins are depositing them into the bank. There is also nothing stopping other people from starting their own bank.

If people are depositing them into the bank , how the hell do you sell those coins to somebody else?

Btw. I'm starting to agree with you on this one:
This is starting to hurt my brain.

dance4x

full member

Activity: 143

Merit: 100

Quote from: stompix on December 13, 2013, 07:24:33 PM

Yeah , that's the way central banks work

They aren't printing their own coins. People with DigitalCoins are depositing them into the bank. There is also nothing stopping other people from starting their own bank.

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: dance4x on December 13, 2013, 07:17:42 PM

Quote from: stompix on December 13, 2013, 07:06:52 PM

Quote from: dance4x on December 13, 2013, 06:51:53 PM

Quote from: 12648430 on December 13, 2013, 06:32:37 PM

Yeah, giving away options for free sounds unsustainable. If the price drops, there's no way the "bank" could stay solvent..

It sounds unsustainable at first, yes. However, the bank is still solvent when the price drops. It is basically just a refund for the DigitalCoin that the customer bought. They don't do anything but sit on the funds the customer used to purchase the DigitalCoin until the option contract runs out.

Quote from: stompix on December 13, 2013, 06:09:02 PM

See that "fixed rate". There you have the flaw. And as you suspected there is a really big one:).

I'm still not seeing it. See my response to 12648430.

And how is the bank acquiring those coins in the first place?
This is the piece of the puzzle.
Because if the banks is getting the coins at 100 , John buys them at 200 , they drop to 50. They have to give John back 200 , and end up with a coin they paid 100 for which is valued at 50.
And if they 'print' their own coins , then we have a central bank

My understanding is that the bank gets the coins from depositors. They then get paid dividends on the transaction fees for their deposited coins. This is starting to hurt my brain. I don't think your example would lead to them going insolvent though. The total value of their assets has remained the same in terms of DigitalCoin, and they have earn money through the transaction fee.

Yeah , that's the way central banks work

dance4x

full member

Activity: 143

Merit: 100

Quote from: stompix on December 13, 2013, 07:06:52 PM

Quote from: dance4x on December 13, 2013, 06:51:53 PM

Quote from: 12648430 on December 13, 2013, 06:32:37 PM

Yeah, giving away options for free sounds unsustainable. If the price drops, there's no way the "bank" could stay solvent..

It sounds unsustainable at first, yes. However, the bank is still solvent when the price drops. It is basically just a refund for the DigitalCoin that the customer bought. They don't do anything but sit on the funds the customer used to purchase the DigitalCoin until the option contract runs out.

Quote from: stompix on December 13, 2013, 06:09:02 PM

See that "fixed rate". There you have the flaw. And as you suspected there is a really big one:).

I'm still not seeing it. See my response to 12648430.

And how is the bank acquiring those coins in the first place?
This is the piece of the puzzle.
Because if the banks is getting the coins at 100 , John buys them at 200 , they drop to 50. They have to give John back 200 , and end up with a coin they paid 100 for which is valued at 50.
And if they 'print' their own coins , then we have a central bank

My understanding is that the bank gets the coins from depositors. They then get paid dividends on the transaction fees for their deposited coins. This is starting to hurt my brain. I don't think your example would lead to them going insolvent though. The total value of their assets has remained the same in terms of DigitalCoin, and they have earn money through the transaction fee.

12648430

full member

Activity: 144

Merit: 100

I hadn't seen that they charge a fee over market price. This could actually work; they are selling DGC with a married put option.

The best way to do this (to achieve fair market pricing of the option premium) would be to have an options market. Then, to make it easy to use for people who don't want to have to understand options, someone could sell BTC bundled with corresponding put options as in the OP.

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: dance4x on December 13, 2013, 06:51:53 PM

Quote from: 12648430 on December 13, 2013, 06:32:37 PM

Yeah, giving away options for free sounds unsustainable. If the price drops, there's no way the "bank" could stay solvent..

It sounds unsustainable at first, yes. However, the bank is still solvent when the price drops. It is basically just a refund for the DigitalCoin that the customer bought. They don't do anything but sit on the funds the customer used to purchase the DigitalCoin until the option contract runs out.

Quote from: stompix on December 13, 2013, 06:09:02 PM

See that "fixed rate". There you have the flaw. And as you suspected there is a really big one:).

I'm still not seeing it. See my response to 12648430.

And how is the bank acquiring those coins in the first place?
This is the piece of the puzzle.
Because if the banks is getting the coins at 100 , John buys them at 200 , they drop to 50. They have to give John back 200 , and end up with a coin they paid 100 for which is valued at 50.
And if they 'print' their own coins , then we have a central bank

dance4x

full member

Activity: 143

Merit: 100

Quote from: 12648430 on December 13, 2013, 06:32:37 PM

Yeah, giving away options for free sounds unsustainable. If the price drops, there's no way the "bank" could stay solvent..

It sounds unsustainable at first, yes. However, the bank is still solvent when the price drops. It is basically just a refund for the DigitalCoin that the customer bought. They don't do anything but sit on the funds the customer used to purchase the DigitalCoin until the option contract runs out.

Quote from: stompix on December 13, 2013, 06:09:02 PM

See that "fixed rate". There you have the flaw. And as you suspected there is a really big one:).

I'm still not seeing it. See my response to 12648430.

12648430

full member

Activity: 144

Merit: 100

Yeah, giving away options for free sounds unsustainable. If the price drops, there's no way the "bank" could stay solvent..

stompix

legendary

Activity: 2912

Merit: 6403

Blackjack.fun

Quote from: dance4x on December 13, 2013, 05:16:09 PM

Info seen here: http://digitalcoin.co/forums/index.php/topic,4.0.html

Quote

It is time to announce the Free Bank of Digitalcoin, an initiative that aims to introduce a new concept to the crypto-world.

What is the FBD?
A community inspired and funded effort to further the usage of DGC as a store of value and monetary unit.

What services are provided?
The primary service will be hedging and profit enabling. FBD will allow people to purchase DGC at a fixed rate (set to match market price), and hold contracts that provide the option of selling back the DGC at purchase price. Deposits and withdrawals will initially be accepted in bitcoin, litecoin, and USD.

How is this useful to me?
The FBD will serve to lower investor risk in crypto-currency and allow simple, risk free cash flow into digitalcoin.

Example:
1. John Doe decides he wants to invest in digitalcoin but he can't handle downside risk.
2. J.D. contacts the FBD for a DGC quote.
3. J.D. purchases digitalcoin directly from the bank and is given the option to sell them back at purchase cost.
4. Now, if the price drops, J.D. can execute his option and sell back the coins at purchase price. If the market rises, he can sell his digitalcoin on the open market.

By removing liquidity uncertainty regarding DGC, the FBD will serve to promote and nurture digitalcoin growth.

I'm also still open to the idea that there is a large flaw in the logic of this kind of service, but I haven't been able to find it yet. It seems like it's basically a buy back option, but I don't see it as an option on any of the Bitcoin exchanges.

See that "fixed rate". There you have the flaw. And as you suspected there is a really big one:).

Topic: Does Something Like the DigitalCoin Free Bank Exist for Bitcoin? (Read 1366 times)