Topic: Interesting Tidbit on Pirate - Charging rates on large BTC transfers? (Read 3388 times)

If we are both being sarcastic/ironic, then absolutely. Otherwise maybe not...

-MarkM-

Why so negative? It wouldn't be a pump and dump, it'd be a pump up to some decent operating level and keep on trucking. All this hovering in the low double digits is silly, its peanuts, way to small to make bitcoin useable as a unit of account in any decent size projects. It needs to get into at least the three digits range and stay there, still on a good strong steady bull-run.

-MarkM-

Of course they're not. Pirate is contacting all the passthrough operators as we type to arrange the payouts, it just took a little longer than he hoped.

-MarkM-

Before or after the bubble it's still a giant BTC-wide pump and dump.  You're saying all the big hands (Pirate backers) are in it to wring the later masses dry?  Bitcoiners may be dumb but I don't think the community is rotten to the very core like you're saying.

Yeah it would have made more sense right at the start, not after the $30+ bubble.

-MarkM-

You have to solve the chicken and egg problem of creating new Bitcoin businesses somehow.  Why not get the first mover advantage and dominate a market?  Why not use all these really cool unique to BTC advantages and create a killer app?  Becoming the next Google is the reward, dropping the price down in the short term is the risk.  You'll always have the True Believers as customers even if the BTC trades at .01 USD again.  Adding more speculators won't solve the chicken and egg problem.  I don't think bringing in speculators would even give you more customers down the road - they're all in it to take a profit and get out.

I don't think anyone with business sense and BTC would follow through with what you're describing.

edit: the chicken and egg problem is "I don't want to start a BTC business because I have to work with USD suppliers.  There aren't enough B2B BTC businesses yet so me operating a business just drives down the price."  This is pretty flawed - even if people are just running through the BTC system like Silk Road customers do it's just short-term pushes up and down in the exchange rate that balance out.  Also, you can solve it by growing a pair and diving in yourself (as I explained above).

Remember that bitcoin looked back then to many observers as if it was tanking. Its not like you could have sold a few tens of thousands to finance a business without driving the price into the ditch...

-MarkM-

OK, apologies if I strawmanned your explanation but here's what it sounds like to me.  You've got Pirate backers with assloads of BTC.  They're giving BTC to pirate (let's say half, bs number) which he uses for the interest.  The backer's gamble is that the popularity of Pirate's scheme will drive up the value of the BTCs they didn't give to Pirate, putting them ahead and growing bitcoin.

This still doesn't beat out starting/investing in a business: if you took half of your BTC and started a business, not only would the half not invested grow in value as the BTC economy grew but the business could pay you back your initial investment through dividends and equity sales.

It also doesn't explain why Pirate's having a bitch of a time paying people back.  Your model has Pirate's backers and Pirate never touch any USD so why is he taking so long to repay?  Pirate himself has said on IRC that he doesn't keep BTC around.

That's certainly another possibility. He's had so much help from people running pass-throughs, making up reasons why this could work, and generally defending him, that he could pretty much just sit back and watch the money roll in.

My opinion is that pirate isn't as smart as people give him credit.  Indeed, the abruptness of the default, the information that was available and subsequent track covering indicates this wasn't very well planned out at all.  My guess is it that whether BTCST started as a ponzi or not, it simply got out of hand and pirate is now shitting his diapers trying to figure out what to do.

MarkM, your thinking makes no sense. Bitcoin was already trading for dollars rather than cents before Pirate started up. I have the same question ldgrn has, why no changing of interest nor changing of investment intake (buy in waves, etc.) once he opened up to wider investment? That just doesn't make sense on the face of it.

I'm sure that all made sense in your head.

Okay, lets say we have an obscure newfangled currency we invented, of which we have shitloads on hand, but for some reason common Earthlings don't seem to think our wonderful newfangled currency is actually worth much, if worth anything at all.

Lets also say we don't have enough fiat on hand to offer to buy a few million of our newfangled currency at dollars apiece.

However, our newfangled currency cost us almost nothing to create. If we could get a dollar apiece for it we'd be stinking rich.

Now if we were prepared to sacrifice a few hundred thousand to pay out as "interest", we could start up a nice HYIP, denominated in our currency, so the whole already existing panoply of HYIP-marketing channels could pick up on us.

If somehow our coins are already fetching a dollar or more per, like bitcoins were last year after the crash, that would be really helpful because we would not have to spend any fiat ourselves at all in order for people to see there is a market for this "interest" we offer to give away to them.

The only "catch" to getting this "interest" from us is, you have to have some of our currency first, as we only "pay interest" on our own currency, not on, for example, fiat currency. So if you want in on these amazing "interest rates", you gotta find a way to get hold of some of our currency.

It can be easy to pay 1%/day for a long period of time under the right circumstances. One such circumstance is that of having millions sitting around that cost you almost nothing and that would in fact drive their own worth down to almost nothing if you actually tried to sell them. So you probably actually want people to re-invest rather than to go cash out right away, because even just the few hundred thousand you plan to give away in this "promotional campaign" could actually drive prices down if more people cash out than are being attracted in. This is the weak point in the plan, because of course all experienced goldgame-players aka HYIP-players know to get their seed coins out as fast as possible so as to be playing only with their earnings. Luckily plenty of people who for whatever reason fail to execute that tactic play goldgames / HYIPs...

-MarkM-

Clearly I don't.  I would like you to make a detailed post explaining it so I can get my head around this business plan.  I'd imagine the other forum users would like to read your post as well.

Look at it from Pirate's perspective.  If Pirate's the dark pook he needs a certain amount of liquidity to operate.  He can close in on that number by enforcing deposit limitations and cutting back on his interest rates (discourage investors).  He needs to forecast what his weekly liquidity requirements are because if either the interest rate or the amount of cash on hand goes over this magic point the interest payments cut into his bottom line and don't improve the business.

Why didn't Pirate fiddle with the interest rate or limit deposits week-to-week?  Not doing so only hurts his business.  What if Pirate had a few bad weeks?  Why would you let your business be crushed under that mounting expense and not try and rope it down a bit?  Why didn't Pirate fiddle with interest rates depending on how much USD or BTC he had on hand?  Why didn't Pirate fiddle with interest rates in response to the changing exchange rate to get some relief from that huge, compounding BTC debt?

I don't think you understand what I suggested, which, if it is an investment at all, is an investment in marketing / advertising / propaganda; also, no default would be involved. People with millions of almost-worthless bitcoins hand out a few hundred thousand to people to increase interest in the coin. Before they are done, the coins are no longer almost-worthless. Yum yum.

-MarkM-

EDIT: Also, a lot of investing in business costs fiat. This plan costs bitcoins, yet could suck fiat into the system. To the extent any "ponzi" is involved, bitcoin itself in whole is the "ponzi". This plan is merely a marketing campaign.

Or they could invest in or start new Bitcoin businesses.  That would increase the value of the currency and the investors don't have the Pirate risk of losing everything when the Ponzi inevitably defaults.  They also won't be responsible for a Bitcoin panic after the default.  Investing in pirate is just a terrible idea for everyone.  Investing normally is a good idea for everyone.

I still think it could make sense for a bunch of early adopters holding millions of bitcoins between them to have had Pirate run this as a way to drive up the value of bitcoins. It does seem like there is nothing like massive amounts of HYIP action to get a fledgling currency off the ground.

Of course the catch in this theory now is why this extra delay? Why not just hand him the half a million coins to pay everyone off?

Maybe buying up all the debt though, to minimise how much ends up getting paid off, might actually further help maintain the value of bitcoins?

-MarkM-

EDIT: Wow, the silence is deafening all of a sudden...

Like I've been saying all along: BTCST popped up right around the time MtGox dark pool trading ended.