Topic: The Vault (Non-Fractional Reserve BTC Banking) - page 2. (Read 2670 times)

I would go for a Daily account, as long as the "Vault" and the "Bank" were separate entities (look at what GoldMoney does). One should not know what the other is doing. This way, a "Mtgoxing" incident on the bank would cause no harm absolutely to the funds, although it would create a temporary publicity problem for the bank. The Vault should be liable to the bank for the security of the funds, and if something bad happens to the Vault (which should NOT happen in the first place - there is enough paranoid security advice here which applies in this case), the Vault should be legally bound to reimburse the bank for all losses in full.

The Timed Deposit Accounts seem to created an interest for the Bank to try to manipulate the price of Bitcoins lower.

Example:

• Customers deposit 10K BTC for a 30 day period.
• Bank sells those 10K BTC on the market when it finds that there is little depth on the bid side, so that the price will drop more than the percentage of the transaction fees.
• Price moves lower.
• Bank immediately places a bid to buy back those 10K BTCs on the market which, having moved lower, has most probably created selling pressure with relatively large sell orders appearing at lower and lower prices.
• Repeat as many times as possible within the 30 day period.

 

Or just create a trading bot which would do this much more efficiently. That's what I would (be tempted to) do anyway.  

I must say that you seem to be honest with this, but the possibility of such a manipulation happening is not really far fetched, or is it?

Governments don't guarantee deposits, the taxpayers do.  Take a look at the bill the FDIC (Federal Deposit Insurance Corporation) has racked up so far this year on the US taxpayers behalf, it's more than 8 billion in the red.

This actually does have a solution - The bank doesn't make bad loans, because nobody is there to save it so it uses actual risk management rather than the mickey mouse parade you see in financials today.   Theres no law saying banks have to loan money to people who probably won't pay it back, that only happens precisely because we have things like mandatory deposit insurance through the FDIC.

And if The Vault (like any bank) ever started making bad loans and losing money, people would stop making timed deposits with them.   But even if that happened, the people with daily accounts would be completely unaffected by this (again this relies on transparency, which would need to be built into the concept)

Well, there is the anonymity benefit, and that is the main reason I'm interested in it, but there's also the technical benefit of being able to send bitcoins from one account at the bank to another without paying transaction fees. In addition, since you aren't actually moving bitcoins, you can act as an escrow between two accounts.

No...

The main reason is why should I trust someone else's security over my own? If anything, putting bitcoins into a centralized service would make my coins even more at risk to be stolen. It's like setting a treasure chest out in the middle of a room and saying "It's okay! It's locked!". Offering "insurance" directly would be circular reasoning. "I assure you the money is safe, but if it is not safe I will give you the money". What if someone hacked 'The Vault' and stole EVERYONE'S coins? Or in other terms, Got Goxed? There would have to be a much much much more compelling reason for me to use 'The Vault' than attempting to keep my wallet safe on my behalf. No one is going to care more about my money than I do.

Point #2 won't work because no one would ever pay you back. You give me a 1000 bitcoin loan and I disappear. Then what? Even if you attempt to verify my identity, and let's just assume I actually provided my true identity, I could easily live in some remote country where you would have no hope of ever prosecuting me. You'd probably even get laughed at in the US at this point.

But let's assume people did pay you back. It still wouldn't work because real banks already offer the same exact thing, called Certificate of Deposits, except there is still always a way to get your money back for penalty before the fixed time expires if you need to. I seriously doubt a lot of people will agree to lock up coins for 90 days with no hope of getting them out sooner if they need to. For example, I buy 100 @ $15USD. Price shoots to $30USD. 5% in 4 more months from 'The Vault' ain't looking too hot to me right now. If you gave people the option the break these terms, you become a fractional reserve bank. But let's face it, centralized bitcoin "banking" is way way far off... if ever.

The biggest problem I have, and I hate to say it, but there is no government agency to guarantee the deposit so there is the very real chance that if the bank makes too many bad loans they will go under and lose the depositor's money.  Even if you can get the loans done in the proper legal form, which I'm not sure of at the moment, then you have the issue of what happens when the value of bitcoins doubles or triples in a few months?  Everyone who borrowed money will now owe two or three times as much, and most will not be able to pay the loan back.  So the bank loses out big time on bitcoin appreciation, but on the other hand if the value halves the bank doesn't get any benefit.  It only helps the borrower since the bank is only making a profit off the spread in interest between what is charged to the borrower and what is paid to the depositor.  So the bank loses when bitcoin goes up, but fails to gain when it goes down.

So  instead of specific "boxes" where your specific BTC are stored, you'd rather have them stored in larger pools, where the total amount of BTC is always at least equal to the amount of outstanding deposits (100% backed)?

Are you interested in mixing BTC for anonimity?  or is there a technical advantage I've not noticed?

I would use all of those services, and even more so if you don't bother to secure my specific bitcoins. Mixing bitcoins is good.

What do you see as the problems with loans/timed deposits?

I can see the security being a selling point, as I can't see the masses being technically savvy enough to secure their own wallets at the moment.

I don't see certificates of deposit and loans being viable though.

Yes

Just to store my bitcoins securely.

I think this is the next major step for Bitcoin as a whole, getting a Vault established that is as secure technically and trustworthily as an existing bank account.

This will make someone a lot of money.

The Vault
A Bank, but not the type you're used to - In the tradition of the first banks (goldsmiths),  The Vault would be entirely focused on security, with an emphasis on ease of access to funds securely and remotely, and would have two types of accounts available

1) Daily Account - Person deposits their bitcoins, pays perhaps a 0.5% annual fee, and in exchange for that The Vault secures and insures them, keeping the specific bitcoins that person lent in a secure and heavily encrypted location.  You might get a physical card, or a QR code, or you could do something cute like have an app that integrates with your browser like secure keychain software does, except this facilitates secure remote payments from your vault wallet.   Basically, you pay them a small fee to guard your BTC.  If you are robbed, the vault is on the hook and reimburses you from reserves kept for that purpose.  This should all be transparent.

2) Timed Deposit Accounts - This is basically you making a loan to the bank where you give them say 100 bitcoins and agree to not withdraw them for 30, 90 days or longer, and in exchange the bank pays you a rate of return relative to the amount of time the deposit is for (1 month - 2% 3, month 5%, 6 month 7% etc.), the bank then looks at various projects and people who need loans, determines which ones are benificial and have a good chance of succeeding and therefore paying back the loan, and they loan at slightly higher interest than they pay the depositor (the spread depends on alot of things, but there is plenty of profit to be made without gouging)  Interest rates would be higher than people are used to now, but the environment of slow deflation makes the money earned when the project is completed worth more than the money borrowed to start the project in the first place, and with the ability to participate in a stable environment means growth and prosperity all around.

In a nutshell, this model focuses on safety and stability above all things, and notably is the only way you can set up a bank in such a way to not follow the practices of fractional reserve lending, which are the downfall of fiat money over and over and over again throughout history.

So would you use The Vault?