It seems that they've pivoted to a Venmo-like model. Here in the UK, we don't have single app that has the wide network like Venmo does in the US (there are plenty of apps, just with small networks.) Myself and my friends have found Circle to be a good option. I'd encourage other folks to give it a try.
What are the advantages of using Circle or other apps over just transferring money? UK bank transfers are free and instant, I can't see what an app could add to that?
Circle's interface is much easier to use than the banking apps and websites I've used. You don't need to enter the sortcode/account number, like you typically need to with the banks. And the fact that it's so easy and fast means that people typically pay each other instantly (at the bar, restaurant, cinema, whatever) rather than waiting and potentially forgetting. I like it because you don't need to remind people, or be reminded yourself.
Granted this a rather provincial point of view, but Circle and Coinbase are the only two companies I'm aware of allowing residents of the state of New York to convert bitcoins to cash and vice-versa. This is because the state of New York instituted a virtual currency license called BitLicense[1] that treats commercial bitcoin transactions as "money transmission"[2].
Ripple was also issued a Bitlicense[3] recently, but their virtual currency is not bitcoin. Haven't seen word on Coinbase's Bitlicense approval, but they applied last year sometime and are expected (or perhaps already have received) their license.
(The UK system of account number/sort code does allow you to set up malicious direct debits against other people's accounts e.g. http://hoaxes.org/weblog/permalink/clarksons_account_gets_ha... - BUT the direct debit guarantee system is supposed to make them all reversible, and you can't DD to arbitary accounts, you have to be a verified merchant.)
All you need is a routing number and an account number to initiate a transfer of funds in either direction. PayPal and others use this as verification of account ownership by initiating a small deposit and withdrawal, prompting you for the amount.
I found it really surprising hearing similar anecdotal stories about banking in the US.
But how does it really work? Is it done on a requester side - i.e. I can request money to my bank account having details of someone's else bank account wholly without their permissions? How could such lax security be allowed in modern age? When paranoid EU banks decline my transactions to my own accounts with other banks, confirmed by 2-factor auth, it's impossible to fathom how one can electronically take money from someone else's account.
What does one actually do with the account number and routing number? The UK system has account number and sort code but does not seem to have an epidemic of this problem, because you can only use those for direct debits.
Nice work from the guys at the NYTimes. They seem to have a pretty solid development team. My enjoyment of the graphic was somewhat diminished however by the terrifying thought of undertaking that climb.
I think this is a really good point. Like the human body, the Internet has it's flaws but in many ways is incredibly well suited to its purpose. An interesting article (which I'm sure many have already read) which discusses how the more organic TCP/IP won out over the incredibly organised effort of OSI can be found here:
http://spectrum.ieee.org/computing/networks/osi-the-internet...
Hi ascorbic. Thanks for pointing us in the direction of the FCA, it’s good to get as many opinions on this as possible. Yes, we have consulted a lawyer specialising in English financial services regulation, as well as closely reading the FSMA Act 2000. I agree that bitcoin isn’t a ‘no-rules’ money, but I disagree that there is no difference in the requirements. This is because bitcoin and other digital currencies are not specified investments under FSMA (the relevant section of FSMA is 22). In our opinion it would be good for digital currencies if they were a specified investment, but currently they are not, and therefore they are not subject to the same regulations as cash or other traditional financial instruments. If you think I’m wrong please push back. This is an important point to clarify not just for us but other businesses in this space.
Hi aston. As you suggest in your post, the majority of demand for bitcoin borrowing comes from market making traders on bitcoin exchanges. They have a need to borrower for a number of reasons, including going short. You say that currently there are cheaper ways to short, which is true. For example, on Bitfinex the borrowing rate is something like 4% APR. However, the rate is also very volatile and can jump up to 50%+ when demand is high. That's one reason why borrowers receive funds from us. Another is that they can use their funds on Coinfloor, which offers access to the GBP/BTC market. Trading of this kind is very popular right now, so I can assure you that these people exist. You and other posters are right to be concerned about Ponzi scheme. What might reassure you and others is reading our full T&Cs - you'll see the time and care we have put in to them. They might give an indication of how we do not want to do anything illegal, or even unprofessional. However, there's always going to be an element of trust involved and if you're too suspicious then you should keep your bitcoin in your own wallet until we're able to prove ourselves.
Thanks very much for this. We were actually aware of this already (specifically, it's an issue with the Fanboy Annoyances feature on Adblock) but we thought that, on balance, so few people would have this specific feature enabled that we would go without an ugly box altering them to this fact. Obviously some people do have it enabled - sorry it it cause inconvenience. I hope your comment stays near the top for clarification.
Makes sense. I'd expect the bitcoin owning population to have many more ABP users than the general population though.
Re: adding a black box.
It looks like just not using "mc_embed_signup" and "mc-embedded-subscribe-form" as the form's id and class would solve the problem. Elements with those classes and ids are display:none'd by ABP.
(You can verify this yourself by enabling adblock plus, then inspecting the element)
Hi deweller. Yes, in the event that a borrower defaults we will use our own funds to repay you. Obviously, this requires you placing trust in TradeMore, but we will work hard to win this trust. One option is to start lending a small amount through us so that you can see what using our service is like. Full disclosure: we do not return lender funds in certain 'force majeure' events, such as a number of exchanges being undermined or entering bankruptcy. Hence, your funds are more secure in your own wallet or, even better, within cold storage. But if you are interested in earning a modest return on your holdings you might want to give us a try.
So you are, in essence, guaranteeing every loan on your service (excluding the usual acts of god and stuff)? Assuming that all goes well, where does the extra 5% come from? As I understand it, the return on a loan is usually a function of the risk attached to it, and you seem to be saying that your loans are risk free...
I would assume they are lending your BTC to traders for substantially more than the 5-10% rate that they are paying you. In exchange for taking the risk, they keep the profits.
Wouldn't a trader who was so Bitcoin-savvy they could make returns well in excess of 5-10% whilst maintaining the full value of their loan in BTC on recognised exchanges be smart enough to borrow BTC on less onerous terms from a pure p2p exchange?
@dweller I understood the leverage aspect as requiring the borrower to deposit a margin of fiat currency in order to be entitled to borrow 2.5x that value in BTC, repayable with a >10% APR in BTC, which appears to be confirmed by sdouglas.[1] If it were the other way round and TradeMore were giving borrowers access to additional funds on top of lenders', then presumably the owners of those funds would also expect a return...
@sdouglas As I understand it most other BTC borrowing is done at a fixed rather than floating interest rate, in which case I can't imagine why anyone would borrow from you except in those rare cases where liquidity dries up and they desperately need to borrow? Or why you'd want to lend only during low liquidity situations (or to incompetent borrowers) and only to borrowers whose trading position is exposed by that lack of liquidity?
[1]As a footnote, if I were running a business with that model I'd be happiest if the BTC ecosystem crashed, in which case my BTC liabilities and all the defaulting BTC loans might be worth less than the nice juicy chunks of fiat. It would be like holding subprime mortgages if house prices massively and unexpectedly soared!
Hi notahacker, the initial margin deposit is in bitcoin (apologies if we did not make this clear) since lender funds are also in bitcoin. Regarding fixed/floating: if you are borrowing on an exchange such as Bitfinex then for any one currency swap the interest rate is fixed, but these swaps are typically short term and so when you come to refinance a position you could find yourself facing significantly higher rates than you had previously. Since (at least in the short term) our earnings will be all be in bitcoin, a collapse in the price of bitcoin would be very bad news for us.
Hi notahacker. It's not just the absolute size of the interest rate. It's also the volatility. Exchanges which offer margin trading have market-determined interest rates, which we have seen swing widely in the past. To be clear I think that market-determined rates are no bad thing, but I also think that there is room to offer a stable rate if you a have a low-risk subset of the overall pool of borrowers.
To deweller's point - yes, we have risk management algorithms. These algorithms listen to the BTC/fiat exchange rate, and if this moves against the borrower so that the value of the loan could be compromised, we issue stop-loss trades to liquidate their fiat holdings and protect the value of the loan in BTC. This doesn't completely remove risk: there is a chance that liquidity drys up completely and in that case we would have to use some of our capital buffer.
@notahacker - As I understand it, Trademore offers leveraged loans. This means you can trade with 2.5 times the amount of the amount of the loan.
So, for example, you borrow 10 BTC at, say, 20% APR interest for 6 months. You have control over 25 BTC to trade with during that time. At the end of the 6 months, you pay back 11 BTC (10 BTC + 1 BTC interest).
With 25 BTC to work with, you have the potential to gain (or lose) substantially more than the 1 BTC you paid for the privilege of using those 25 BTC during that time.
This seems like a big risk to take for Trademore, but they must have some risk management algorithms worked out on their side.
You're right that among the safest places for your bitcoin is your own wallet. An even safer option is cold storage, using Coinbase, Elliptic etc. But the success of BTCJam and others suggests that individuals are willing to trade-off return for risk. Our model is very different from BTCJam, in that your bitcoin does not get sent to a borrower's private wallet. Bitcoin users by their nature are early adopters and interested in new ventures and new companies. We have users lending through us who have been burned badly before, but still want to try out our new service. We work hard to be as professional as possible and use industry best practices, including margin calls; stop-loss trades and a significant capital buffer. But if you're really worried about 'amateur hour' then that is fair enough - we'll try our best to convince you otherwise, but it's your money.
I'm the co-founder of TradeMore and we are excited to share with you our bitcoin lending platform.
We allow individuals to lend out their bitcoin and generate a fixed return. For those interested in trading and market making, we allow funds to be borrowed and used to trade on Coinfloor and others.
I'd be very interested to hear any questions or ideas you might have.
Correct me if I'm wrong, but are the following all true
- You're running this business as a UK limited company named after the founders, who are based in the UK
- Your scheme involves third parties, probably outside your control, performing arbitrage trades on third party platforms in an unstable asset with variable liquidity characteristics in order to turn BTC into more BTC
- You're marketing a service as a "loan" offering a "return" within a specific range and offering assurances about vetting third parties using the service and covering losses, but don't include even a boilerplate terms of service or risk warning
- Nobody on the team has a background in compliance or due diligence
- You're not Bitcoin billionaires
Assuming the above are true, I hope you have a very good lawyer. Since at a glance you actually appear to be real, traceable people I'll assume you're acting in good faith and not running a Ponzi scheme which would be my first assumption based on the website's claims otherwise, but the chances of you heading in the same direction as Ponzi-scheme operators in the likely event of something outside your control going wrong are very high indeed. In all sincerity, I'd encourage you to trade less unless you have the backing of someone with a deep understanding of relevant UK law and even deeper pockets.
Hi notahacker, thanks for the well balanced comment. We're incorporated with our surnames but operate under the name TradeMore. Alas, we're not Bitcoin billionaires.
You're right on a number of counts, but I disagree slightly with a couple of your points. For example, our borrowers are not "outside of our control", because they only borrow on very specific accounts where we have implemented stop-loss logic and where the withdrawal address belongs to us. This functions in a similar way to when you trade through a broker.
We have not included terms of service on our website, and this is something we should do. However, we do make sure to share the full T&Cs with lenders and borrowers prior to transacting. Right now these are in the form PDF documents which outline clearly each parties responsibilities. Send me an email if you want to take a look.
Point taken about "heading in the direction" of a Ponzi scheme. I know what you mean. We could say, "oh, we've had a bad week, let's just repay our existing lenders with our new lenders funds". It's a slippery slope. To avoid this we separate client funds. So for each our of clients we know where their funds are at any given time, and do not just let funds flow from one to the other. Point also taken about trading less. Obviously we want to grow, but not to the detriment of our quality of service.
On the point of lawyers and legislation in general, we have consulted a number of lawyers in the UK and US. Generally, the feedback we have received is that Bitcoin is a very grey area, with most governments in a 'wait and see' mode. However, we want to act as if we were already a regulated financial institution and stay ahead of the curve (one day, if the FCA accepts bitcoin companies into the fold, we will be regulated).
Hi imaginenore, are you talking about the situation in which we earn less on our assets than we owe in our liabilities? In this case we would use our capital buffer.
