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If I was operating this service, I would just sell the Bitcoins as they were deposited to me. When people wanted to withdraw, I would buy them back at the curre
by gibybo 13y ago
If I was operating this service, I would just sell the Bitcoins as they were deposited to me. When people wanted to withdraw, I would buy them back at the current market rate. Of course I would do this in bulk and have a small reserve pool of Bitcoins to reduce my fees and improve liquidity, but that's not very significant.
As long as I can buy/sell for cheaper than I am charging my customers (which I can if I'm using MtGox at 0.5% and charging 0.75%), this is profitable with no risk to either me or my customers. There is no need for this to be a scam or a gamble by the operator (although it doesn't exclude the possibility, obviously).
- rscale 13y agoExactly. Even at the lowest transaction volumes MtGox charges 0.6%, so the operator can capture 15bps in each direction. That said, customers still face risk that the operator could use the deposits for expenses, or for dividends. I'm reminded of Full Tilt Poker, where customers were told their funds were in segregated accounts, but the funds had actually been given to the directors. The issue was undetectable until outflows outpaced inflows and the music stopped.
- jav 13y agoThat's exactly how I operate Bridgewalker (I'm the founder). Everything is fully hedged, I'm not taking a gamble on the exchange rate.
- dlitz 13y agoSo, you're basically an exchange, right? Are you operating in the US, and if so, do you have the appropriate MSB license? It seems like the US government is starting to crack down on Bitcoin exchanges that operate without a license, so what are you doing to assure your customers that you're not just going to get shut down?