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Michael Wenli
Posted - 2011.08.03 12:28:00 - [1]
 

So I'm looking over articles about the rise and fall of EBANK and trying to revamp the model a bit.

So EBANK modeled itself after American Banks, keeping liquid cash at a minimum and investing and loaning heavily (We can see how thats worked out for my nifty U.S. Economy Shocked )

It had six directors and a staff of about 8. The idea was to spread the work and holdings around so that no one member could crash the bank (Too big to fail...NOT)

So some ideas for improvement on a player run banking model. Keep lots of liquid cash available and limit interest percentage given. Have more like 12 directors and a staff of 20.

Michael Wenli
Posted - 2011.08.03 12:31:00 - [2]
 

Edited by: Michael Wenli on 03/08/2011 12:31:10
I think there is merit in the idea of spreading the isk to the board members and having the voting systems. But I think empowering them or the bank to give loans is a mistake. That looks like where EBANK started to cave. They massively defaulted on loans and got robbed by a board member. No other banks to bail them out, so they are liquidating.

So basically a more conservative model with a larger staff. No loans, less interest paid on deposits.

Blondie Rens
Posted - 2011.08.03 13:42:00 - [3]
 

Without loans what would be the revenue stream for the bank in order to pay those interest rates?

IceFyre S18
Zulu Labs
Zulu People
Posted - 2011.08.03 14:30:00 - [4]
 

Edited by: IceFyre S18 on 03/08/2011 14:32:10

The board took "hit by a bus" measure to reduce any risk with capital.
All that bank stuff they took it very profesionaly.

All they don't do, the most basic thing, was detailed in-board transparency and the lack of any analytics/reporting/analyze of the bank backbone.

So, in my opinion, the reason to fail:
1. CCP don't give any mechanism of protection of assets of such venture.
2. CCP (look at 1.)
...
98. look again at 1.
99. People with no experience in running a bank with other people money. Yeah, fly a peregrine and hope for the best.

The people involved are good, with great personal integrity and trustworthy, and I admire them.
But with no good financial and general expertise for such venture, leads to fail.
And it did, such a waste for a great idea.

Now, just work 1. to 98. and you have a good bank, sir.

SencneS
Rebellion Against Big Irreversible Dinks
Posted - 2011.08.03 14:50:00 - [5]
 

Edited by: SencneS on 03/08/2011 14:51:32
Just so you know, EBANK was too big to fail..

It could have happily run as a massive ponsi scheme even from the massive debt. The reason is while it did have a massive debt, it also had a massive ISK reserve held by Hexxx (about 500Billion ISK) on top of all the ISK invested etc. EBANK ALWAYS took on more deposits daily than withdrawals. The reason it collapsed was the Board of Directors froze everything did a full audit, and chose to inform everyone the deposits are only worth about 30%.

The only time EBANK took on less ISK then it processed in Withdrawals is the day Ricdic announced his scam, however, each and every single one of those withdrawals where processed and paid out 100%. After a few days of panic withdrawals, it returned back to taking on more ISK from deposits than paying out withdrawals. I seem to remember still being left with about 20-30B ISK in my withdrawal wallet and that was just me. The withdrawals processed in those few days didn't come from liquidation of assets or closing of ventures.

At the time of freezing the account and locking everything down the liquidity was about 100B I believe and that was just liquid none of the assets included etc. I can't remember the exact number, but I know it was close.

Imagine if the Directors, Hexxx, LVV, Banni, Ray, AC155, even myself where not honest and though it was OK to run at a massive deficit, or even never informed anyone in EVE that Ricdic was RMTing EBANK's wallet? Just covered it up, something a real bank would do..

The EBANK system was not perfect by any means, it was lacking a lot of checks and balanced but it was huge beyond what most people can conceive and despite the huge defaults, and the scams could have maintained the appearance of stability publicly without issues.

That is by definition, too big to fail.

Loans work, the problem is they need collateral, even unsecured loans can work if the people providing capital accept the fact that it's unsecured.

Probably two years ago right after EBANK's issues there was a thread about loans, and using EBANK real Data I produced a report that showed that despite the 250B default by KIA alliance loans do generate profit. It was profitable, and returned to profit even with that massive default.

In that thread I described a system which I still believe would work that addresses the real issue of Bank in EVE. The issue that ISK is not credit, it's ISK.. Meaning, there is no Debt in EVE, either you have the ISK or you don't, you may owe someone ISK in which you have a debt to pay, but the ISK is not based around a debt based system unlike most monetary system in the world.

Loans require that once issues the value of the loan be locked from withdrawal, meaning while you could have 100B ISK in a bank, if the bank issues 10B ISK loan, there is only 90B ISK available for depositors to withdraw. Each loan would require the system to basically lock down ISK in peoples accounts. You could easily create a system that when payments are made it releases locks equal to the payment amount etc.

Also - EBANK did keep a liquid cash available, and limit interest give, and had a staff of 7 directors, and 5-7 "staff". While it's not 12 directors and 20 staff, it was large.


Claire Voyant
Posted - 2011.08.03 14:50:00 - [6]
 

In my opinion, the only way to run a safe bank in Eve is for the directors and managers of the bank to put up their own collateral held by a third party. That way the directors only get their money back after the depositors are paid off, just like a real bank. Every bank in Eve has failed because when they hit a rough spot the attitude changes from "the depositors' money" to "the bank's money" and from then on it is all downhill.

Of course banks need to make loans to make a profit. Some loans will go bad which will eat into the bank's profits. If so many loans go bad that there is no more profit and the bank starts to run a loss. The loss should come out of the directors' capital, not the customers' deposits. Run like a real business, the bank would evaluate loan risk more conservatively and pay lower interest rates to depositors in return for greater safety. Paying high rates to attract deposits and then making risky loans to your buddies because you need to earn money on those deposits is a great way to grow quickly but not a good way to run a bank.

I have written elsewhere about how a network of 3rd party holding companies could make this all work. Everyone involved, including the 3rd parties, would have personal assets secured (mainly cap ship and tech 2 BPOs) by other parties. Items put up for collateral by bank loan customers could also be held by one of these 3rd parties instead of the bank management. Finally, since the 3rd party holding company is ultimately responsible for resolving ownership of bank assets, they would be required to audit the records of the bank to make sure that capital requirements are met and records of deposits and loans are properly kept.

On how large a scale this could work, is an open question. It really depends on getting a large number of wealthy people to back it. At a minimum you would need about 15 people each with at least 50 bil in BPOs as a start, just to get a robust 3rd party system off the ground. I imagine banks in this system would be smaller, because the action of one director can effect the wealth of the others. But if there were a number of smaller banks they could use the secure 3rd party system to make short-term collateralized loans to each other much like real-life banks make overnight loans.

SencneS
Rebellion Against Big Irreversible Dinks
Posted - 2011.08.03 15:14:00 - [7]
 

Despite what I said above, Banks in EVE will never work, because the requirements to make it successful would be unattractive to the customer. It would also be lacking enough details to it's operation to be called a "Bank".

It wouldn't matter if it was backed 500% of deposits in assets held by Chribba, the same requirements to make it "successful" would make it not used. There are so many details and considerations which EBANK had to take on in operation on the fly that none of some of the smartest people in MD at the time even considered. The biggest issue is one I already mentioned, ISK is not credit/debt. Imagine a world in which there was no credit cards or electronic processing from your bank account at the swipe of a card.

When you buy something you need the ISK in hand. When you sell something, you get ISK in your hand. These are the reason why EVE is not a debt/credit economy. While it is "electronic" transferred to/from your wallet, that is not what I am talking about. It's "your" wallet, that houses the ISK you have available to you, not some bank somewhere using the ISK, and "honoring" the transaction.

Bank's in the real world rely on this type of transaction, the lack of this ability in EVE makes Bank's jobs next to implausible to operate. That is why Bank's fail in EVE from an operational standpoint. They fail in EVE because someone is inevitably greedy and get to the point where they'll just start "taking" rather then giving, just as Ricdic stated "I was sick of giving to people who did nothing but whine about interest rates and run us down over and over again, so I started taking.."


GreasyCarl Semah
Posted - 2011.08.03 16:19:00 - [8]
 

Edited by: GreasyCarl Semah on 03/08/2011 16:20:12
Originally by: SencneS
Edited by: SencneS on 03/08/2011 14:51:32
In that thread I described a system which I still believe would work that addresses the real issue of Bank in EVE. The issue that ISK is not credit, it's ISK.. Meaning, there is no Debt in EVE, either you have the ISK or you don't, you may owe someone ISK in which you have a debt to pay, but the ISK is not based around a debt based system unlike most monetary system in the world.

Loans require that once issues the value of the loan be locked from withdrawal, meaning while you could have 100B ISK in a bank, if the bank issues 10B ISK loan, there is only 90B ISK available for depositors to withdraw. Each loan would require the system to basically lock down ISK in peoples accounts. You could easily create a system that when payments are made it releases locks equal to the payment amount etc.


What you are saying is that fractional reserve banking doesn't exist. And you are correct, it doesn't and it can't. In the EVE system you need $1 of deposit for every $1 loaned unless the loaned amount comes from the only other two sources available to the bank, investor equity or profits. Essentially, credit doesn't exist because the word of the bank is worthless (due to scamming), no one will take a note from the bank as payment for any transaction. So true credit doesn't exist.

Most of the ideas I see in this forum are flawed because people think a banking system in Eve should be like a modern bank. By necessity, a bank in Eve would be more like the merchant banks of the Italian middle ages where credit is fully collateralized but letters of credit could be traded as though they were money because they were backed by the bank and people had faith in the bank. Even then the credibility of the bank needs to be established and that takes a lot of time and work.

Claire Voyant
Posted - 2011.08.03 17:00:00 - [9]
 

Originally by: GreasyCarl Semah
Most of the ideas I see in this forum are flawed because people think a banking system in Eve should be like a modern bank. By necessity, a bank in Eve would be more like the merchant banks of the Italian middle ages where credit is fully collateralized but letters of credit could be traded as though they were money because they were backed by the bank and people had faith in the bank. Even then the credibility of the bank needs to be established and that takes a lot of time and work.

Correct. Note that merchants banks with branches in different cities also provided the service of transferring money safely from city to city. This would have no advantage in Eve. But merchants banks had to also compete with real estate as an inverstment (or had to get their deposits from wealthy customers who were not allowed to hold real estate, i.e. jews) so that would be one advantage for an eve bank.

In other words, learn from the history of banks and the practice of modern banks, but realize that Eve is a completely different financial, economic, and legal environment. Practices and policies unique to Eve will need to be developed, and you must learn that you can't just rely upon trust to run a bank.

Tigerras
Smash Incorporated
Posted - 2011.08.03 17:17:00 - [10]
 

Plus you have to realize that there's a stigma about banks because of what happened with Ebank. That's going to be hard to get around.

Cyaxares II
Posted - 2011.08.03 18:14:00 - [11]
 

your proposal is flat-out terrible and your profound analysis of the US financial crisis and its parallels in EVE is truly awe-inspiring.

GreasyCarl Semah could read a bit about the Hawala system (and ofc old Hexxx posts)

OP should have a look at EOH.

Cyaxares II
Posted - 2011.08.03 18:16:00 - [12]
 

Originally by: Tigerras
Plus you have to realize that there's a stigma about banks because of what happened with Ebank.

and DBANK
and EIB
and Fury Bank

Tigerras
Smash Incorporated
Posted - 2011.08.03 19:54:00 - [13]
 

Originally by: Cyaxares II
Originally by: Tigerras
Plus you have to realize that there's a stigma about banks because of what happened with Ebank.

and DBANK
and EIB
and Fury Bank

Figured one example was enough, but there you go...

What happened to A through CBank?

Lyris Nairn
Caldari
GoonWaffe
Goonswarm Federation
Posted - 2011.08.03 20:09:00 - [14]
 

Edited by: Lyris Nairn on 03/08/2011 20:15:47
The ideal player-run bank right now is not to have a player-run bank at all.

Among a community which exists outside of the game it is possible to set up an establishment that works like a bank, but things which allow that bank to function reasonably and "safely" for the investors are out-of-game social tools. To use Goonswarm Federation as an example, we are a group from the forums community at Something Awful: you don't get into GoonFleetSwarmWaffePlatoonWhatever unless you are a member of that community, or someone who is a member invites you. Goons want to play games with other goons. This subculture allows us to have implicit bonds to each other which affords us a degree of trust inside the video games we play together. In the specific instance of EVE Online, one's credit rating is one's membership in the group, with one's continued membership in the group the collateral. With this sort of group dynamic, a player-run bank could exist (and several financial institutions do in fact exist within GSF); but, that is entirely because there exists out-of-game social bonds and a visible punishment for default.

In EVE Online, if you are just Joe Pubbie the threat of being kicked from PubbieSquadOne and having your name forever shamed—even to the impossible extent of every single person in EVE knowing what you did and that you're a bad man—does not have much gravity because you can just go join PubbieSquadTwo with a parachute alt. You can be right back in PubbieSquadOne playing with the same people and enjoying the same corp or alliance programs on that alt within a few days or weeks depending on how old your character is. Or you could just say to hell with it and go join PubbieSquadTwo. This is why any investment of public goods is a potential theft waiting to happen: there is no way to punish the thief. And even if you find out his alts somehow, he can just say screw this game and go play World of Warcraft. He is completely off the hook, then.

Goonfleet is different. Seeing as how one does not get into Goonfleet without a forums membership on Something Awful which meets certain activity requirements, and that each registered account costs $10 USD, and the fact that goons generally do not enjoy the company of pubbies (because most goons are pretty much every negative stereotype about Internet nerds), there exists a much greater incentive for goons not to steal from goons than exists for pubbies not to steal from pubbies. If a goon flat-out steals from another goon through default, or some other means, then not only is his character kicked out of goonfleet but his SA account is flagged as being banned from Goonfleet as well (which prevents him from registering for goonfleet on another character unless he makes another SA account). And since a lot of goons that play EVE in the goon guild for EVE also play other games with goons, it is not beyond the realm of plausibility that a goon stealing from goons in EVE might have his name mentioned to people in the goon guilds in other video games so as to keep him from being able to play there.

In this environment, it is possible—and common—to run financial institutions. We have a dedicated subforum just for discussing potential investment ventures, and another subforum specifically for recording those contracts agreed upon for future reference in the event of a default. As a result, the vast majority of goon loans do not default and the vast majority of goon bonds remain profitable. What you need for a player-run bank that's open to the public to be feasible is some incentive for people not to steal your money, which presently does not exist in EVE Online.

e: spelling.

Michael Wenli
Posted - 2011.08.04 01:06:00 - [15]
 

Lots of good ideas. Ok so not only a larger board of directors and staff, but also a long standing community of people who trust one another through some means.

The bank would profit through collateralized loans. Although I don't think thats the whole answer. It seems to me that it would be just as easy for board members to steal items as isk although it would be a more effective way of limiting the banks exposure as far as players defaulting on loans.

But I like the idea of a strong support structure, although such a thing is not built overnight nore easily maintained.

Lyris Nairn
Caldari
GoonWaffe
Goonswarm Federation
Posted - 2011.08.04 01:13:00 - [16]
 

Edited by: Lyris Nairn on 04/08/2011 01:14:36
You are not going to build the requisite support structure within EVE. Unless your bank officers are entirely people you know in real life and trust, or with whom you have some other sort of out-of-game connection, then anyone that you think you trust in-game could just be playing you for a long-term scam and there is literally no way to know ahead of time unless the guy makes a very noticeable mistake. And even if your bank officers are all people you can trust, they are not people that I or anyone else outside of your circle of friends can trust. How do we know that you and your friends won't collude to just take all of our money? We don't, and you can't prove that you're not going to do it ahead of time.

e: With that said, people will still invest because the promise of free money is too good to pass up.

Jerry Pepridge
Posted - 2011.08.04 01:25:00 - [17]
 

would like pledge 20b

Claire Voyant
Posted - 2011.08.04 14:04:00 - [18]
 

Another way a bank could work is if it started out with private capital. All the directors could put in a sum of isk and they could start making loans from that. Once they established that business they could start taking in deposits to expand their portfolio. As long as they establish policies to maintain capital requirements and stick to them it could work. The idea here being that they see themselves in the business of making loans or investments and not just collecting deposits. Bank directors could run API checks on loan customers who would be happy to avoid the whole public offering and audit rigmarole. Of course, I would still like to see a sizable portion of bank assets locked down to assure that the directors kept their obligation to the depositors, but I'm guessing they could still attract deposits if the right people were involved.

Stealing Honest
Stealing Honest Speculation Group LLC
Posted - 2011.08.04 14:32:00 - [19]
 

Originally by: Claire Voyant
Another way a bank could work is if it started out with private capital. All the directors could put in a sum of isk and they could start making loans from that. Once they established that business they could start taking in deposits to expand their portfolio. As long as they establish policies to maintain capital requirements and stick to them it could work. The idea here being that they see themselves in the business of making loans or investments and not just collecting deposits. Bank directors could run API checks on loan customers who would be happy to avoid the whole public offering and audit rigmarole. Of course, I would still like to see a sizable portion of bank assets locked down to assure that the directors kept their obligation to the depositors, but I'm guessing they could still attract deposits if the right people were involved.


Hmm i kind of like this idea. Perhaps a new lending institution... Stealing Honest Merchants Bank Smile

Tom Bithoff
Posted - 2011.08.04 15:57:00 - [20]
 

A successful bank will secure its "loans" via the one transaction where CCP won't encourage players to scam each other: character sales.

Each player has fictional equity against which they can securely borrow isk, in the value of their character's skill points. A little less isk than the price a character would fetch in the character bazaar can be secured via three contracts: an in-game character sale, a RL insurance obligation, and a RL loan.

Say you have a character worth about 1.1B isk on the character bazaar, and would like to borrow 1B isk. First, you (in RL) agree to insure me against loss, if I suffer a loss in a character sale with you, to the tune of at least $45 (whatever the conversion rate is for $ to plex to isk), lets say $60. I now am a beneficiary of a RL insurance contract, against which I borrow $60 from you.

You loan me $60 in RL. You send me the cash. So far, we're two people doing business in RL; CCP isn't involved.

Finally, we agree to the sale of your character to me, on the character bazaar, for 1B isk. I deliver 1B isk to you in game immediately; you pay the character transfer fee and deliver your character to me within 3 months. If you back out, you pay me my money back plus a small penalty (perhaps 5% of 1B?) for backing out of the sale. If you back out without returning my isk, I have two protections: I can ask CCP to deliver the character. If I don't get the character or my 1.05B isk back, I can collect on my RL insurance policy for $60.

No one would use this for RMT, because the exclusive choice to fail to pay me back or deliver the character rests with the Character seller (who resembles an isk borrower). If he just wanted the isk to keep rather than borrow, he could have just bought plex from CCP to sell for 1B isk, for $45, and saved $15. Instead he gives up $60 temporarily while using 1B isk for three months, and when he cancels the character sale and returns the 1B isk (plus a small % penalty, similar to interest on a loan). Upon getting my isk back, my insured loss is conclusively avoided. Our RL insurance contract is concluded; I repay the $60 RL loan.

If he wants to RMT, he'd be an idiot to do this instead of buying plex from CCP. If he wants to screw me over, he'd be screwing himself, since he's my RL insurer. If I want to screw him over, I risk RL legal consequences for fraud or failure to repay a RL loan.

By design, no RL money ultimately changes hands.

This is like secured lending, with more security than saying, "Please don't scam me" and without a violation of the Eula (no exchange of in-game assets for out-of-game assets.) There aren't even incentives that could be confused with RMT. The only way you get customers, is if they're willing to insure you for more than they'd pay CCP to RMT dollars for plex for isk.

Mella Elcus
Posted - 2011.08.04 18:55:00 - [21]
 

Edited by: Mella Elcus on 04/08/2011 18:55:34
A successful bank needs secure loans. The only way to secure a loan would be with collateral (or trust... but good luck finding that in EVE).

The problem is that it makes no sense to put something up for a collateralized loan when you just can sell it instead for it's full value. Also there's no way to continue using something that's put up for collateral.
(BPO's being the only exception...)

Until CCP fixes that, good luck with your bank. (scam/RP-project)

Claire Voyant
Posted - 2011.08.04 19:16:00 - [22]
 

Originally by: Mella Elcus
Edited by: Mella Elcus on 04/08/2011 18:55:34
A successful bank needs secure loans. The only way to secure a loan would be with collateral (or trust... but good luck finding that in EVE).

The problem is that it makes no sense to put something up for a collateralized loan when you just can sell it instead for it's full value. Also there's no way to continue using something that's put up for collateral.
(BPO's being the only exception...)

Until CCP fixes that, good luck with your bank. (scam/RP-project)

1. BPOs (they really exist, I've seen them)
2. Commodity Speculation (I put up a stack of an item as collateral. If the market value falls below a certain trigger point and I don't come up with the isk to cover the bank can sell the item at whatever price they can get.)
3. Trust (it also exists)
4. Reasonable Risk (loan officers do due diligence and if the amount of work to set up the scam is large enough in relation to the size of the scam then the risk/return is probably small enough to justify a loan.)
5. Rare items (hard to sell at a fair price)

Whether enough safe loan customers exist to satisfy the demand for safe investments is a question that can theoretically be resolved on the interest rate market.

SencneS
Rebellion Against Big Irreversible Dinks
Posted - 2011.08.04 19:21:00 - [23]
 

Here is a few things to keep in mind.

1) ISK Availability across the BOD.
No matter how much ISK each BOD member puts forth, they'll have access to more then their secured deposit. Show me a scammer who would not put down 10B ISK for the possibility of gaining access to 120B ISK, and I'll show you why BOD Secured Collateral isn't the answer.. Somewhere, someone has access to ISK, securing BOD funds prevents short term quick pilfer from the Bank, it actually promotes a more long term deep scam to build trust up to the point where their Chribba secured ISK is a small price to pay for scamming the bank vault.

2) Large staff/support.
History has shown that too small (one man shows) will burn out, Experience has shown too large (EBANK) and you run into a lot of complexity and social disorder between the BOD. While EBANK did appear to have a somewhat stable start it was a hotbed of argument threads and heated discussion. Ask anyone who lived in EBANK's private forums and you'll get the same answer. Oddly enough Ray, AC155, Arthe and Myself got along better then the entire board ever did, despite the tension between Ray's domination of the BOD and hard fast ruling. EBANK got more crap done in a shorter amount of time with not as many peoples input. A large group would appear to be better but you'll have one of two things happen a) Everyone will disagree with someone at some point stopping productivity, b) Complacency and "Yes men" who just go with the flow being ruled by a small few. Not to mention payroll issues which I can speak from personal experience is a nightmare to maintain.

3) Shares to BOD members.
Next to pointless apart from locking down BPO Assets. But lets face it, if you're using 3rd part to secure BOD deposits you might as well use 3rd party for BPO Lock downs. It's more secure and it increases the security for the customer, create a Corp for the 3rd party in which they have control and the BOD/Workers of the Bank are just corp members with access to use, not take.

4) API Checks.
Good up until the point someone actually takes the Bank's Assets, then you're screwed anyway. I'm not saying not to run API Checks but lets face it, all it does is give undeniable proof of the theft, which will be pretty easy to spot anyway. It's a confirmation of the loss, not a prevention measure.

5) Use real Account practices or have a solid backbone of asset tracking and financial reporting.
EBANK suffered from the poor mans account method, combine that with the "Venture Capital" CEOs lack of desire for solid reporting. It gave the illusion the bank was much better off than it really was. So rock solid air tight reporting and asset tracking is absolutely required.

6) #5 triggered something I did like about how EBANK operated and I recommend anyone attempting to run any sort of large investment fund to work in a similar way. Use ventures rather then attempting to manage all the funds.

While EBANK did end in failure, prior to it's failure it had spent two years developing a system in which works very well for fund distribution. It separated the overall funds of the Bank into "ventures" which had a BOD member as a the CEO of the corporation, to secure this I would use 3rd part as CEO and BOD as the "Member" of the 3rd party secured Corporation. EBANK itself was more the fund provider for the ventures and would request a very simple return on capital provided, like a line of credit. Each time the Venture CEO/Bank BOD member requested more funds for something the BOD would vote on it's expansion.

The system worked very well despite the turmoil it took to get there. The issue was the ventures where not monitored like EBANK's Wallets. If a venture started to fail there was no insight into it. EBANK just expected to get it's 10% monthly interest payment. EBANK also held full rights to close each venture if needed and demand liquidation and return of funds.

If you want to know more policies about that let me know because it was effective.

Ray McCormack
Nordar Innovations.
Posted - 2011.08.04 19:21:00 - [24]
 

Originally by: Tom Bithoff
character sales.

That would mean CCP involvement, and this is the player market. Also, 18 months, etc. A far more broad-ranging approach with CCP involvement would be actual ingame tools to prevent the CEO is god aspect and enforce contracts between players via wallet and asset forfeiture.

Originally by: Mella Elcus
The problem is that it makes no sense to put something up for a collateralized loan when you just can sell it instead for it's full value.

Of course it does, because you can't always and sometimes it wouldn't just make sense to.

Kaethe Kollwitz
Posted - 2011.08.04 20:17:00 - [25]
 

There is no 'ideal player run bank.' In the end EVERYONE runs with the isk. Everyone.

When the whole of eve has a perfectly good wallet I cant understand why people constantly buy into the idea of giving someone else their hard-earned cash.

one born every minute i guess.


Edwin Rothbard
Interstellar Arbitrage
Posted - 2011.08.04 20:40:00 - [26]
 

RothBank™ has 100b in cash and is ready to lend! Details in my bio.

My bank has only 1 depositor: me. I'm also the bank manager. I lend to customers. Everyone is happy. OP is talking about the same me thinks with the addition of multiple depositors.

There are generally three parties in a bank:
-depositors
-bank personnel
-borrowers

There is lots of idle isk in the universe and hence many would-be depositors. The problems come in with the other two parties. Unlike the realworld there are no repercussions for bank managers who steal or borrowers who defraud. Both are legal in eve. Bad reputation doesn't hurt those who do wrong. Biomassing and/or selling a character is trivial.

You can mitigate the problems with borrowers who defraud by requiring collateral for all loans. This is the only way I will loan money. Dealing with bankers who steal is more difficult. Unfortunately many of the people who want to play virtual banker are crooks looking to defraud others. There is NO good way to ensure a banker doesn't run off with depositor money short of requiring collateral from the bankers similar to requiring collateral from borrowers.

All Most people have a price. Once the potential score from a heist is high enough many people will relax their moral judgement.

Block Ukx
Forge Laboratories
Posted - 2011.08.04 20:58:00 - [27]
 



B-Bank


We ran a Cash Reserve for several months, which could be considered a bank. It was a successful project.





SencneS
Rebellion Against Big Irreversible Dinks
Posted - 2011.08.04 21:34:00 - [28]
 

I dug though my old files and came across this document I created after Ricdic and around the time EBANK Froze accounts.

It was a complete restructuring proposal designed by myself and this version includes Ray's reply/alterations to the proposal to better sure a smaller entity. Ray made a great point which I agreed to about size and separation of duty. The issue with running a large multi-functional entity with a large group of Independent people all doing something under the same collaboration such as a Bank is all laid out in this document. It's old, two years at least, it highlights some of the issues EBANK suffered from along with solutions to prevent those same issues from happening again.

Most people don't even consider something like what this proposal suggests, the reason is it doesn't show up until you get to that point. I'm putting it here because this appears to be a genuine discussion about how to setup a large entity.


Tom Bithoff
Posted - 2011.08.04 22:40:00 - [29]
 

Originally by: Ray McCormack
That would mean CCP involvement, and this is the player market. Also, 18 months, etc. A far more broad-ranging approach with CCP involvement would be actual ingame tools to prevent the CEO is god aspect and enforce contracts between players via wallet and asset forfeiture.


No, it wouldn't necessitate CCP involvement, beyond a couple player posts in the character bazaar. In fact, it would likely reduce the burden on CCP with respect to enforcing character sales gone bad.

It also doesn't rely on hope that CCP will improve current mechanics. Character sales aren't the key. The key is players offering RL insurance to each other, with RL consequences that make scamming, RMT'ing, and defaulting on an isk obligation ugly enough to be worth avoiding.

Keep in mind that so long as the insurance policy is for an amount of RL money worth more than the $ to Plex to isk exchange rate, the incentives work to avoid defaults, to avoid RMT allegations. The character's bazaar value isn't the critical component for setting values.

If you want secure lending, there it is. I can't be the first person to have thought of this. I might even wager that this form of secure lending is already going on among people who figured it out before me. I don't see a downside.

Ray McCormack
Nordar Innovations.
Posted - 2011.08.04 22:44:00 - [30]
 

Originally by: Tom Bithoff
No, it wouldn't necessitate CCP involvement

Of course it would. As judge, jury and executioner. And if I were them I would say **** that.


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