Quote from: gigi on June 23, 2011, 08:41:22 PM

Guys, there is a simple legit way to generate interest on Bitcoin without risk: borrowing it for shorting.

The bank borrows 100 BTC to some party for a month for 3 BTC. It gives 2.5 BTC to the person depositing the BTC and keeps 0.5 BTC as fee.

Sombody wants to short BTC. It borrows 100 BTC, paying 3 BTC for this privilege to the bank. It sells the 100 BTC. One month later it buys the BTC back (hopefully for a lower price) and gives it back to the bank. The profit covers the commission.

The central banks do this with gold for example, earning interest with zero risk. This assumes no counter-party risk, but this is what contracts are for. Of course, in Bitcoin world everything flies, no contracts needed

How would the back find someone trustworthy people to loan to? I suppose they could have some USD in escrow and have a way to force them out of their position if they are reaching their escrow limit. But all in all, it requires a lot more infrastructure than we have at the moment.