29 March 2012
First Bitcoin Credit Default Swap
A Bitcoin user started selling a special kind of insurance, called Credit Default Swaps, for Bitcoin loans.
They sold insurance on a total of 1000 bitcoins that would last for 6 months. This insurance was based on whether a Bitcoin investment would keep paying out as promised.
The insurance was split into ten parts, each covering 100 bitcoins.
People who bought this insurance had to pay a fee every month.
If the investment stopped paying out, the person who sold the insurance had to pay the buyer.
If the payment was just late by more than 48 hours, the buyer would still get some money, but not as much.
To make sure everything was fair, a well-respected member of the Bitcoin community named nanotube was chosen to decide whether the investment had failed.
The insurance was sold in a special auction where people said how many they wanted to buy and how much they were willing to pay each month.
The minimum monthly fee that could be bid was set at 1%, with the smallest bid change allowed being 0.1%.
The person selling the insurance also tried to show that they were trustworthy by pointing out their good reputation on the Bitcoin Web of Trust and Bitcoin forums.
They also made the contracts official by using digital signing.
They expected that the people interested in buying would be known and respected members of the Bitcoin community or the Web of Trust.
Source
They sold insurance on a total of 1000 bitcoins that would last for 6 months. This insurance was based on whether a Bitcoin investment would keep paying out as promised.
The insurance was split into ten parts, each covering 100 bitcoins.
People who bought this insurance had to pay a fee every month.
If the investment stopped paying out, the person who sold the insurance had to pay the buyer.
If the payment was just late by more than 48 hours, the buyer would still get some money, but not as much.
To make sure everything was fair, a well-respected member of the Bitcoin community named nanotube was chosen to decide whether the investment had failed.
The insurance was sold in a special auction where people said how many they wanted to buy and how much they were willing to pay each month.
The minimum monthly fee that could be bid was set at 1%, with the smallest bid change allowed being 0.1%.
The person selling the insurance also tried to show that they were trustworthy by pointing out their good reputation on the Bitcoin Web of Trust and Bitcoin forums.
They also made the contracts official by using digital signing.
They expected that the people interested in buying would be known and respected members of the Bitcoin community or the Web of Trust.
Source