Market Discussions

Excuse me if I'll chill down the thread.

CCP won't support banking in EvE, because their economy would vaporize under a mainstream banking system. Markets are vastly too illiquid to support "big players", individuals and alliances can heavily affect even the largest EvE markets already.
EvE would need 10 times as many RL players before it could smoothly support big players like banks (I mean 10T+ being moved on the markets by each big player every day).

They did all the possible to brake money velocity and segregate it, they won't implement one of the best big velocity magnifiers.

So true, in 2009 I knew nothing, zero, nada about anything even vaguely related to markets, economy, finance, bonds etc.

Then MD happened and now I am an happy RL trader bunny

Ditto. These threads are great reads no matter what side of an issue one happens to be on.

I am strictly talking about a player created bank with utterly no required involvement from CCP. If such a thing developed, CCP would almost certainly adjust their mechanics (ISK creation, etc.) accordingly rather than shut down a player creation. I was just wondering if you would support that group of players, assuming that their system was solid (not scam-proof, but able to survive scams), since you have reservations about the ability of the market to handle the influx of purchases.

IP bans were useful years ago, now most people are on dynamic IP anyway or can spoof it.

What's needed is something akin to my Sister Funds concept: assume that the other guys CAN and WILL stop playing or whatever (not every scam is due to a scamming plan) so spread the risk over many "peer to peer" holding entities.

The brain overlords here could even form a mathematical model, where statistically there would always be a loss (compared to 1 guy reliably keeping everything with no theft ever) but it could be bearable enough to form a viable business model.

Credit default swaps done out of game could help.

http://en.wikipedia.org/wiki/Credit_default_swap

Trust etc aside, the main problem for a bank is how to make ISK to pay interest.

ISK making in EVE simply doesnt scale well beyond say 100B ISK.

Any bank in EVE offering (even very low) interest (and run profesionally and being trusted etc etc) will get FLOODED with ISK - Just look at EBANK.
(Too much) Success is the achilles heel of banking in EVE - Absurdly enough.

This is the number one reason why BMBE was never set up as a "true" bank (offering interest) - and have stuck with just doing loans.

Also - As long as we are stuck with collaterised loans (which I don't ever see changing) the demand for loans will be small'ish.
It sure as hell will never be able to pay for the interest on trillions and trillions ISK of deposits.

Which means a bank will need to invest it's ISK in other ventures to make the necessary ISK.

Which leads right back to what I started out with : "ISK making in EVE simply doesnt scale well beyond say 100B ISK."

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There is one other option - Zero interest accounts.
But for people wanting to use (flock to) that, it needs to have a utility function (instead of interest)

By utility function I mean (as an example) the ability to use the ISK in your bank account in ways that you can not do ingame.

Examples of that would be 3rd party websites (news sites, services etc) that require (low) ISK payment.
You can of course still do that today (due to the API), but it has a "lag factor" (the API only updates so often).
This lag factor you could eliminate with a (player run) banking account. ("Banking account" might not even be the right name - Think PayPal or similar instead - Who does loans on the side)

Go to site X, pay for Y and get instant access - As the bank and the website would talk together and handle the transaction right away with no lag.

The utility function increase is rather low though, as (on average) you don't have to wait *that* long for the API to update your deposit to "site X".
Not to mention, there's really not that many sites out there offering that kind of "service" (where you need to pay ISK).

So... It's a bit of an (almost) non-starter to begin with.

@Jake
I think what we need to do here is understand that there are two distinct but overlapping economies that we can talk about, as that will help us to avoid some confusions that are coming in on both sides of the debate from using overly monolithic language. So, economy 1, which is the core eve economy (call it CEE) is the economy of the ingame markets. Here you can only use actual real isk issued by CCP. Economy 2 is the direct player to player economy (DPPE) wherein financial arrangements of all sorts can be organised between players on their own terms. Here you can use promissory notes (bank cheques, digital transfers or whatevr) as well as isk.

The money supply in each economy will be different. In CEE the money supply is just however much isk there is. There is no multiplier here because nothing but isk can be used. Taking the definition of the money supply that you give, bank deposits do not count because they cannot be used 'to make payments'. In DPPE, on the other hand, the money supply could potentially be multiplied insofar as other players are willing to accept promissory notes of whatever kind from banks as well as accepting isk. But no increase in the money supply of DPPE would affect the money supply of CEE because all the increased supply in DPPE will be bank paper that cannot be moved to CEE.

So, when Adunh and I say that the eve money supply cannot increase, this applies only to CEE. It can potentially increase in DPPE, though. However, there is a question about how significant this fact is as I would assume that a) the DPPE is a fraction of the size of CEE, and b) the obstacles to getting a broad acceptance of promissory notes even in DPPE might be insurmountable with our current tools. Indeed, it might be better to think of DPPE as, itself, further split up into potentially overlapping zones where some bank paper will be accepted (given a group A trusts the paper issued by a bank B but not by a bank C, whereas a group D trusts both and a group E trusts neither), giving each group a different money supply. Not quite sure how this last is best understood, though, in terms of the money supply in each group compared to DPPE as a whole.

I have my doubts about this as I'm not convinced that there is sufficient demand for borrowing that can be matched with lender expectations of security to have anything more than a microscopic effect on the speed money moves. My experience lending isk and observing the investment market is that there is more than enough supply for borrowers borrowing under safe conditions (i.e. collateralised loans). I have never heard of someone failing to get the loan they wanted if security was available because there is already a huge amount of idle isk competing to be loaned out on good terms. Making even more available to loan will, I expect, drive down the cost of borrowing a bit but will not increase the incidence of borrowing.

so true.