Topic: Bitcoin Loans and Lending; The Weakness in The Bitcoin Economy - page 7. (Read 17603 times)
I love it when bitcoiners finally look directly into the mirror and a brief moment of terror washes over their faces when they realize what they've done. It's always much too brief, and then they look away and try to find re-assurance in the echo chamber.
You almost realized that promoting bitcoins as a currency doesn't make any sense at all. You were soooo close.
I've been reading about bitcoin now for just over a month and am fascinated with the economic possibilities. Myself and my partner managed to launch the largest Bitcoin Market so far at www.BitCoinWorldMarket.com Every day there seems to be new and exciting news regarding the growth and acceptance of bitcoin and I for one am so excited at the future and possibility of bitcoin becoming extremely widespread.
One of the very interesting things about bitcoin is that it is a deflationary currency. Normally economists list massive deflation as a bad thing. Bitcoin embraces that with its infinite divisibility.
The one weakness that I see in bitcoin is that the current model for loans and lending is incompatible with bitcoin.
Imagine Taking a loan out for 100 bitcoin at even 0% interest to keep it simple. At the end of the year you have to pay back that 100 bitcoin. If the point of your loan was to pay for something now so you can create more income in your business the volatility in the bitcoin market would make it infeasible to pay it back. If Bitcoin doubles for example in value it is like having to pay back 100% interest. If it drops in value by half the lender then is basically out half the money they lent out.
With the longterm likelihood of an overall gaining in value due to bitcoin being deflationary it just doesn't make sense to have any loans, interest, or even credit be issued in bitcoin. Fractional reserve banking in bitcoin is completely unlikely.
The only way i'd see loans or credit working is if you just get the loan in your national currency and exchange the money as needed and spend the bitcoin right at the moment.
As a business man this creates an interesting dilemma. Most small and medium business DEPEND on short term loans and credit. Suppliers accept Net 15 or Net 30 payment terms. Inventory costs are highly variable and often come all at once rather than at a rate related to income.
I see the future and complete acceptance of bitcoin as an alternative currency, however I don't see how we will ever separate it from daily exchange with a fiat currency.
Thoughts?
One of the very interesting things about bitcoin is that it is a deflationary currency. Normally economists list massive deflation as a bad thing. Bitcoin embraces that with its infinite divisibility.
The one weakness that I see in bitcoin is that the current model for loans and lending is incompatible with bitcoin.
Imagine Taking a loan out for 100 bitcoin at even 0% interest to keep it simple. At the end of the year you have to pay back that 100 bitcoin. If the point of your loan was to pay for something now so you can create more income in your business the volatility in the bitcoin market would make it infeasible to pay it back. If Bitcoin doubles for example in value it is like having to pay back 100% interest. If it drops in value by half the lender then is basically out half the money they lent out.
With the longterm likelihood of an overall gaining in value due to bitcoin being deflationary it just doesn't make sense to have any loans, interest, or even credit be issued in bitcoin. Fractional reserve banking in bitcoin is completely unlikely.
The only way i'd see loans or credit working is if you just get the loan in your national currency and exchange the money as needed and spend the bitcoin right at the moment.
As a business man this creates an interesting dilemma. Most small and medium business DEPEND on short term loans and credit. Suppliers accept Net 15 or Net 30 payment terms. Inventory costs are highly variable and often come all at once rather than at a rate related to income.
I see the future and complete acceptance of bitcoin as an alternative currency, however I don't see how we will ever separate it from daily exchange with a fiat currency.
Thoughts?
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