Topic: Debt and Crypto? - page 3. (Read 956 times)

Well, what you need to remember here is about the function of the cryptocurrency itself. By understanding the function of cryptocurrency, you will understand what should be matched to it based on its functionality as well. Debt/Loans and cryptocurrency can certainly be synergized, because cryptocurrency is a protocol that can replace the role of cash. However, to get a large loan, of course there are various requirements that must be fulfilled by the applicant.

It's actually very simple, if you don't have anything, you don't buy anything. Debt is indeed a way to overcome the temporary lack of financial resources, but at what cost? If we look at the younger generation having nothing and resorted to loans to fill up their gaps, it's safe to say that they have made the situation worse for themselves. It was stated that in the last decade  the total debt of the younger generation has tripled in number, which is a worrying development. That's what you get when banks and other financial institutions are so easily allowing people to get into debt, and the shocking part is that this will not stop and likely triple again in the next decade. Great system this is....

A finite supply changes nothing there. That's just the nature of debt. The debtor has less, the lender has more. The difference is interest.


For now. Several companies have emerged to take advantage of that vacuum (Civic, Bloom, and others). The traditional credit reporting agencies don't have skin in this game, but I think third party services will be used to verify identity and check backgrounds just the same.

I know what you mean, but the main point still remains that you are exposing yourself to debt, regardless of the purpose. I know a family member of mine who has taken out a mortgage loan to buy himself a property, and have it rented out to several students at the same time where they each get a room for themselves. At current stage his monthly mortgage costs are almost €800 per month, where he nets a fair +€2000 per month after collecting rent from all students. After various smaller potentially unexpected expenses, he on average walks away with €1000 in profit every month. In this case he makes his debt work for him, which is good for him as long as it works, but definitely not something I would ever do.

If something is impossible for me to fund on my own, I will just accept that it's not a reachable target for me, it's that simple. I'll either set myself a target to accumulate the required number of funds to invest or buy something later on with my own money, or focus on something completely different. I am not a slave of my bank and never will be.

Very interesting point: When lending money, everyone wants to receive more money back than they lent, but when the supply is finite, there must be other people losing money to make the first one earn interest, right?

So we are just redistributing money (Bitcoins) among ourselves. We aren't building fortune, but exchanging fortune among ourselves where you never increase your budget without making another person lose part of his budget...

About the loans, it works perfectly, because it will be an eternal exchanging scheme. You borrow money, you recover it by doing business and pay the lender, but thanks to other people who have lost money for you, by paying for your services/products, then you and your lender will need these people later and you will pay them for their services/products. So this money is constantly coming and going...

But to make it work I believe it's necessary to keep spending money, and avoiding accumulating wealthy. Hmm, that is the complex part as everyone wants to upgrade their life status...

If there's a finite cap and the banks are willing to create a platform where they would act as the "Escrow party" and the lenders and borrowers can participate on this platform and pay the Banks some form of commission or escrow fees. This way they banks would only need to maintain the ratio of lenders vs borrowsers by regulating the borrowing rates of interest to attack borrowers or leders appropriately. This will eventually also put the banks out of "monopolistic" power where they're too big to fail and several such platforms would emerge by private parties who would provide a service for cheaper interest fees and create competition, unless ofcourse the fees are also regulated.

Also, I feel in a realistic scenario If the banks created their own cryptocurrenceis, then a finite cap wouldn't exist. They would still want the power and authority to be able to print more of the cryptocurrencies based on need and on whatever algorithm they use for it. Banks would prefer to use a private blockchains and sometimes be able to freeze funds to prevent money-laundering and illegal transfers. I'm also going to mention that several banks have also tied up with public blockchain services like Ripple for cheaper and quicker money remittances.

In the end most of the present day debt comes from Banks who maintain some reserve but have the ability to print cash in excess of the reserves when need arises. This makes them "Ultra superior" and important, which also makes it risky for the economy if they collapse.

In the past I have been able to say that this process is extremely risky, as a small amount of bank debt and a profitable buyer of Bitcoin. The stress that is required will remain constantly in your head with many other risk reasons. The situation will be even more serious if cash shortages or panic sales are made after a sharp decline.

Not sure what your hang up is about it. Most "money" that exists is digital, so if you're thinking there has to be physical currency sitting somewhere to represent the value of your house, that's not necessarily true. You don't pay your mortgage in cash, it's done by electronic transfer or check, and the latter is a physical analog to electronically move money through a series centralized ledgers. In that sense, the digital fiat system we have isn't any different from bitcoin but for the fact that it's centralized instead of decentralized. But it's still true that the value of your house is represented by the digital fiat in existence.

But since they can print fiat at will, we end up with delusional, unsustainable hopes of constant growth, which is why capitalism is collapsing, it's based on constant growth and this is not how things work in real life.

In any case, like I said before, bitcoin for me was never meant to replace fiat, but to act as a catalyst against it when fiat goes full retard thanks to corrupted fiat policies. When they bailout corrupt bankers and your savings go to hell you will see the need for bitcoin as a neutral safe haven that's limited in amount and basically immutable.

I agree with your idea about crypto and debt this explains what the current economy and people in every nation has. Debt maybe a poison that kills and let people drown but it could sometimes help and make them successfull if they did it right. It is also a privilege to those who have nothing but the only problem is on how they are going to pay such expensive goods, houses and cars? Is this what governments want and promised to it's people to get locked in prison because of debt? I myself hate it too because I know how hard life is and I don't want to get into trouble. Cryptocurrency is the best way to have financial freedom without getting involved in debt.

Totally agree with you, some people think that all the banks do is to take your money and bitcoin is the angel, but people forgets that banks and regulation protect the crowd, with all the scams happen within the bitcoin network it would be impossible for it to receive a massive adoption without regulation, because innocent people will just lose their money.
I believe that it is going to be hard to maintanain a successful economy without part-reserve banks, and that's one of the reasons I believe it's going to be a disaster if bitcoin replaces fiat completely.

This seems so wrong that I can't believe anything else that you wrote. Basically, you are saying that there is money sitting around somewhere that represents the value of the house I bought. That can't be true.

I am currently a little bit in debt to buy Cryptos.

Now as far as your question, Bitcoin will coexist with banks, it will not elimante them. As you said banks are needed for loans.

I appreciate the concept but this is too early to execute such kind of plans in my opinion. On the other hand, we must take into the consideration of the failed models like BTCJAM. Although it was a peer to peer lending site, their execution went wrong and since BTC is in the early stage, I am sceptical about the capacity of the implementation such concept even through the fork. However, if we can build something like this in the future then it will definitely be a path-breaking milestone for us.

Gold wasn't a suitable currency instrument either, which is why the whole world has abandoned gold-based currency. It limits economic growth because it can't be produced at will. Currency (money) is just a representation of value that exists in the world (value = goods/services) so the worth of money is how much money exists divided by how much value exists. When value increases faster than the money supply, you have deflation (money increasing in value) and when the money supply increases faster than value, you have inflation (money decreasing in value). The trick is to marry the currency growth rate and economic expansion so money stays mostly stable, and this is the job of the Fed. It cannot be accomplished with a decentralized, uncontrollable currency, which is why crypto is never going to replace fiat.

Economic growth depends on taking stored value (savings) and loaning it to someone who will create something new of value to repay the debt with interest. This is sustainable because the new thing of value increases the overall amount of value in the world, which did not exist previously, and justifies the increase of the money supply (the loan). A crypto-based system would inhibit this, and inhibit economic growth, because the money supply cannot be increased.

Debt doesn't depend on printing - it depends on fractional reserve lending.

And of course you can lend without fractional reserves if you want - just lend what you have deposited, rather than a multiple of deposits as in the banking system.

I cannot imagine an economy without debt.
In a narrow scale, debt used by individual when there is a financial problem. Loans survive individual and sometimes, we loan because we have to buy something in a rush.
In a large scale, the debt is used when there is financial crisis. Usually, if there is a catastrophic event happened in a state or country. It is also used of the country to increase the future growth of the economy.
Yet there is an advantage in debt, we don't deny that too much debt of an individual or the whole economy make is bad. High debts will lead to a great crash of an economy. It may not also make the economic development of a country but it might goes to inflation and citizens will suffer much of it.
In conclusion, debt may be a boon and bane to the economy. It may upon the uses of debt and how it will be return. In my case, I prefer to have loans when I will invest in something but I will invest with assurance that I will pay  my debt. It is hard to take risk when you did not know what will be the result.

Forgive my limited economic knowledge but isn't bitcoin simply just like gold? Even if there is a limited amount of it in circulation, isn't it the value that is being lent out and the value increases as the economy expands? So say, the entire world has switched to bitcoin, isn't it unlikely to have all that BTC21M in debt?


We have a saying in our family that debt is only bad if it's bad debt, basically anything that don't make a profit. It's impossible to fund everything on your own and if people are to lend you money, they're going to ask for something in return, whether that be interest or shares (if you are building a company). Even investors in crowdfunding would ask for something extra to make it worth the risk.

Crypto is already seen as a bubble and "not real money" by large sections of society. Allowing "debt tokens" to be printed, and watching the default rates inevitably skyrocket, would only further reduce legitimacy in crypto. The debt token would be associated with BTC/ETH and such. This is a very, very bad idea. As they say, only invest what you're willing to lose - a debt token would encourage the exact opposite.

The "debt is good" argument fuels state run wealth distribution programs which give undue privilege to the wealthy at the expense of poor to middle class income bracket taxpayers. The european union and united states being trillions in debt is largely due to taxpayer wealth being redistributed to elitist institutions like northrop grumman under a guise of "serving the public good"(example F-35 with massive, uncontrolled, cost overruns / extremely bloated cost). Large corporations like google have many of their operations subsidized by the state and receive unfair tax cuts which prevent small businesses from being competitive in the same markets. "Debt is good" as it allows one percenters to shovel a greater proportion of poor to middle class wealth into their own pockets.

"Debt is good" also empowers high risk investments which caused the 2008 economic crisis. Repealing glass steagall which separated investment banking from commercial banking led to a less stable economy.

Another issue with "debt is good" involves it being an oversimplification in absolutist terms. Of course looking at the USA being $21 trillion in debt, I don't think anyone would say that's an example of debt being a good thing. So of course, while debt might benefit the economy and elevate living standards under some circumstances, it doesn't justify the extreme commitment to rampant and uncontrolled consumerism which defines the "debt is good" perspective.

Crypto currently isn't a good framework for loans. It lacks the creditchex, identity confirming, background check and debt collection infrastructure which banks and loan institutions rely upon to make running their business viable.