Topic: How would loans work in a Bitcoin economy (Read 1041 times)

When you buy a cryptocurrency or a bitcoin, you are the one who manages or takes control of your funds because it is decentralized means no organization nor the government has control of it, that is why you can't borrow bitcoin just like a traditional loan in banks. You can only take a loan on people who also buy bitcoin by visiting this Lending section in this forum.

It will happen if there will be a person who are willing to give loans using bitcoin. But i think it needs more transparency because you can't give loan if you don't have access to their accounts or just know the persons credentials. Also making bitcoins loans is very risky and it is not advisable because you have a  tendency to lose and get into debt.

I don't see much changes speaking about the lending threads in the forum,
The loan service are divided into two, the secured loans and the unsecured loans, and what I seeing is that majority of the loans belong to the unsecured loans, so this means lenders are still trusting the borrowers which are the forum members with reputation or those who pass in their requirement.

Probably it's different outside as legality has to be established when borrowing.

there are already existing loans offered here in Bitcointalk.org and also they are given big amount of loans  recently and  some ended up as  scamming the  person who gives loan.

it has been mentioned  in the first post about the load thread.

But now there are changes  that  they required Collateral because  of  these people  who did  not pay their  debt  and instead gone  here  in forum.

You came up with a nice question.
For me, I don't really see Bitcoin as a bank itself because as far as i know, its only a digital wallet with great features that can help us manage our financial transactions virtually.
And regarding the Bitcoin loans, though a lot here says that we can really have a loan, as offered here in some sites. But, I think its more complicated because of being decentralized of Bitcoin and other cryptocurrencies...I suggest that maybe you would do some research before engaging to a Bitcoin loans and just try to simply do bounty campaign jobs, so you could earn, trade and invest instead of taking some loans.

We never see them succeed because if they are successful, they might already be popular now.
I also saw a lot of ICO in the past about the said services, but when the market was bearish, it looks like these projects were already forgotten.

I also interest bitcoin, It's safe and valuable than ordinary loans, however we need some extra knolage to handle bitcoins, It really safe but it value changing time to time, So I suggest first study tutuapp, appvalley well about bitcoins and search bitcoins loans in search engine you can find lot of details from internet.

Crypto lending and loan concept are possible if It will be facilitated by a P2P platform Crypto Bank which will serves as a direct link between lenders, borrowers, and the related services – managers, analysts, insurance companies, funds, trading terminals etc. There are some Crypto banks that are introduced thru ICO before but i don't know if their project is a success.

the method or concept of the loan that is in bitcoin I think bitcoin is only a tool for payment so that loans are easier to happen and transactions will be easier, bitcoin loans are dependent on lender policies which will usually be easy and simple.

As you've said everyone is their own bank with the use of bitcoin so the process of loans here are peer to peer. Some people agrees to loan their bitcoin or crypto to someone through some agreements. The interest will also be the loaned crypto though it might be high if you convert it to fiat value.

Yes, in the bitcoin economy referred to by the OP, loans in crypto will be difficult because of unstable prices. But if he has seen a lot of activity in the crypto world, then loans in the crypto world can indeed be done and a guarantee is the main requirement and there is an agreement that must at least be agreed upon before making a transaction because of the unstable prices. So in this case the loan can still be done as long as all the requirements can be met and there is agreement from both parties.

I don't think so that is the case with the bitcoin.

It is even easier with the bitcoin to give out loan when it comes to the interest rates, flexibility of amount to be levied and ways of transacting. I mean it is far easier to have escrow with nominal fees who will be your securer of funds and with nominal transaction fees of network you can send as much amount as you want.

"Yes everyone is bank but not everyone is having sufficient amount to be a bank"

Unfortunately, persons providing loans and lending funds are forced to act at their own risk. Taking advantage of this, fraudsters often pay a certain amount of small loans in cryptocurrency, raising the rating in the list of borrowers, until the opportunity arises to get a larger loan. In addition, there are quite a lot of tips on passing verification on fake documents on the forums.

Loans are easy as long as there are collaterals existing. Even cryptocurrency is a world full of unknown people and credentials, as long as there's a thing you can hold for safe keeping, loaning through it would be possible. Nothing to worry about.

Been searching little more on this topic. Now we have some that are giving away loan in crypto, but for me this can be huge gamble but some can take this very seriously. Why if you loan on crypto example bitcoin with price of 10000 dollars sell it into dollar and then you have drop on price to let say 8000 they you are good for 2000. Also for price jump. This is from this part to me very risky.

Many will ask if this is legal or not but from some point this will be normal. As cryptocurrency continues to make inroads into mainstream fin-tech and creating its own products we will continue to see improvements in this field. While I'm personally not comfortable handing over cryptocurrency to 3rd parties, from my perspective this is huge risk. Also I do think this is still a proof of concept stage that can be little more adopted. As we move to a more decentralized approach where these loans can be handled on a Smart contract basis and remove the need for handing over your funds but locking it in a decentralized manner.

So, why the involvement of banks again in cryptocurrency loan when this can be carried out easily in a peer to peer loan group. If you go to the loan section of this forum, you will see how many people are requesting for loan and being grated loan amongst themselves with the necessary collateral being giving to ensure that the loan has been paid, and since I have been visiting there, I have never seen any one that has loaned complain of being duped or not being paid because everything is well spelt out there.

Banks always want to out their hand in everything and if they still out their hand in cryptocurrency load also, they will operate it still the same way they have been operating their traditional loan when they give it out.

Bitcoin loans could be very risky becase of volatility so if you don't have some income source in Bitcoin at the end you might find yourself in situation that you need to return much more than you have borrowed. Of course the amount in Bitcoin will be the same but if you have to spend fiat to return Bitcoin loan that is bad.

Global bank strategy can also be use to loan individual Bitcoin, laws and regulation will be in place to ensure both parties interest is taken into consideration, escrow can be use and a percentage will be use as interest for the borrower, this will be base on tine of repayment.

Crypto loan already even exists, we have individuals that have been practicing it in this forum, and then we also have some banks that they call crypto banks that are already loan facilities. There is this thing about cryptocurrency, it gives an opportunity to virtually everyone, from the government, to banks and to the users, and everyone is able to accomplish something great from cryptocurrency.

One would not really care to know about how the cryptocurrency load works, except maybe it is of interest to one too to start cryptocurrency load business, and by the time one makes deep research about it and write some feasibility study about it, maybe op would know exactly how it works which is beyond just discussion on this forum.

ive seen a thread before about bitcoin banks . its a kind of bank that accept bitcoin .

 when people deposit on it , the these bitcoin banks might also offer bitcoin loans to others .  that should how bitcoin loaning works  .

  other one that i can think off , is those lenders only uses thier own money converted to btc so that they can run a bitcoin lending business   . there are also what you called a bitcoin investing platform , where people put thier btc on it  . we never know if these platforms use the btc deposited on them and use on other business like lending  .

It also works the same way we borrow from a bank now, but now all transactions will be done on the app or website. For example, if you want to borrow 1 bitcoin, you must provide evidence of how much money each month you earn and how much balance you have in your account. After completing the procedure, you will receive the money. that's it.

when compared to bank interest rates for fiat currencies, the difference is very far. bank interest rates for fiat currency loans around 12% per annum, and using collateral. Does the loan in cryptocurrency use collateral as well? reasonable if the selection is very strict if not using collateral

Banks will always exist and lend to both the state’s economy and the structure of business and individual citizens. It is unlikely that loans in bitcoin or other decentralized cryptocurrency will ever be widely distributed. Due to the fact that Bitcoin has a very high price volatility, it is almost impossible to calculate the return of loans. In view of this, obtaining loans in cryptocurrency will not be attractive for business structures.

This market will work always. Very often, the interest rate on loans in cryptocurrency reaches even 20 or 25%  in a year. That is why such loans are beneficial to take for the short term only. Additionally, despite such a high rate, many users, having been refused by the bank, agree to such conditions, as this is the only way and the only opportunity to get a loan for purchases, business or other purposes.

Certainly the loan market will pose several new problems, above all with regards to the guarantees, the competences and the reimbursement systems. But in the end it's always about money, and it won't take long to find a practical solution to the new problems.

You are half right, banks receive your money and give loans using that money, but banks can use fractional reserve banking which basically allows them to create money, so there are two possibilities, the first is that some people will use banks to store their bitcoin and banks will use fractional reserve banking to print some form of paper bitcoin, this will artificially increase the supply and decrease the value of bitcoin, the second option is that we are going to have something similar to what happens in the forum in which people ask for a loan and expose why they want the loan and the collateral they can give and those holding bitcoin in excess can choose to fulfil the loan or not.

So far I do not know that there is a loan as you asked. because bitcoin changes at any time so if there is a borrowing of bitcoin, when the return is clear the price of bitcoin can be below or above the price when borrowing, other than maybe priced at US first. it also won't solve the problem if bitcoin prices are higher.

With a very limited supply of bitcoin, in my opinion bitcoin cannot be treated like money in a bank. In addition, in my opinion it would be better if bitcoin is used as a store of value. But our monetary system may change and bitcoin is used as a reserve

With bitcoin, how is everyone their own bank? Seems you didn't understand correctly what people mean. They mean that with bitcoin, you own funds online which are independent from banks while you have to keep usd with banks, that's difference, it gives freedom in virtual world.
On another hand every process will be almost same with bitcoins too but problem is that bitcoin's price is valued in usd and when you give loan of 1 btc for example and price is 1000$ (loan is 120%), then if you return 1.2 bitcoin and price will be 600$, bank is in loss. But if they set 120% of usd, then you may have to return less bitcoin or much more.

This time around, the cry of the common man that they have been suppressing has been heard because nobody needs to tell them the effect of cryptocurrency on their superiority before they start seeing it themselves.

The fiat is what is basically giving them such power, and you know that the number of rich people in every country is far greater than the number of the common men, so if this system is for the common man, it means that the table will turn and they will be the one to be swept under the carpet when the adoption of cryptocurrency becomes very high even without their support.

We actually don’t need any of their support because cryptocurrency was built to be independence, it is because we just feel that some sort of regulation will help us speed the process up that you see a lot of people clamoring for it.

Bitcoin and other crypto loans services have been successfully working even now. However, it is a great risk for both sides. We all know about the highest volatility of the cryptocurrency, and each participant of the deal should understand that his chances to lose/win are 50/50.
For me, it is even like gambling, which finally, lead to the greatest losses those, who are too active.

nice moon setup

You guys are giving people more credit than they deserve. Humanity has always been an idiot race and we have always failed to see what wrongs are going on in front of our eyes, even today there are people who VOTE for a dictator and they like him, all over the world by the way not just in one country. They like being openly racist as well and they think it makes them different from others.

There is no way we can actually make people realize how much banks are screwing us when they are literally not caring about deaths all over the world because of their political opinions, the party you voted might be killing or jailing people and they don't care. So telling them that crypto is far superior in every sense then fiat makes no logic since as long as one of their peers could say its a sin and they would stay away from it forever.

That's not the case. In our ecosystem you can borrow a smaller portion of bitcoin and repay after.
It is not mandatory to get a loan of 1BTC. As the market is volatile there is the possibility of losses but for profits as well.

If you mean an economy where everything that would be used is just cryptocurrency without regulation and people being anonymous, then, sorry no one is going to give you any loan, except for the way that it is being down currently – how it is being done now is that you submit your cryptocurrencies as collateral and you then get loans in dollars.

Nobody is going to give you loans as cryptocurrency direct, you only get dollars after you give them your crypto assets. When you return the money you have borrowed with the interest, then you get back your cryptocurrencies. But, if people are to start giving loans as Bitcoin, then Bitcoin would need regulation and there will have to be ways for them to be able to trace you down to your house and collateral will also be a must, in case you decide to run off with their money.

Lastly, a lot of people here don’t even want cryptocurrency to be regulated , so how is that going to work? Things are just going to remain the way it is and Crypto will remain as an asset and nothing more, even if they start being regulated, won’t change anything.

I don't think Bitcoin loans would work for now. No one will borrow 1 BTC ($10,000) and then repay 1.10 BTC ($22,000) if Bitcoin moons. The same goes for a crashing Bitcoin price, no one will lend out. Maybe in the future if the price becomes less volatile or you don't have to exchange it to fiat.

Well you may have to take the loan off from an individual rather than from an institution so the more need for collateral since it would be easy for you to run away with their money. I personally never took any BTC loan so am also unfamiliar with how it goes.

If I'm a lender though I'd probably never lend to someone outside my own country and I might even risk revealing myself just to meet up with the borrower personally and exchange documents for the collateral.


Yes that is a concern for lenders. Even if the transactions are done in person and the lender took all the borrower's personal info, how to tell if he's a good payer? I don't think we can even piggyback on the banking industry's credit score system, I doubt we can get such info unless we have insider friends in multiple banks.

If you loan funds from tied crypto it would be far more risky, especially in the long run because the price always goes up. you can return the funds many times more. If you loan funds is more recommended with tied usd because it is more stable, there is no difference too large between what you borrow and the funds you have to pay.

We would need smart contracts to handle the escrow of value. Or a third independent party of sorts.

In the smart contract you as a lender would agree on an interest, payback interval and duration of the loan with the borrower, who would legally pawn something of agreed similar value or other relation in case of payback issues, which would also be agreed on the smart contract.

Volatility could be solved/reduced with implementation of future contracts into the deal.

Haha, same! It feels much safer holding your assets in a currency that is unable to be manipulated, then holding fiat currency, which could lose it's valued due to government manipulation and is constantly being printed with no cap on things.

It is one of the problems with BTC though. P2P trades are fine for most people, but if BTC was truely able to replace fiat currencies, how will companies be able to get millions in BTC as loans, how would mortgages work? All very good points you've brought up here.

I don't think no-collateral loans would ever work in a decentralized system, there are so many ways to exit scam, and unless KYC or something similar to credit scores are enforced, no lender would ever risk such a thing.

And if we did implement KYC, it'll be pointless and ruin the point of BTC, so tough situation.

It would really suck when you take a loan and in the day's between the value skyrockets and you will have to pay sometimes double or even triple of what you initially borrowed. I really think should use make sure that all lending is price tied to the USD so that they also don't end up losing when the value plummets.

I also prefer to take a loan at a price tied to USD. It's good because we don't know who will profit and lose between the lender and the borrower when the price of Bitcoin will not necessarily be stable at that price If the loan was tied to BTC.

I wouldn't take loan in crypto. Except if the price was tied to USD, not BTC.

I think we are living in 'bitcoin economy' already now .. the bank services like a traditional loan and a peer to peer lending services been around for the last few years side by side, as time goes by this kind service would become mainstream and people would'nt even realized that it's powered by blockchain technology,  because of course yes they care only about how they receiving an easy loan as quick as possible .

Banks will always be there with their product even they could adopt the blockchain technology to compete in the advanced market era ( at this point it's about how to deliver a loan effectively efficiently )

In my opinion, bitcoin was created not to replace money but as a peer to peer payment instrument that does not involve third parties such as banks. If in the past fiat money was created with a back up of gold, it could have been if bitcoin was recognized as an asset, fiat money was created with backups of bitcoin as a reserve. But in my opinion this is still far away, because the central bank certainly does not want to lose its role in the economy

Never cross in my mind how bitcoin economy works because we are still far away to reach that achievement but in bitcoin economy maybe there are plenty of possibility to get loan and one of them is bitcoin lending services companies will growing rapidly and most of them probably independent because maybe there is no investors to support their companies then they use their own bitcoin to give people loan

I do see different scenario from you.

People now are having more awareness than our ancestors. They do cross-check everything that they come across. They may stop using their traditionally trusted banks when they start realizing "how worst bubble their fiat is", those cyclic recessions will tech them big lessons.

But, I am sure governments and central banks will mislead people like bitcoins are meant for something illegal. At the same time most people will not listen to them (as they are having enough statistics and other resources to conclude the actual truth). This way, I am sure we may not need to stuck with traditional way of banking for another hundred years.

This does not mean cryptos will straight forwardly going to replace traditional banks. But, banks may adopt bitcoins to ensure fulfilling common people's expectations. This way bitcoin banking and traditional banking may co-exist and this may turn into ONLY bitcoin based on banking only after centuries when governments are dealing against/with aliens by realizing the importance of NOT having borders for their countries.

I think it is more about how can you force your loan claim than where the money goes.

If you get a loan from a bank and then move it to another bank nobody really cares because as long as you pay your loan to them they will have more money in the end, they are risking inflation as well which people are forgetting, if you buy a house right now at 100 thousand dollars and pay it in 10 years for example by the end of 10th year when your loan is finished you paid back lets say 150 thousand dollars, well the house now worth more and 150 thousand dollars may worth less in 10 years then 100 thousand today, hence banks are already taking a risk but know you will pay back.

However, if you fail to pay back they will put a claim on everything you own and they will seize your property as well, if crypto loans get that power then we will see a TON of banks doing the same.

I think loans in the form of bitcoin, will be repaid in units of bitcoin too. if as you describe, it feels unfair. so when the price of bitcoin falls, then return it is not in fiat units, so both parties must know about bitcoin, and there is no dispute in the end

Maybe I still have not fully realized the possibility of taking a loan in cryptocurrency, but given the fact that people buy a loan for several years to buy very expensive things, such as an apartment or cars, and over the past three years, Bitcoin has jumped from $ 1,000 to  20,000 dollars and dropped to 2,500 dollars, then scary you might think how the loan will be repaid.

Yes, which I why I specified moving money to a different business or bank. Exchanges and web wallets already move bitcoin between customers' wallets without actually moving any bitcoin. With fiat this happens between institutions as well - balances are transferred and settled without moving assets. It isn't possible to settle bitcoin balances between institutions without actually moving bitcoin, unless you end up with a system of ever escalating "IOU"s or something equally nonsensical.

Unfortunately, you are almost certainly right.

My point wasn't that cash is never involved, it was that banks don't need the ability to print physical cash to be able to create money out of nothing.

I really don't understand why this ain't possible with bitcoin.
I get a 5000$ loan, I blow it all on hookers, are those still just settled automatically? And no money is moved?

I get an apartment, the bank just moves bits in my mortgage account but it DOES have to pay that guy the money.
He decides he wants to buy a car, are assets getting moved? Yes, they are!

The same way for BTC I get a 10BTC loan, I get an apartment and the transfer goes to the previous bank account owner. Does it require an on-chain transaction? No, not until the guy getting the BTC decides to withdraw them. (If ever!).

Why?
Say you take a 1BTC loan to buy a car. You get 1BTC in your account at BigBitcoinBank, then go to the car dealer, and pay 1BTC to his account at BigBitcoinBank. The 1BTC never even left BigBitcoinBank!

Banks have their way of taking tangible things, and turning it into nothingness, while making people believe it has the same value.
That started with gold, which was replaced by banknotes, because they made it much easier to "create more money". Then, when even creating a piece of paper turned out to be too much effort, they replaced it with just numbers on a screen. And still people believe it has value!
I can totally imagine they'll go from Bitcoin to Bitcoin-backed-banknotes to fractional-reserve-Bitcoin. Or more likely: they skip the Bitcoin-backed-banknotes and go straight to fractional-reserve-Bitcoin.
And I can totally imagine people will actually use it. People are used to their trusted bank that takes care of everything, and an account protected by a large corporation is much better than keeping your own wallet, right? Right?
Add some legislation that convinces the general population that direct Bitcoin transactions are only used by criminals, and Bitcoin transactions on BigBitcoinBank are the only trusted transactions, and we're stuck with banks for another century

True, but they don't need to be able to create bank notes in a fiat system. If I take a loan for $10,000 for example, the bank in question just creates both a credit and a debit of $10,000 in my name. Their bottom line doesn't change, but they've created $10,000 of new credit. If I spend or otherwise transfer that new money to a business or another bank, then again, things are just settled electronically, usually without any movement of actual assets. This isn't possible with bitcoin. Sure, they can "credit" my account with 1 BTC without actually moving any bitcoin, but as soon as I spend or transfer that bitcoin to a business or other provider, then they have to actually take that bitcoin from their reserves and send it to the other party.

Given that they would actually need to transfer the bitcoins held in their reserve, coupled with the fact there would be no lender of last resort to bail them out in the event of a bank run, a fractional reserve system would have to keep a much higher fraction in reserve than they traditionally do with fiat.

Dont think it would be possible. Bitcoin can be stolen no matter how good security is. Maybe in case of hardware wallet this can be done and to be safe, this could be example.
Think in any other case this wont be possible. And then remains interest how could be payed and backed up with bitcoin or any other crypto or with cash. How will they pay. Many questions and many set back are not good for this.

That how it should be, but unfortunately the reality of Fractional-reserve banking is this:
That wouldn't be any different if everybody would only use cash, and hold on to their own cash. The moment you give something to a bank, the bank can lend it out. Bitcoin users have proven to give large amounts of their coins to exchanges, and some exchanges have been lending these coins out for trading already.

I think you're wrong here. I'd really hate to see fractional reserve banking introduced in Bitcoin, but I'm pretty sure it's going to happen once banks start losing business: suppose a bank holds 10,000BTC, and gives out 10,000 loans of 10 BTC each. As long as it's not withdrawn (meaning it's only used to transfer between accounts at the same bank), it's good business for the bank!
Withdrawing everything won't be possible, and would be called a bank run. Just like in fiat.
Luckily, you can just opt to store your Bitcoins on your own address, and unlike fiat money, you can still make near instant payments without using a bank.

Banks don't create actual banknotes either When it comes to loans from banks, Bitcoins will be like banknotes, and anything else that happens within the bank will be as crazy as regulators allow.

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I saw this topic before, but didn't post yet. I got sommoned by Maggiordome:
Mine is very simple: I offer Little Lightning Loans, worth around $1 only. It's meant to test LN, not for serious loans (yet).
There's not much I can lose, and until now I haven't encountered a scammer who went through the trouble of setting up a Lightning wallet.

Try to ask LoyceV and Omegastarscream on whats the set-up or main requirements on having no collateral loans.
https://bitcointalksearch.org/topic/list-bitcointalks-lending-services-list-5135395

But how to identify borrowers who are sure to provide 100% of their real information?
The current KYC is still fake a very sophisticated way. What is the lender's solution for this?

Thats all about smart contracts and kyc providers. There will be credit score like in typical market

For a loan economy to even thrive, there should be the availability of collateral which cannot even happen without verification of such collateral and that is the challenge with bitcoin usage and its applicability to work effectively which is what we are facing with the KYC. However, we have seen economies developed because of the availability of credit facilities for both individuals and corporate entities. For me personally, the idea of a bank even negates the essence of the autonomy of bitcoin because it means all of us have to gather our bitcoin for it to be loaned to an individual after he must have fulfilled some obligations.

Good wondering. Obviously the same lending operations as banks do, cannot be carried out with bitcoin. Firstly, because bitcoins' supply is limited.
If we put the credit theory here and if bitcoin reserves would lend out bitcoin to other then that must create new bitcoins out of thin air but that is again impossible.
So the total idea of lending in the same way fails right here. Just imagine how would lending work id they had out lend gold. Not money based on gold but actual gold.
Reserves would have to give out actual gold and that would not create new gold out of thin air. Although new gold can be mined but then there is a limited supply to gold, we just don't know how much.

As for the large scale bitcoin lending, well it might be possible in some way, probably huge collaterals based on trusted entities and escrows.
Even that would only be possible if bitcoin is trusted and accepted as a legal currency.

There is something that you will think will not be possible until you see people carrying it out smoothly without issue. I know that when it comes to loan, lender would either need collateral to do so before lending the loan and some interest rate will apply to it, but now that we are talking of bitcoin, don’t forget that it is a decentralized system, and everything would just operate n decentralization and those who would offer the loan would have also mapped out exactly how it will go.

If I was ready to go into loan business now, I would have just gone to the loan section to really see how things are being doing there, and I will ask you to really visit that place, I am sure you will get more understanding about the way people offer crypto loan without a physical collateral.

From what I know some banks are already doing this. Some banks are already lending Bitcoin to bypass the Swift transfer system which is a big wall in transferring fiat currency into another foreign money. I recall that the German bank, German Radoslav Albrecht, has created Bitbond a official online bank to transfer out loans with Bitcoin and the user has the option to payback those loans with either fiat currency or through Bitcoin again. In the future I could see the same thing being done by other banks if they tried to compete to the banks who are already doing it. The best thing about this kind of Crypto bank is they are like traditional banks in terms of their clients can also invest their own Bitcoin for interest, they in turn will be the ones who will loan out your BTC to loanees.

It will only work best if two parties come together and decides to perform the transaction with the lender collecting a visible collateral from the borrower aside from the interest rate.
Where the problem may arise is if the  price of Bitcoin should increase, the lender might be losing as the value won't be same when borrowed. The only way for this to work is having a personal agreement regarding in the time of borrowing.

No-collateral loans could possibly work, if the amounts are low enough and if there is some level of proven trust in play.
But yeah, even banks ask for collateral and extensive proof of income etc. when applying for larger loans.

Look at BTCjam, they essentially ended up getting buried by the many people scamming them. I think it's a fate for any such service that might pop-up in the future.

In my opinion, every loan system would need a centralized authority that would keep the properties of both counterparts until the payback time.
I don't think that two sides can trust each other in a loan system. Someone needs to ensure the flow of properties to each side.

First of all, bitcoin does not move 10x upwards or downwards in short / midterm duration. So this is not scary as much as you are trying to project it. It may move a little upwards or downward direction, but both the loan giver and taker knows this and they will agree to return the full amount in satoshi regardless of the usd price.

Getting loans in bitcoins have a real advantage that you can get loans from anywhere in the world and you are not restricted to geographic restrictions as in the case of fiat loan.

I understand that bitcoin loans should have a price at the time of taking the loan + %, I do not see other options

Part of the reason I (and I'm sure many others) became interested in bitcoin in the first place was precisely because central authorities can't print more money as they see fit. As you say, we need some other method where lenders can hand out loans without money creation. Fractional reserve could work, but the risk to depositors is even higher since there would be no government run lender of last resort as in the case of fiat. The only other option which occurs is simply entities with high net worth handing out their own money in loans.

Collateralized peer to peer loans work fine for small amounts and over short terms, but if we are looking at bitcoin as a global currency, then we need to start thinking about big loans - mortgages and business loans, for example - of hundreds of thousands of dollars over years or decades.

Probably another reason why lending in crypto is worse than fiat lending in its current state. Operations like ETHlend and other companies have tried to create platforms for lenders to find lendees, but it's not really solving the biggest issue with lending - which is what you've described in your post.

There are a lot of platforms for lenders, we don't really need more. We need a way where they are almost able to print money for people, and therefore customers are safer.

Me personally, I don't think it'll be possible for the lending scene to become decentralized. There won't be any options for large business loans, because of whales not having as much money as banks.

I'd love to see some solutions to these problems, it's definitely a sector I'm interested in.

Digital accounts make for poor collateral. There is nothing stopping the borrower from performing an account recovery process or contacting Steam/Instagram/gambling site/whatever and saying they were hacked, and regaining control of the account, leaving the lender out of pocket and without any collateral. There are plenty of examples of users in the Lending board being scammed by this exact process.

I am still considering a sort of automatic system, I don't know how it would work but maybe we could make an automatic system where some AI predicts if a person is worthy of a loan and there would be collateral aside from money as well. Like right now, you give 1200 dollars worth of ethereum and get 1000 dollar worth of bitcoin and that is called a "loan" in crypto world, I don't really want that type of deal, I want to be able to make a system that would allow you to give other stuff.

For example, have some partnership with gaming websites where people buy skins and accounts and so forth, after that deal when someone wants to get a loan they will give you their gaming account in full control and then if they fail to pay the loan you sell it with your partnership of that gaming website. Same with social media for example, people can give their instagram account as collateral or whatever. Basically digital stuff not money could be done too.

There will be always people taking loans and giving them. There is part for this forum for that. Nothing will change with Bitcoin. But first rule of taking a loan is that you need to take it in currency where yo have income. So you only take loan in Bitcoin if you get salary paid in Bitcoin.

I think there are collateral stuff going on and that is not remotely like loan just now, lending is not working like it should and it is very risky for people to give out loans for now. However the moment people realize that bitcoin is something that can be taxed in some countries which makes it money we will start to realize that we can make contracts for loans as well, it is too expensive and makes no sense for now but with time it will happen.

All you have to do is prepare a document, go to any "crypto bank" you want that gives loans and lender will make you sign that contract that states you will pay it back, if you fail to do so then you will be facing some bankruptcy law just like regular loans, hence crypto loans can get legit as well. It will just take some time of course, like any new thing.

I'm not sure how we could create new money for bitcoin loans, though.

With fiat, a bank can just change a few numbers in their computer system and suddenly you have $10,000 in your account. They don't have to add to or move any of their physical reserves; they just create this $10,000 out of thin air. How can they do that with bitcoin? They can't put 1 BTC in your account unless they actually transfer 1 BTC from their accounts to your account, meaning their other customer's deposits are now no longer backed up.

A fractional reserve system could work (if people were stupid enough to use it for bitcoin), but banks couldn't create new bitcoin out of thin air to fund loans like they do with fiat.

Bitcoin and blockchain technology makes the lending process much more decentralized, and instead of them being mostly bank to person, it's more person to person, due to how many platforms there are that help lenders find lendees.

Bitcoin still doesn't really change the system that much. Microloans are often P2P, while companies will look to venture capital funds, or large crypto investors that would be interested. It's just an import of the regular fiat lending system, but with more freedom and features.

This is just dumb. Are you saying people can't take mortgages or car payments because they need to buy everything with money they have at once? Not being careful with your money is what makes people poor.

Usually the idea of trust springs to mind when lending/borrowing in a bitcoin economy. If it's P2P lending and you haven't asked for any collateral for the loan, chances are you'll see that loan getting defaulted in the end and not have any funds come back to you. Basically a collateral secures the amount you loaned so in the case of a default, you still got the same price you have loaned. For a centralized platform issuing loans such as banks, of course they'd follow standard bank procedure and may still involve the creation of new money to match what was loaned to another party. I wonder if they would ever initialize this in a large scale given that not everyone is interested in crypto loans.

I'm often curious as to how large scale bitcoin lending operations, such as those by a central bank or similar, would work.

Obviously with lending on small scales, such as that which takes place on this forum, the lender takes bitcoin from their holdings/reserves, and sends it to the borrower's address. However, when banks lend fiat to individuals or to businesses, it's not a case of them taking any fiat from their holdings/reserves and putting it in to the borrower's account. Generally when banks give out a loan, they simultaneously create a new credit and a new debit of the same amount. New money is created out of thin air, and the bank doesn't need to move any money from their reserves, or even have enough money in their reserves to cover the loan if they wanted to.

This credit theory of money, while possible with a monetary system such as fiat where more can be created at will by centralized entities, isn't possible with a system like bitcoin. If a central entity wanted to lend out bitcoin, they would have to have the bitcoin to actually lend out. A fractional reserve system would be possible, although probably with a much larger fraction in reserve than commonly occurs in fiat banking. I for one would never let a third party store a fraction of my bitcoin whilst lending the rest out, but given the number of users who seem quite happy to hand over complete control of their coins to web wallets and exchanges, I have no doubt a fractional reserve system could exist.

There are avenues to lend or borrow in bitcoin. Loans have always been with humans, there are people who can't do without loans due to poverty or bad habits. It seems the author of the OP is not aware that there are already means to access loans in bitcoin on various platforms such as the exchanges.

As the function implies, it is a peer to peer transactions, which mean people would just seek for loan within themselves, it is now left for those who wishes to offer the loan services to look for the modalities of operation that would make the loan smooth, this would even make the interest rate cheap because I am sure that there will be room for negotiation, unlike banks that has fixed rate for their interest rate.

Also, we are beginning to have cryptocurrency banks, and I am sure that one of those banks also would be able to offer such services, if you want to see how it works, check the load section of this forum, you will see that such service already exist and people have been running it smoothly. I have been wondering how they do it, but they actually run it without any form of scam.

Unfortunately the price of bitcoins is super volatile and therefore I think loans could prove bad for both the giver and taker .
Take for example the loan is given by someone and bitcoins suddenly flew to 10* times the price of the time he gave the loan at , now I could only imagine the situation the person who gave the loan would be in.
I think Its a really bad idea , also if you take loan in money and then convert it into bitcoins you could loose everything or maybe gain a lot..
No one knows , this is scary .

first of all i dont consider bitcoin as banks because to me bitcoin is a currency or a payment method   .  

second , i dont know why people call it a bank , maybe because you can earn thru it thru investing or what ?

 third , there are service that make bitcoin loans .

last , there are also third party bitcoin investments were you put them your btc and these investment company are being controlled and managed someone and they can either use your money to lend or to gamble  .

We don't have Bitcoin banks that would provide crypto loans and other services but there are some platforms that provide Bitcoin loans. Even here on forum you can get them.
But Bitcoin loans could be very risky becase of volatility so if you don't have some income source in Bitcoin at the end you might find yourself in situation that you need to return much more than you have borrowed. Of course the amount in Bitcoin will be the same but if you have to spend fiat to return Bitcoin loan that is bad.

There will crop up new banks holding btc which will loan these out.

Well, @DarkStar_ did it
You can also apply for loans from different users here in this forum.

It's the same as loans in the real world economy, basically (1) collateral loan and (2) non-collateral loan.
Both require interest to incentivize loan providers.

But my curiosity too is that, how will the value be quantified because of bitcoin fluctuations. We know that when price fluctuate, either a coin goes higher or lower.

If so, then the inter-bank loan is enforced, bank A ownership of person A gives a loan to bank B ownership of person B and vice versa, because as you said everyone who has a bitcoin wallet is their own bank. So, the loan can still be done in my opinion and the most important thing is the existence of an agreement about the rate that is always changing.

I don't see it being that difficult to be honest-- we have years of evidence that the lending aspect on this forum has been thriving really well-- so well that due to the competition the interest rates here are very low.

It's probably not very rewarding, but at least it's a convenient form of semi-passive income and people with sufficient collateral benefit in the way that they get the best possible deal in form of lower interest rates.

The lenders on this forum have proven to provide better quality loans than banks have done in the last decades. It can work in a honest way, unlike banks that keep extorting people even far after they ended up broke.

If you don't ask for collateral when lending either crypto or fiat, you're asking for trouble.  It's just way too easy for someone to run away with the money if they don't provide collateral for a loan, and I've seen it happen many times.

Banks haven't really gotten involved in bitcoin or any other crypto in any meaningful way, but I suspect that they'd follow the same procedures as any other loan if they did start lending cryptocurrencies (and I don't think they will, since very few people accept it in general).  Banks are risk-averse and there's no way they'd make a loan to someone with a irreversible currency without getting collateral from them.  I'm not sure why lenders on this forum give out no-collateral loans, because they're extremely risky.  You don't know if someone has bought an account here, and reputation in the form of a trust score is next to meaningless.  I learned that the hard way a few years ago.

I think there must be a legitimate and trustworthy agency under government law to provide loans and submit collateral value above the loan. therefore if bitcoin is legalized by the state, of course banks will not lose their role, because there will be many problems if borrowing between personal

This applies for the loan application inside the forum on the Lending section. There are websites that are giving this service but I haven't used any of them.

Like this website: https://nexo.io/instant-crypto-loans

This is the website that I can suggest for now because I've seen that they've been advertising in many platforms.

PS: I haven't used nexo.

Loans are easy, but getting your coins back if someone forfeit repayments might be a complex story. Bitcoin is borderless and you can loan money to anyone in the world, but each country has it's own laws and they are there to protect their citizens.

People use Escrow services as a third party to execute the loan, but not all Escrow services are legitimate.. so you have to get reputable Escrow services to protect your transaction.  

Also remember, Bank are not just loaning people other people's deposits... they loan money that they get from Reserve Banks.  

Loaning bitcoin requires a collateral because its decentralize in nature and its hard to have a trust on the people here. On the part of the borrower, its not advisable that they will loan on the form of cryptocurrency because of its volatility. Cash is still the best.

What would be the difference of fiat loaning from crypto or bitcoin? I think that will be the same. People would think, that is dangerous since you will be loaning a money from someone you don't know but obviously there will be a requirements, a third person where they will sign the agreement. As far as I know there is a thread here about that.

Edit : the link is already posted here.

It is actually just the same as banks.
They will need all your information so they could do something if you run away.
A guarantee is need and that means giving a collateral. What can you offer?

Loans are indeed difficult in the bitcoin community specially if we just know each other online. If I the lender then I might want something that is secure.

If the holder of bitcoin is the bank itself, you can still borrow between banks, just like a real bank they also make loans if deemed necessary. So you can borrow between bitcoin holders, but clearly you have to give a guarantee unless you are already trusted.


This is the importance of collateral in bitcoin loans, I think if the borrower gives a collateral  of equal worth or above, this is not a problem. Therefore most moneylenders will not receive a loan if the borrower does not provide collateral and may be without collateral if the borrower feels trusted.

It will work out the loans in the Bitcoin economy base on the account status of the one who wants to apply for loan. The higher the ranks the more chances to be accepted and of course the contract has done through collateral basis.

Nope, it doesn't mean that.
It means simply you store your money in your own wallet, safely and secure without having to rely on a bank for this.
You don't need a bank account anymore to deposit your wage, you don't need a card and an account, all you need is a wallet.

But that doesn't mean banks will be gone.
There will be still people needing loans, people looking for investments and banks do a lot more things that storing your money and doing wire transfers.

So loans will just go on the same as before.


Banks, Loans business, there are plenty right now and there would be plenty even in a bitcoin only world,  and they will work the same as now.


Nope, stupidity when taking a loan and stupidity when blowing all that money away is what keeps people poor.
But, if you plan on living with your parents till you're 50 and you finally have saved enough to buy a home with no mortgage, it's your choice!

I don't think Bitcoin will be good for loan because investor of Bitcoin monitor it every day to make sure it grow and if anyone give Bitcoin as loan he or she will expect double from the person that collected the loan, and there is a risk of not paying back because u are your own bank, which means if you don't have power the person might run away with you Bitcoin

We can have loans in bitcoin, only if there is a contract between the two sides. As bitcoin is a decentralized currency and there is no company or bank governing bitcoin, I think that's impossible. Another problem is bitcoin volatility. The value of bitcoins will differ when you want to pay back.

Loans keep the people poor so better to have no loans than traditional loans from banks because they were printing more money to give loans for the people who were asking so the value keep decreasing when the people debts increases.

You can still get loans here on Bitcoin world. Visit this board https://bitcointalk.org/index.php?board=65.0

You will able to find out and familiarize on how its being set-up.Some of them ask for collateral and some don't.It depends on what you can guarantee that you can repay.

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?