Topic: If I loaned you 1 bitcoin today, how could i expect you to repay if value rises? - page 2. (Read 3007 times)

Debt to invest can be a bad or a good decision but debt to consume is almost never smart, even for a wedding or a much needed vacation

Debt to pay medical bills could be seem as an investment or a very needed thing to buy

This is exactly what I was thinking when reading this thread. Who the hell thinks in FIAT when giving a loan in BTC? Why make things so complicated? Just stick to the "KISS" rule... 

you can't loan 1 BTC in a FIAT value.
you can loan a 1 BTC for 1,2 BTC after 1 year for example (0,2 BTC of fee for the loan contract).

stop thinking about FIAT when you talk about BTC...

It depends on the kind of debt. If the debt is to purchase an asset with a high chance of appreciation in terms of the borrowed money or to start a profitable business then it can lead to freedom, provided of course that it is done responsibly. As for student debt I would say that unless the debt is for an education with a very high earning potential it is in most cases a bad idea. Virtually all consumer debt with the exception of home mortgages is a very bad idea and yes is a form of slavery.

As for borrowing bitcoin, unless one has a masochistic desire for a brutal bankruptcy, is an absolutely terrible idea.

Short term: 1BTC should just be paid back 1BTC, unless it was a loan and interest was expected (I don't know how much interest you could justifiably charge for that small of a short term loan).   

Long term:  This is a bit more complicated, so just pay it back quickly or get it paid back quickly.  If someone needed to borrow $550 or whatever, and did not have that money themselves...you can guarantee that they cannot pay back $10,000 if BTC were to be that high in the long term...

Debt is freedom. Last October I borrowed about 5k$ to start my business, by the end of the year I'd repaid every cent, this year in 3 months I've completely replaced the take-home from my day job via my small business.

Please, tell me how debt is slavery. Debt is neither good nor bad, being responsible or irresponsible is what matters. If you take on a bunch of debt to buy junk you don't need and can't afford... it's bad. If you borrow to start a business, buy a house or get a (useful) education in a (profitable) trade debt is freedom long-term.

enter a legally binding contract. DUH

You and him are not considering the same aspect.

His perspective : He takes a loan of 1 bitcoin and sells the bitcoin for 600$ , uses it. Over the next 10 years , he saves up 600$. He tries to return , but the 1 bitcoin he borrowed is now worth 6000$ and he has to pay 10x.

In this case , BTC itself is just loaned on a long term.

Your perspective : You take a loan of 600 $ and use it to buy 1 bitcoin. Over the next 10 years , the price rises to 6000$. You sell the bitcoin and return 600$ to your friend.

Here , even if the medium of Bitcoin is used for the loan , fiat is the truly lent.
Many BTC lending websites allow you to peg your loan to USD , such that it is basically a fiat loan and not a Bitcoin loan.

In case #1 , you need to repay 10x the value , because you own fiat
In case #2 , you need to repay one tenth the value because you own Bitcoin.

He was asking about the first scenario.

There was a huge website that allowed people to loan/lend money

Didn't it shut down after BTC price went up in November?

To get a loan in BTC you need an alt coin collateral nowadays

1 BTC

I i loan 100$ to a friend.. I expect him to repay me 100$ even if it loses lot of purchasing power..

1. no one will lend coins for 10 years, even a mortgage company would ensure they own your house and only allow you to live in it if you repay, before lending you any amount for a long period of years. they wont simply 'trust' that yo will repay
2. but for shortterm loans, the terms of the agreement EG 1% within a week, become binding so no matter if the dollar value spikes or dumps the initial agreement of terms still stands. its all about agreeing the repayment amount and sticking to it no matter what happens.
3. i reiterate it doesnt matter if you measure the repayment in dollars or bitcoin or facebook credits, its all about both parties agreeing to it.
4. and if you dont repay the terms. hopefully the other person owns the colateral or has enough info to see you in court to get it back

if you give me any money, don't ever expect it back haha

Exactly this!

Here's an even simpler case:  you lend to someone who takes your bitcoins and  sells them for some fiat at localbitcoins and rebuys them immediately with their own fiat of the same kind parked at an exchange. They effectively used your bitcoins to get volume in their Bitcoin business with zero exposure to any of the many fiat currencies exchange rate.

However you are exposed to the risk that the person you lent the bitcoins to is not going to do that but will instead gamble them or run away with them and later say "man! exchange rate man!" in which case he is just stealing your coins but having an excuse that may be satisfactory for other prey, friends, forum people or even family who are aware of the dealings.

If you loan 1BTC today at $560 (as I write) then when the value rises you should expect a profit.
I don't understand what is so hard?

Also, if you are expecting an interest fee then add that too.

EDIT: Your biggest concern should be if the price drops.

Why to repay you in exchange? Repay you back in bitcoins + interest.

If you borrow Bitcoins;  you should have the loan denominated in a large stable inflationary currency  that is most likely to lose value over time, or something like Gold which is in low demand and should be stable over time,  not a deflationary currency  that is likely to eventually gain value over time.

So borrow  1.0 Bitcoins today  when they are worth $557.

When it comes time to repay the loan.... repay in however many bitoins are worth $557 at the time.

If Price of a Bitcoin doubles,  then you  owe  0.5 BTC at  payment time.


You may be receivin the loan in Bitcoin  form,  but you can peg the loan value and exchange rate for repayment to whichever currency both borrower and lender  can agree to ----- or just arrange for repayment to be in the different currency,  with amount of repayment pegged when the Bitcoins are received.

You've fallen off the deep end! Don't get me wrong, I think consumer debt is horrible, but not all debt is the worst. Judging by your response I'd say it's probably safe to say that you do not own real estate, if you did you'd probably have first hand experience in at least one situation where debt can be at least a neutral force in someone's life.

Circling back to the OP's question; in the case of real estate loans (and certain other long term loans), it's not uncommon for them to be priced at (+/- 1%) of inflation. For example, I have a 30 year home loan priced at 3% interest. Once you factor in inflation, is the bank really making much or anything? In fact, as the debtor I would be foolish to pre-pay such a loan. Ignoring the interest write-offs (as that's a very country and loan specific thing), the fact that the loan hovers around the inflation rate means any pre-payment carries an opportunity cost risk without a large (any?) financial benefit.

So, this really all comes back to an ROI calculation against opportunity cost. If a BTC loan's interest can be justified by having access to BTC today verses tomorrow then re-paying at (or slightly above) inflation could be justified.

Obviously a smart consumer is going to run the calculations in both fiat and BTC, so you'd want to keep the duration of such BTC loans lower... Say 12 months, as to mitigate this.

So, in short; yes, BTC loans could work (even at 26% interest), but you'd have to keep them short and probably have them be very specific purpose loans (e.g. Loans specifically for purchasing mining equipment where you could keep physical possession of the hardware as collateral). "Personal" loans where the debtor can do anything with their BTC or Multi-year loans are probably way too risky given the current inflation rate.

If you use the loaned BTC for an investment that is denominated in BTC and is not exposed to BTC/fiat exchange rate, then it should be possible to loan and repay Bitcoin. Opportunities like this aren't easy to find right now, but they may become more available when BTC adoption grows.

If you do use the loaned BTC for matters that are exposed to the exchange rate, it is possible to cover the risk of a large increase in exchange rate by buying BTC call options. If you loan a BTC now for $560 and buy a call option with a strike price of $700 that expires just before your loan is due, then the maximum exchange rate risk is $140 plus the premium paid for the option.

Using derivatives such as options or futures it is possible to hedge against exchange rate risks, at a cost of course.

This is why I can't believe people put money into that stupid site coin lenders.

1.  Bitcoin goes up 10x, good luck getting your money back.
2.  Bitcoin goes down 10x,  the punter will pay you back and profit.

So these things did not exist before "capitalism"*? Please, "capitalism" has only existed for 200 or so years. sexism and slavery has existed for as long as humans have existed. You fail logic.

*We never had a true capitalist society yet.