Topic: Issuing loans in Bitcoin, how we could do it - page 4. (Read 1341 times)
It could be simplified if it will be done locally like bitcoin being partnered with a banks. As of now there are banks that has already accepted and integrated cryptocurrency and one of it that I know is the unionbank and is also been here in the Philippines. I never thought of this to happen but the unionbank has already stated that they are partnering the satoshi group.
It's correct that the number of bitcoin's is limited and the bank just can't print the number of a loan on your banking balance that way.
In such case I think the bank should to buy as much bitcoins as it can. If such function will be taken by some banks then the price of bitcoin will fly high, cause of the demand will raise.
I doubt that banks will work that way honestly. Cause first they will have to buy bitcoin's, which price is totally unstable. If the person who took a loan will bring back all bitcoin's he took and the price fell down sharply the bank will stay in minus. But again, if many banks will follow that the price for coins will raise constantly, due to demand.
Hmm its interesting thing to think about really.
In such case I think the bank should to buy as much bitcoins as it can. If such function will be taken by some banks then the price of bitcoin will fly high, cause of the demand will raise.
I doubt that banks will work that way honestly. Cause first they will have to buy bitcoin's, which price is totally unstable. If the person who took a loan will bring back all bitcoin's he took and the price fell down sharply the bank will stay in minus. But again, if many banks will follow that the price for coins will raise constantly, due to demand.
Hmm its interesting thing to think about really.
One of the easiest thing is to write a contract between the Bitcoin borrower and lender. If it meets standards of their jurisdiction, the contract will be legally enforceable (raising chances for collateral liquidation if borrower defaults).
I feel like loans are the biggest reason why we are in this mess to begin with. Banks give you loan and expect you to pay it back with interest but if too many people do the same then there would be eventually someone who couldn't find the interest, there is a finite amount of money and unless you give out the exact amount expecting more back is the problem.
I think it's just part of how the financial system works. Even if loans aren't likely going to be paid back, you can always repack multiple potentially unprofitable loans and turn it into a financial instrument you can sell.Banks have been doing that for decades and that's where things tend to go wrong. If you also add that governments might jump in financially, the larger banks don't have much to worry about.
I would say the risk for these banks is pretty low in that regard. It sucks that things are like this, but as long as there is demand for debt banks will continue to turn you into their slave at little to no risk.
In order to see if this could work out, we have to solve following two limitations:
1. It is impossible to issue loans and charge interest in terms of Bitcoin until Bitcoin becomes primary currency in the economy.
2. Banks can't maintain big reserves in terms of Bitcoin unless Bitcoin becomes primary currency in the economy.
1. It is impossible to issue loans and charge interest in terms of Bitcoin until Bitcoin becomes primary currency in the economy.
2. Banks can't maintain big reserves in terms of Bitcoin unless Bitcoin becomes primary currency in the economy.
#1 is only impossible at scale (like major retail banks today). It's already done on small scales. For example, see the lending board right on this forum. Loans are made in BTC everyday.
Regarding #2, I think it's implied that banks can't lend out BTC until they start accumulating adequate reserves via deposit accounts. Eventually, retail banks will offer BTC depository accounts alongside regular checking, money market, and other accounts. We may see this start on a small scale (like a small regulated bank offering a niche use case) long before BTC becomes a "primary currency in the economy."
BTC doesn't need to be the currency. It doesn't have to replace fiat money. Enough people just need to have faith in it as money to start seeing these use cases popping up.
I feel like loans are the biggest reason why we are in this mess to begin with. Banks give you loan and expect you to pay it back with interest but if too many people do the same then there would be eventually someone who couldn't find the interest, there is a finite amount of money and unless you give out the exact amount expecting more back is the problem.
Lets say bitcoin is capped at 21 million and all of them were mined by just one person, he gives 21 million bitcoin as loan and expects you to give him back with interest, since there is finite amount you can't give him interest back since it doesn't exist. Well if we do small loans even at 1 satoshi eventually the amount of loans given and couldn't get back will reach 21 million and above, that is when inflation and money printing happens in fiat and we don't want that in bitcoin.
Lets say bitcoin is capped at 21 million and all of them were mined by just one person, he gives 21 million bitcoin as loan and expects you to give him back with interest, since there is finite amount you can't give him interest back since it doesn't exist. Well if we do small loans even at 1 satoshi eventually the amount of loans given and couldn't get back will reach 21 million and above, that is when inflation and money printing happens in fiat and we don't want that in bitcoin.
I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
I think they only lend BTC to people in the same country as them and they can manage their information. because loans need to be very careful in determining the identity of borrowers.Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
otherwise, I think they will only lend money to big businesses because they are reputable enough to repay the debt.
a custodial wallet issues a loan to user account, and real btc transacted only when user withdraws
so the custodial wallet can act just like a bank (managing it like a real bank may run into some issues)
I take your point, but with fiat, banks can just change numbers in a database without any money actually moving. If you try to spend loaned bitcoin anywhere other than sending it to another user of the same custodial wallet, then they have to have enough bitcoin in reserve. Fractional reserve could only work with a very high fraction in reserve.so the custodial wallet can act just like a bank (managing it like a real bank may run into some issues)
first you have the price of bitcoin constantly chagrining which means paying the loan back will vary depending on the price
The contract for any loan would simply state whether the repayment value is based on BTC or fiat. I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
With bank systems when you are given a loan you are obligated to pay it back with interest, because in real life they have all your info and details and they can pursuit by law and police if you don't pay it back in time, but with bitcoin it is different, first you have the price of bitcoin constantly chagrining which means paying the loan back will vary depending on the price, and also bitcoin is supposed to be anonymous so there should be no personal details that would be given, details like where you live, and if someone does not pay you back you can't do anything about since bitcoin is not regulated by the law and government has no power over it, however there has been a p2p landing site a couple of year ago called BTCjam where people post their projects and how much they need and people will give them btc and they expect interest in return, but i shut down a while ago fir unknown reason. Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
Yes, he edits number on your balance but that's not something magical because behind those numbers there is real money, they can't lend more than they can. Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
as a borrower you will want to withdraw that loan in real fiat money... hence bank needs to supply that
I think your confusing the properties of magically creating money with that of fractional reserves.
~ Take that to its limit, and that $100 deposit will end up funding $1000 of new loans, creating $900 out of thin air as I previously described.~ they don't move any money out their reserves to cover your loan. The $100 loan is brand new money created out of thin air.
imo, that's not creating new money but reusing money in circulation to create new credit line and the problem is, in our social life we treat and use this credit line the same as money
This is impossible to do with bitcoin, since if you were to take out a loan the bank HAS to give you the relevant amount in bitcoin so you can transact it.
it's possible... think of exchange or custodial wallet "the relevant amount in bitcoin" transacted only when borrower withdraw bitcoin to his own wallet
user sends real btc to deposit address in a custodial wallet and his account balance adjusted properly
a custodial wallet issues a loan to user account, and real btc transacted only when user withdraws
so the custodial wallet can act just like a bank (managing it like a real bank may run into some issues)
a bank will collapse when all depositors take their money at the same while bank doesn't have enough reserve balance
the same thing can happen to custodial wallet who tries to become like a bank or misuse users' funds
Issuing loans in Bitcoin committee is not such a good idea. There were a lot of websites like BTCjam and others which used to provide loans to the users and even this form provides loans who need them. But I will still suggest taking loans from banks is a much better option then in cryptocurrency. You can seize digital assets or any other collateral in the online world if you want to provide loan to others but in banking factors, they do not accept digital collateral instead they need physical mortgages.
If you want to issue the loan you need to you have the collateral first from the users who want to lend from you. If you want to start the service in this phone there is a separate board for you to do that.
In forest and collateral I am not so sure about it you could check with the lenders who do that service in the forum.
Observe some banks are coming up with the loan offers via cryptocurrencies. Maybe soon they could have help you.
In forest and collateral I am not so sure about it you could check with the lenders who do that service in the forum.
Observe some banks are coming up with the loan offers via cryptocurrencies. Maybe soon they could have help you.
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
well then they have to go back to the "honest banking" system instead.
which means you lend what you have instead of lending more than you can afford. and they will lend actual money (in this case bitcoin) instead of credit. and having limited supply is not a problem! imagine if price was 1 million and you wanted to loan $100k you simply take 0.1BTC!
but also there is another rout they could take, which is probably what they will too. and that is the same methods of using "credit" instead of actual money. for example when you loan money to buy a house you take a check and pay the check to other person and that other person deposits that in his bank so there is no need for real money to change hand but only numbers in their databases!
Maybe banks have guarantees when they borrow money from customers, but if in bitcoin you might find it difficult to collect your debt if there is no guarantee, because this bitcoin is not wooded by some governments so with this we are deceived by parties owed then we cannot claim that Kate Bitcoin has no legal force in some countries
I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
If he doesn't have the strength to ask for a debt, he won't lend it to others. Maybe he has a gangster power behind him and nobody knows it. and when the debtor wants to escape, he can use his forces to suppress it. This is quite simple because I know some crypto lenders and I understand how it works.Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
The problem is how can this gangster power find it? whereas bitcoin is a decentralized currency, should borrowing in crypto have to enter into an agreement? And now there are no clear regulations regarding crypto loans.
I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
In order to see if this could work out, we have to solve following two limitations:
1. It is impossible to issue loans and charge interest in terms of Bitcoin until Bitcoin becomes primary currency in the economy.
2. Banks can't maintain big reserves in terms of Bitcoin unless Bitcoin becomes primary currency in the economy.
So this returns us to the basic question, Can Bitcoin become the primary currency in the economy? If this could turn possible then issuing loans in Bitcoin is no big deal. Banks don't magically generate money. They do this through a process known as 'Money Multiplier'. The process is also possible with Bitcoins if people start depositing Bitcoins in the bank as it will lead to the maintenance of reserves with banks and secondly, borrower conduct his business in terms of Bitcoin. So yes, corporate lending is possible with Bitcoins but the basic assumption for it had to be the acceptance of Bitcoin as primary currency.
But Bitcoin with its limited supply can never become primary currency in the economy. Hence, all ancillary economic activities associated with currency like deposits, lending, etc. are also not possible at all at bank level. However, it may be possible at individual level like 'Lending' section on the forum but that is also not very successful due to limitation of valid collateral. Not everyone possess altcoins before taking Bitcoin loans.
I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
Don't say what you don't know. Banks does not just edit your account balance to what you need, that doesn't happen. If you're taking a loan from bank, the money they are crediting to your account is coming from their own account. They don't just grab digits from the air and fill it up to your account. So stop saying what you don't know. Stop acting like one of these crazy Bitcoin enthusiasts that are always saying shitty things about banks, it makes no sense and is leading you to no where. And by the way, banks always collect collateral when they are giving you a loan, if you don't pay back they will sell the property you used as collateral to get back their money. That's the same thing Bitcoin loans, before you take loan from any Bitcoin loan service, you will submit your crypto that is worth the amount of loan you need as collateral. I don't even see any difference between them and traditional banks,, they are all the same. Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
Bitcoin on credit is a complicated system. This is one of the main reasons why it has not yet been implemented. The second reason for the instability of the cryptocurrency market. I think that Bitcoin was created not for loans, but for full payment of services. Because the main chip bitkonka like most cryptocurrencies is anonymity.
I started to think about it. How a bank and folks could issue loans to people?
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.
But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.
The only way is to make an agreement, of course this must be done by using the services of legal agencies that have legal status. Because these third parties are needed to avoid things that can later be risky for either party.
I think issuing loans with Bitcoin is not suitable right now because people are still used to make profit out of cryptocurrency with their own local currency. I don't see any use cases were an individual use to loan Bitcoin or other cryptocurrency just to buy items or even make a business online.
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