The lending problem - page 3. | Bitcointalksearch.org

Findingnemo

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Quote from: VictorProsh on August 29, 2021, 11:22:10 PM

Quote from: Findingnemo on August 29, 2021, 09:57:00 PM

Quote from: paxmao on August 29, 2021, 06:57:07 PM

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

Lending, this is never going to be completely decentralized and bitcoin is not actually created to kill the central banks nor to bring the decentralized lending system it is just to eliminate the third party to send your own money to someone so concept of lending is not actually under the bitcoin.

But due to the evolution lot of projects are coming up with different ideas and one of them is DeFi which created hyped but didn't made any changes in the real world usage.

You are right, DeFi is a dead-end direction that copies the existing monetary system. But you are wrong when you say: "Lending will never be completely decentralized," it will be very soon and without a third party.

Without third party there will be a valid collateral and there should be some kind of agreement or else most loans will become default and the Market will totally collapse.

el kaka22

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Banks do not have any power over you at all unless there are laws, laws that protect their fiat currency when they loan you. So, if you take a loan, and do not pay it, what happens? Bank seizes your stuff and come in with couple cops and take your stuff and sell them to pay off your debt right?

Well, why shouldn't that be the same for crypto? If banks are given the right to loan crypto to people, and if you do not pay your crypto loan back, then there should be laws that will allow banks to come in and seize your things and do the same thing they do with fiat. It is not about lending not being easy in crypto, if you loan to someone you do not know then you will not be able to do anything, however if there are laws and the laws back you up then you can loan to anyone you want and if they fail then you take their stuff, just like how it is in fiat world.

boled

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In my opinion, DeFi is just a platform, where they offer financial management services, the products are the same as banks, so their position is still the same as banks.
The banking world will never be replaced just because of cryptocurrencies, and what happens is that they will make peace with crypto and make certain coins that are considered valuable as part of their products, such as savings, loans, or financing products, and loan products become one of the flagships of almost all banks in the world.

slaman29

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Quote from: hatshepsut93 on August 30, 2021, 09:29:53 AM

There is no problem because human society will always operate on trust and server/client relationship. You can't turn everything into a decentralized network and doing so is often counterproductive. Bitcoin works by having every node store all transactions ever made, so its capacity is very limited. Torrenting networks suffer from the problem where rarely-accessed files can't be downloaded until someone who has them decides to seed them. Point is, decentralized is not automatically better.

The idea that everything should be decentralized is just a hype created by crypto bros who sell shitcoins and "blockchain technology".

Totally agree here, I love Bitcoin, I love torrenting, I love all kinds of P2P and when I can share, trade crypto, even music, I try to do p2p as a more decentralized form of interacting. But this doesn't mean I abandon centralized alternatives.

Bitcoin's great but it can't pay my bills.
I've got torrents waiting for months, and then I probably will give them up at a time.
P2P trading's great until you keep getting orders cancelled because people aren't online. Then you switch to an exchange for instant trade.

I really, really get annoyed with decentralized this and that... which isn't even most of the time the truth.

Desmong

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

A simple question to the forum - I hope that people can provide sensible answers, since it would be way too easy to preach rather than to reason.

It has been mentioned many times in the forum that banks can be killed by bitcoin and that crypto is a threat for central banks, etc... One of the reasons that make me doubt about that possibility is the worldwide need of having a strong lending and borrowing system. I think that currently DeFi does not offer a realistic solution and that lending eventually has to rely on an intermediary. That, in some way or under a different name, is a bank.

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

Really is somehow hard for this to happen in the blockchain platform but I believe that all these problems would be resolved as time goes on. We all know that change is constant and everything that is happening now is tend to be adjusted as more people adopt the use of Bitcoin and it blockchain interface. There is no need to panic about how Bitcoin will overcome the Fiat system of transaction of goods and services whereby making it hard for borrowing and lending to occur without it being compromised.

hatshepsut93

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

There is no problem because human society will always operate on trust and server/client relationship. You can't turn everything into a decentralized network and doing so is often counterproductive. Bitcoin works by having every node store all transactions ever made, so its capacity is very limited. Torrenting networks suffer from the problem where rarely-accessed files can't be downloaded until someone who has them decides to seed them. Point is, decentralized is not automatically better.

The idea that everything should be decentralized is just a hype created by crypto bros who sell shitcoins and "blockchain technology".

Betwrong

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Quote from: TheUltraElite on August 30, 2021, 01:56:01 AM

Quote from: paxmao on August 29, 2021, 06:57:07 PM

I think that currently DeFi does not offer a realistic solution and that lending eventually has to rely on an intermediary. That, in some way or under a different name, is a bank.

DeFi Lending pools do exist and privately run p2p lenders also exist. Of course we have our own Lending section in this forum to use as prototype example of how lending can be done in the context of cryptocurrency.

However, the fact still remains for collateral and trust. These things are lacking in crypto. Collateral specially valid ones are limited in crypto while in fiat markets, a lot more options are there.

Trust is highly lacking in this sector too added to it the anonymity or pseudoanonimity provided by crypto makes lenders even more careful about lending out their precious coins.

My take on this is that banks cannot replace crypto and neither can crypto replace banks - they are meant to work together and that is what most institutional banks are trying to do with their own take on blockchain development.

I absolutely agree with this and I don't think Bitcoin can replace banks in the foreseeable future. Why I'm not saying "ever" is because maybe a completely new economic system will be invented in the future, and in that system maybe Bitcoin will replace banks, but with the current system we can't live without banks, and I personally can't imagine this new system yet.

davis196

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I think that most of the Bitcoin/cryptocurrency supporters are coming from the assumption that "banks are bad by default",which isn't always the case.Some banks provide better customer service than others.
Nobody said that Bitcoin is going to replace the banking system,in terms of lending and borrowing.
Bitcoin is supposed to replace the banking system is terms of where to store your money and how to be more financially independent.
Buying and HODLing BTC is way more profitable than having a bank deposit.
The second idea is that Bitcoin is better than central banks,because no human or entity is controlling the supply of Bitcoins.I agree with that statement,but that doesn't mean that Bitcoin is ever going to replace central banks.

Reid

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Sounds like it will always end up with how much "trust" is and the banking industry can provide that with money already in their hands that can be paid slowly to the lender.
Third parties, this is why interest is growing when there is more than that.
But I do believe cryptocurrencies cannot overtake that industry. It's just the combined power that will make it better.
Both have their strengths in different services and if only banks will try to adopt it. Humans will still be in control and cryptocurrencies are just tools that need to be used.

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

One of the reasons that make me doubt about that possibility is the worldwide need of having a strong lending and borrowing system.

While crypto is a great alternative to banks for quick worldwide money transfer, there are plenty of fields the banks still stand solid.

A centralized institution can very easily lend Bitcoin and ask back the same amount of bitcoin plus interest if that institution already has actives/investment in bitcoin. When Bitcoin will become reserve asset for banks, it wouldn't be that strange to have banks lend bitcoin. It's just money after all. Of course, they'll still prefer fiat since with fiat they can do fractional reserve banking.
An exchange has now reserves for that and could start [now] lending, but probably the paperwork involved makes it less compelling as a business, especially as the trade fees are quite a good income already.

But the question to start with may be different. Would you borrow bitcoin, which has a good chance to rise and make you pay back much more, or you'll just borrow fiat, which is inflationary hence it will be much easier to pay it back? Should we really bother thinking that deep into large scale lending in bitcoin?

VictorProsh

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Quote from: The Sceptical Chymist on August 30, 2021, 05:07:25 AM

OP, I'm also not that familiar with DeFi, but I know how lending works and know what a pain in the ass it is when you're combining crypto and lending. The way I see it is that you ultimately need a way to either force the borrower to repay the loan or put up sufficient collateral in the event that they don't. I'm pretty sure DeFi hasn't found a solution to the repayment solution, but if it's come up with a way to deal with collateral (without a 3rd party handling it), then I'd say the problem is solved--but I'm pretty sure that isn't the case.

Think about all the mob movies you've seen where a debtor gets his legs broken when he's late on a gambling loan. That's how tough it is to get someone who can't or won't pay you back (because mobs work--or used to work--that way), and in those cases the identity of the borrower is known. With crypto and the inherent anonymity, it makes the problem much more difficult, and I seriously doubt there's going to be a way to lend funds efficiently without having a 3rd party involved and still allowing people to maintain their anonymity.

I'd also be interested to know if any of these problems have been solved by DeFi or any other system.

No, the problem of lending is not solved in DeFi, unlike it, I have found a way to lend if you carefully get acquainted with my project, you will see that this is possible.
http://prosh.info/smart_eng.html
https://bitcointalksearch.org/topic/would-you-like-to-become-a-co-owner-of-a-world-bank-5264440

The Sceptical Chymist

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OP, I'm also not that familiar with DeFi, but I know how lending works and know what a pain in the ass it is when you're combining crypto and lending. The way I see it is that you ultimately need a way to either force the borrower to repay the loan or put up sufficient collateral in the event that they don't. I'm pretty sure DeFi hasn't found a solution to the repayment solution, but if it's come up with a way to deal with collateral (without a 3rd party handling it), then I'd say the problem is solved--but I'm pretty sure that isn't the case.

Think about all the mob movies you've seen where a debtor gets his legs broken when he's late on a gambling loan. That's how tough it is to get someone who can't or won't pay you back (because mobs work--or used to work--that way), and in those cases the identity of the borrower is known. With crypto and the inherent anonymity, it makes the problem much more difficult, and I seriously doubt there's going to be a way to lend funds efficiently without having a 3rd party involved and still allowing people to maintain their anonymity.

I'd also be interested to know if any of these problems have been solved by DeFi or any other system.

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Quote from: bitterguy28 on August 30, 2021, 12:41:43 AM

I see no problem if there is always collateral in every borrowed funds? but the problem is the assessment of value f each collateral and also the decentralization and anonymity .

That's what OP mean isn't?
All of the lending platform exist until now is they holding the collateral itself (e.g. Blockfi) or even those self pro claimed decentralized finance is also centralized, you can see how their lending work that need a third party of DEFI platform [1] don't forget too about DEFI Hacks history [2]

The truly decentralized lending is possible to create with peer to peer mechanism, the borrower send the collateral to lender and the lender send the money to borrower. But, it will face some problem of collateral scam (a scammer which selling the collateral to earn profit), which party is sending first, lack of liquidity, etc. There's also a problem if the borrower want to get quick loan, he need to provide specific collateral (e.g. Bitcoin or top 3 altcoins) if he only have precious metal he need to wait few days until his collateral delivered. Escrow will only solve the collateral scammer, but the liquidity and shipping times still a problem which almost impossible to become worldwide lending.

[1] https://medium.com/@blockchain_simplified/defi-based-crypto-loans-explained-85e40cd485c9
[2] https://bitcointalksearch.org/topic/defi-hacks-history-5267124

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Quote from: TheUltraElite on August 30, 2021, 01:56:01 AM

Quote from: paxmao on August 29, 2021, 06:57:07 PM

I think that currently DeFi does not offer a realistic solution and that lending eventually has to rely on an intermediary. That, in some way or under a different name, is a bank.

DeFi Lending pools do exist and privately run p2p lenders also exist. Of course we have our own Lending section in this forum to use as prototype example of how lending can be done in the context of cryptocurrency.

However, the fact still remains for collateral and trust. These things are lacking in crypto. Collateral specially valid ones are limited in crypto while in fiat markets, a lot more options are there.

Trust is highly lacking in this sector too added to it the anonymity or pseudoanonimity provided by crypto makes lenders even more careful about lending out their precious coins.

My take on this is that banks cannot replace crypto and neither can crypto replace banks - they are meant to work together and that is what most institutional banks are trying to do with their own take on blockchain development.

And what are the limits of collateral in cryptocurrency, how do they differ from Fiat?

TheUltraElite

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

I think that currently DeFi does not offer a realistic solution and that lending eventually has to rely on an intermediary. That, in some way or under a different name, is a bank.

DeFi Lending pools do exist and privately run p2p lenders also exist. Of course we have our own Lending section in this forum to use as prototype example of how lending can be done in the context of cryptocurrency.

However, the fact still remains for collateral and trust. These things are lacking in crypto. Collateral specially valid ones are limited in crypto while in fiat markets, a lot more options are there.

Trust is highly lacking in this sector too added to it the anonymity or pseudoanonimity provided by crypto makes lenders even more careful about lending out their precious coins.

My take on this is that banks cannot replace crypto and neither can crypto replace banks - they are meant to work together and that is what most institutional banks are trying to do with their own take on blockchain development.

VictorProsh

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Quote from: bitterguy28 on August 30, 2021, 12:41:43 AM

I see no problem if there is always collateral in every borrowed funds? but the problem is the assessment of value f each collateral and also the decentralization and anonymity .

because banks will never let go of this meaning we will live forever in banking system if this problem cannot be resolved properly, unless we will use centralized exchange in which also not loved by many here.

Absolutely, it is true, any loan must have a collateral and this excludes a third party and banks will inevitably come to a cryptocurrency in which all transactions are transparent.

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I see no problem if there is always collateral in every borrowed funds? but the problem is the assessment of value f each collateral and also the decentralization and anonymity .

because banks will never let go of this meaning we will live forever in banking system if this problem cannot be resolved properly, unless we will use centralized exchange in which also not loved by many here.

Wexnident

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

I don't think it's possible? The most plausible reason I actually agree with crypto replacing banks is because of its decentralized and transparent nature, which forces everyone to actually be their own bank, which I disagree btw, it'd be coexistent at most, since if people are looking for a decentralized option, there would also be people who would look for a more convenient method, of which centralized is probably the better option than decentralized. I don't think it'd be possible for a lending system to be fully decentralized, unless there's a breakthrough in the way the lending system works.

fiulpro

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Quote from: paxmao on August 29, 2021, 06:57:07 PM

A simple question to the forum - I hope that people can provide sensible answers, since it would be way too easy to preach rather than to reason.

It has been mentioned many times in the forum that banks can be killed by bitcoin and that crypto is a threat for central banks, etc... One of the reasons that make me doubt about that possibility is the worldwide need of having a strong lending and borrowing system. I think that currently DeFi does not offer a realistic solution and that lending eventually has to rely on an intermediary. That, in some way or under a different name, is a bank.

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

Addressing the question regarding: Lending
The reason we do need third parties are because of the lack of *trust*, which is honestly right, you cannot just expect people to give the money back if they are not monitored and that is the whole point of the administration.
We can for sure come up with something where there can be organized documents being generated by both parties and where they would have to submit their real passport or something. That can only be accessible to two of them and if they do choose to not give money then it should be acceptable by the government as well.

VictorProsh

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Quote from: Findingnemo on August 29, 2021, 09:57:00 PM

Quote from: paxmao on August 29, 2021, 06:57:07 PM

How is this problem addressed currently and how could it be solved at large scale without a "bank" of shorts?

Lending, this is never going to be completely decentralized and bitcoin is not actually created to kill the central banks nor to bring the decentralized lending system it is just to eliminate the third party to send your own money to someone so concept of lending is not actually under the bitcoin.

But due to the evolution lot of projects are coming up with different ideas and one of them is DeFi which created hyped but didn't made any changes in the real world usage.

You are right, DeFi is a dead-end direction that copies the existing monetary system. But you are wrong when you say: "Lending will never be completely decentralized," it will be very soon and without a third party.

Topic: The lending problem - page 3. (Read 534 times)