Bitcoin Forum

Hi,

As newbie on this forum i ask myself the question why give people loans with altcoins as collateral? If they trade their altcoins in BTC. Their problem would be solved, cause they have their bitcoins. Can one explain this please, thanks?

maybe because exchange fee

Read the sticky thread: https://bitcointalk.org/index.php?topic=577765.0

Altcoins could be considered as collateral because, even if borrowers could trade them to btc, they could keep altcoins for speculation purpose, hoping the value of altcoin raise significantely in a near future or on a long-term period. I believe that can explain why altcoins are valid collateral.

because they don't want to actually exchange them to btc, they only want to have those btc if they need soemthign urgent, but they still want to keep their alt, for the future in case the price skyrocket

practically they want to keep both, but they do not have one, so they use the other as a collateral for the moment they need it

It is same like you giving your house as collateral for some bank loans in real life. Altcoins are also type of assets so if you have other source of income and after some time you will have more than loan amount than why to sell assets if you can easily get loan.

Probably because the loanee was HODLing that specific altcoin hoping for a price pump in the future and he doesn't want to exchange it for bitcoins. That's exactly the reason before when a Facebook friend borrowed some bitcoin from me and he offered his doges as a collateral. Good thing he repaid on time.

Altcoins are great for collateral since they can be transferred to and from the lender very easily.
With accounts the hassle is password protection etc. etc.

As stated, typically altcoins are fairly good collateral because they can be fairly easily accumulated, and easily sold for Bitcoin. As long as it is a coin with a fairly-well known name, there shouldn't be any issues with the price fluctuating too much, and thus allows for a means of liquid, steady collateral.

altcoins are 100% collateral as you can easily sell them off
and get your btc back should you default on the loan. Just
make sure you get more altcoin than what the loan is for cause
I had a friend who did about equal and the altcoin (think it was
ltc) went down and the guy just said keep the litecoin and
never paid the btc back.

Because if anyone give loan in BTC, he want the collateral. And collateral only can be either stable altcoins, which you can exchange to BTC or your forum account in some cases. Will be vary hard to offer another one collateral, like your laptop, car etc. - you can check in Marketplace/Lending section here in the forum  ;).

All the responses so far explain why altcoins make good collateral, but nobody has answered your real question:

Why get a loan if you already have altcoins? Why not trade the altcoins for BTC instead?

Consider this: would it make sense to get a BTC loan and use dollars as collateral? The only reason I can think of is maybe currency arbitrage. If the borrower thinks that the value of Bitcoin is going drop relative to the altcoin, then it makes sense. Also, if the borrower thinks that the altcoin is going to crash, they they could offer the altcoin as collateral, and then just default when it crashes.

You know !, I asked myself the same question before and I found no answer except that those who gives altcoins as a collateral want to save some satoshis they will lose dew do the exchange fees . although the loan interest might charge them more !

I don't understand it either and never, ever will. I think the whole loan section is a giant performance art piece anyway. There is something about it that simply does not add up.

I think the main reason people use altcoin as collateral is that they want to keep the altcoins, and do not want to exchange twice.

People just want to keep their altcoins. Some of us (at leas I am one) just sell every altcoin we get for BTC, but there are lots of people who keep altcoins to do transfer between exchanges or in the hope they will raise their value.

So they want the BTC but not to lose their altcoins.

May  be (if the borrower was legit) he/she doesn't want to loss/exchange the altcoin but, urgently need some BTC/$. So that he/she used altcoin as collateral (or may be borrower got some difficulty on selling that altcoin  ;D ???). And also the lender accepts alt coin as a collateral because, if the rate goes up, lender actually own more than he lend.

Altcoins aren't really used commonly as valid collateral nowadays. They're more unpredictable. People used to use stable altcoins (stable being the key word) as collateral, as there were many exchanges out there to liquidify into fiat/bitcoin.

Nowadays they aren't as stable, so they aren't used as much. You might have double the worth of what you risked, but when your client scams you, the collateral might be worth nothing.

True, Not all altcoins are valid, Almost aren´t valid, LTC is an example of  valid.

Examples are litcoin, monero, ethereum or dash, dgb. Those are large market cap coins. Easier to get rid of.

Volume is very important. Low volume coins can only be sold at loss.
But stil coins are a better form of collateral then an account.

I am not in the selling of things yet, but i would defineatly accept altcoins with a good daily volume.
It's as safe at bitcoin so you are sure to get your money back.

I offer some loans sometimes and I only accept big volume altcoins like litecoin, dash and Ethereum.

Most other altcoins I don't accept since they are not listed on my exchange.

Not everyone accepts altcoins as collateral, unless there are only few most popular like lt doge nxt or a few more, by this the lender want to be sure to get at least 110-120% just in case if he needs to sell the collateral to not lose even if the altcoin price changes a bit.

What happens if the price of the bitcoin rise, and those altcoin price drops against bitcoin even though their dollar value remains the same?

Well there are many reasons to use altcoins for loan colletral. maybe the a person has invested in some altcoins and the price has suddenly fallen so he decided to hold the altcoins and when he needed a loan then he gave those altcoins as colletral because if he convert them now then it will lose its real value ( loss )

it has happened already but it is very rare and not for the top altcoin, since some of them are directly tied with fiat like bitcoin