Bitcoin Forum

If I loaned you 1.00000000 bitcoin's today, which has a value somewhere around the arbitrary number of whatever value $600 i really supposed to represent, With a 10 year term.

If bitcoin rises in dollar value over 10 years by a multiple of 10, or the dollar devalues by a factor of 10, how could I reasonably expect repayment of the original loan of 100 million satoshi's.

Debt is slavery, if you give me a dollar, don't ever expect it back. There's a reason bitcoin transactions are one-way, just like cash.

If I'm so poor that I need to borrow money to meet my needs, my society has FAILED at both equality and solidarity.

http://strikedebt.org/

Did I mention fuck capitalism?

Because fuck capitalism.

lol jesus christ I can't believe people like you exist

That's what religious folk have been saying about atheists for a long, loooong time. Every day there are less religo-bots and more free-thinking, reasoned human beings.

Your time will come soon too, capitalist.

whats wrong with capitalism?

You wouldn't expect repayment. You'd have to charge a ludicrous interest rate for that loan to have a positive risk-adjusted net present value, an interest rate nobody could afford or would ever want to pay.

Long term BTC-denominated loans are nonsense.

Even short term loans have extremely limited use cases.

That's not really a loan, it is short selling.   If the price of bitcoin rises, the person making the loan of the commodity needs the borrower to come up with collateral or money to cover the short position, or they need to buy a bitcoin as collateral to cover themselves.  If the loan is unsecured, then you probably just lost a bitcoin.

If you have to ask this question, congratulations you live an extremely privileged life, pretty much in a bubble from the awfulness of the rest of the world. Typical westerner.

Right, we just need to get back to the "good old days" of capitalism.

When was that exactly, when women were property? The slavery era? Capitalism is a horror show, and it's only getting worse until it's dead.

http://www.youtube.com/watch?v=hpAMbpQ8J7g

http://www.ted.com/talks/john_hunter_on_the_world_peace_game

To avoid that hassle, if you loaned something as small as 1btc, the term of the repayment would just need to be quickly to avoid much variance

On that point, we agree. Cryptocurrency is an incredibly powerful technology for liberation.

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.

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.

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.

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 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.

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

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.

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

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

1 BTC

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

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

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.

enter a legally binding contract. DUH

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.

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...

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.

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...

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...  ;D

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

The volatility of the underlying currency is a risk that the borrower must bear.  This is one reason why stability is preferred.

If the price rose 10-fold over the next 10 years you couldn't then reasonably expect the borrower to repay you.  Practically nothing appreciates at that rate so you would fully expect default.

In the future, this exchange rate should become more stable.  As it does, bitcoin-denominated loans over long periods will become more feasible.

---

Rather than trying to derail OP's thread: create a thread describing why you think Bitcoin and capitalism don't go hand in hand (economics section would be a good bet), describe the economic system you would prefer to see, and defend it's superiority.

Good thing the United States isn't capitalist. Rofl idiot. Kill yourself.

If you loaned me 1 BTC today, I'd add it to the Just-Dice bankroll and over time it would almost certainly grow in BTC terms.  By keeping it in BTC we're immune from (http://forum.wordreference.com/showthread.php?t=2084916) currency fluctuations.

What I uderstand is that you want to get sure that you will be paid back equally with interest of course right is my suggestion will be if its a small time loand then u don't have to worry about it in long term loans decide the lending and payback amount in usd  :)

I'm more of an agnostic myself... the only true proof of the sublime / god I see is in synchronicity.

Anyways... actually most of the major religions consider usury wrong.

Modern interpretations do vary, however, as you can see in the state of the world today.

History would suggest that over the long run, that bitcoin will be stolen or lost in some fashion.

Lending Bitcoin is a suckers game, and borrowing it is worse.

If the price rise by x10, I could repay you 0,7btc for 1 btc at most. But when the price rise ×10 and then fall 60% i could repay you 3 btc for 1btc at least if my orders do not intetact with the market (orders for 10-50 btc)

A loan agreement could be thrown out by a court as unconscionable if it turned out there was exponential deflation

Utter bullshit! There is even a precedent:

http://blogs.wsj.com/moneybeat/2013/11/07/judge-orders-coinlab-to-pay-up-in-bitcoin/


Stop defending fraud already! If you took a loan in bitcoins that is because you operate in bitcoins in the Bitcoin economy or because you hedged your exposure to exchange rate accordingly like posted in the examples above. If you don't pay it in the amount of bitcoins agreed that is because you were deceiving with your financial dealings an that is the very definition of fraud (seriously, look it up).

Nice post.

Holy crap what a messy thread.

Original poster:

You simply document the amount 1 BTC buys at the time you loaned it:  $600

That's what he owes you.  Even if its 10 years from now.

Oh snap that totally changes everything! So bitcoins are just USD. Got it... Last one out turn off the lights...

Defending fraud?  What kind of non-sequitur is that?  We are talking about hypothetical possibilities.
Geez...

Anyway thanks for posting the court case, although I still think there could be other situations
that might be different.  At the end of the day the judge can do pretty much whatever he wants.

WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH

I just want to take a sidebar here to talk about bank loans as opposed to loans from other entities. Your points are valid for loans form entities other than banks. However, I think you are misrepresenting the nature of a loan from a bank.

When banks make a loan, the money that they loan is not the bank's money. They don't even loan money that they have from depositors*. Further, that money does not even exist until the loan is made. The very act of loaning the money zaps that money into existence.

As such, the bank is the beneficiary of quite the sweetheart deal. They get to collect interest (typically several times the principal of the loan) on ... nothing. At least nothing of theirs.

Where does the wealth that this new money represents come from? It is shaved off every dollar in existence at the instant the loan is made - in the form of a reduction of that money's purchasing power. While society seems to be OK with this, in my estimation it is a criminal theft of purchasing power. I think society just does not understand how loans work, otherwise they'd be at torches and pitchforks.

Not making the loan does not carry any opportunity cost to the bank, as there is no money sitting around at the bank that they can use for any other purpose. The money does not exist until the loan is made. Edit: strikethrough. While this paragraph is true, it is based upon a misreading of your point about opportunity cost.

The financial industry is a parasite that is incrementally absorbing all the wealth of the entire world through this process.

With this knowledge, run the mental experiment behind foreclosure. Disgusting.

* Yes, there is a very small percentage of the loan that is made with money in the bank's possession. But to a first order approximation, it is overwhelmingly (I think currently in the US 90%) newly-created money.

greed

Can you explain why greed is inherently wrong? Or is this just an axiom of yours?

Don't you think that the politics are greedy?

They want to control everyone and they want power that they sell to the highest bidder, if we don't want them to sell their power (corruption) we need not to give them the power in the first place

You want them to protect you from the big corporations and to build schools but they will buy guns and hire IRS agents to get more money out of your family

When politics are young they know they can get a nice life by doing politics, you can live like a king and have a lot of power and respect if you succeed as a politician

------

Apple cannot force you to buy his product but the government force you to buy its product; the state tells you a monopoly is bad but they run a lot of monopolies; when you have a monopoly protected by law and people are forced to buy your product you don't innovate and you are not entice to change if you are not pleasing your customers

My last argument is that other systems have been tried and they don't work, central planning doesn't work because it is not efficient : less innovation and less adaptation to what is changing

Nineteen Eighty-Four is so 1949 ::) ;) ;)

why don't we update that shall we  :D :D
http://25.media.tumblr.com/6cd513b8befd283395a78b5f896eb991/tumblr_mu43y2lbHQ1rcjd58o1_500.gif
 ;D ;D

Regarding, "what's wrong with capitalism?"

Exhibit A: http://www.youtube.com/watch?v=TZU3wfjtIJY

Exhibit B: http://vimeo.com/4041228