Bitcoin Forum

We all want Bitcoin to replace fiat, right? And banks too. ;D

Well, one of the things that needed to be replaced is the feature of banks to provide loans. Loans are important for businesses, but also for consumers if they want to finance costly goods like houses and cars.

In a Bitcoin world, where everything is tied to BTC's value, this can lead to some complications. First there is of course volatility - it could be risky to take a loan in a Bitcoin bull market because what you would have to repay it could have a substantial higher value than what you got as loan, with a high risk of insolvency.

But let's assume the volatility problem has been solved, there's still a challenge. Current banks, when they give out a loan, create an amount of money on the account of the borrower. This money can be instantly moved to be used for payments. In reality it's a relatively complex process if we take into account clearing and interbank loans, but we can say that the fractional reserve system enables a high availability of loans at any time.

In a Bitcoin world however, a fractional reserve system can be imagined (like Hal Finney proposed it here in the forum in 2010 (https://bitcointalk.org/index.php?topic=2500.msg34211#msg34211)) but it would be very risky for banks, because there is no Central Bank and thus no lender of last resort. Banks would never be able to operate with a reserve as low as the 1% currently standard in Europe and the US, but probably need reserves of 30 or even 50%. This would indirectly lead to less availability for loans, a situation called credit crunch (https://en.wikipedia.org/wiki/Credit_crunch) or credit squeeze.

This is even aggravated by another problem: in a Bitcoin world bank accounts are not really necessary because you can use always a wallet, so there would be less deposits on banks.

From all I understand this would mean that less availability of loans would mean much higher hurdles to build up businesses, but also for consumers to finance their houses and cars. Economy would suffer a slowdown (at least if the other Capitalist mechanisms stay the same).

Do we have a solution for that? Well, those are some I can think of:
- ICOs, STOs and other token mechanisms. They would surely be a very popular way for medium- to large businesses to get money, and if regulations are not too strict, also for smaller ones. But the problem of an ICO is that you always need something "sellable", easy to understand for investors. So it's not a tool for everyone.
- Bartering. One could imagine bartering platforms based on tokenized (smart property) goods and services, where businesses could lower their need for liquidity bartering their own services for others. This however depends on the business already having a product/service.
- P2P lending. This could be something interesting for consumer loans, but the liquidity I expect to be relatively low, too.
- Loans in Bitcoin-based stablecoins. I think here of something like Bitshares' BitBTC. These would be created by speculators shorting BTC, and can create additional BTC units even if they're not directly backed by "existing" Bitcoins.
- DeFi-style lending (cryptos as securities for other cryptos). This unfortunately today has very few use cases, because it needs crypto-securities as collateral. Maybe it could be combined with the tokenized smart property approach.

I would be interested in your opinions. Is my interpretation of a possible credit crunch right? What about the possible solutions I listed? Are there alternatives and even better ones?

I've not studied economics, so I may be wrong, but from my limited knowledge in the area that's what I think that could be issues the Bitcoin community would have to solve before really reaching mass adoption.

If Bitcoin had effectively replaced fiat, that should solve the issue of volatility as it doesn't have to be liquidated into other currencies (which would hypothetically no longer be in use).
I'm not an expert in the field, so I can't also explain the intricacies of how a Bitcoin powered economy would function, but it would definitely be different from what we have now.

The liberty to choose whether or not to use a financial institution could be seen as an advantage rather than a problem by some people.

I have been approaching DeFi lately, not really willing to invest in that, but only to really understand what is it and how it works in details, as a lot of people I am asking how it work cannot properly answer my question.
The only aspect DeFi can be through is to reinstate some kind of Bitcoin Standard, ad the Gold Standard was in place between Bretton Woods and 1971 (https://wtfhappenedin1971.com/).
As you lend your Gold to the Bank, and you get a private Fiat COIN (think à la Hajek a competition between private moneys, not a real law enforced FIAT money), then now you lend your digital decentralised Gold (BTC) to get some kind of decentralised money.
The fact that it is possible to borrow and lend this money could stimulate a new decentralised, trustless and efficient decentralised finance to bootstrap a new economy based in bitcoin.

The reality is that today (Jul 2020)  DeFi is still a ICO-greed-FOMO driven pump.

At the current adoption stage,  loans make no sense imo. Only in casinos or similar websites that need crypto, not fiat.

If you need 10k usd, why would you ask for a 1 btc loan? To sell that btc, convert to usd and then buy btc back to repay?

Volatility is so high that both parts would like to convert the value of loan to fiat, not btc.

It appears a very complicated problem to me. I guess we just have to admit that Bitcoin by design cannot fully support all the features and services that banks are currently providing to its clients. Neither is Bitcoin designed to fully support an entire country's economy. I'm afraid the hard-coded system is simply not as flexible as it should be.

Which brings us back to step one and ponder deeply whether or not we really "all want Bitcoin to replace fiat... And banks too." Or perhaps we should settle as the main alternative currency or as the one global currency.

A credit crunch is very possible which may result to Bitcoin-based loans offered only in relatively small amounts. Cars and houses may easily be accommodated but not huge industrial loans coming multi-billion companies or large development loans to build massive government infrastructures. 

Loans in the Bitcoin world is such a complicated problem to solve! Let's start with the hypothetical scenario about the Bitcoin value, which is always increasing over time. In this imaginary world, no one will be incentivized to lend and borrow Bitcoin. Lenders need an incentive to provide liquidity, usually in the form of interest, while borrowers need stability (fixed interest and repayments). If the Bitcoin value increases over time, borrowers will find it more challenging to repay the debt (principal + interest), which makes it undesirable to borrow money and then drive interest rates to zero. When the interest rate is zero, the capitalist would think, why would I risk my Bitcoin if I can just hoard it in my wallet.

I have really looked into this loan mechanism in Bitcoin. I have tried to researched a lot and tried to make some sensible flowchart but unfortunately nothing striked. To be really true loan system in bitcoin is just not possible. It could work in short term like defi are doing or some people do but making a large, robust and value adding system is not possible until the lender and the buyer are legally bound to repay each other therefore are in one country. Because the biggest challenge is repayment. Generally bitcoin loans would be tied with certain charge of interest. Now price volatility is a big issue when the price increases lender would just not return the loan because even practically it doesn't makes sense for him. Moreover, sort of defi structure might ensure that lenders have enough liquidity but problem is collateral? Collateral around the Web can be pretty diverse. You would need a specific interaction with every lender to understand his collateral which does not makes sense. Most of the time defi asks for collateral such as other cryptocurrency which is absolute nonsense. Why would I pay interest for borrowing a liquid cryptocurrency by keeping with you another liquid cryptocurrency of similar value? Even if you say that keep a reserve of 80% then we are back to ground zero that lender just won't pay back in even normal cases and he is under no legal obligation. P2P lending also faces the same issue.

At the moment you are right.
Given price volatility, or rather price direction, only a fool would ask a loan in Bitcoin.If it is true that "throw good money after bad", you want to spend bitcoin after your FIAT money, so you actually want to take a loan in the bad money (FIAT). So at the moment DeFi works because there are many "crypto only rich", who cannot have a FIAT loan (remember interest rates are negative in large part of the world!), and so are ofrced to ask a loan in crypto.

I think that with mass adoption, and with a more complete price discovery of Bitcoin, volatility will eventually come down, allowing a more widespread use of Bitcoin in a lending economy. Again, as I said in my above message a "bitcoin standard".

This assumes that Bitcoin will be a dominant currency of the world, which is likely not gonna happen. So, even if 5% of the economy will run on Bitcoin, Bitcoin's deflation won't be a big problem.

So, there totally will be Bitcoin lending and banks, they probably will be very strict with their clients, like you'll have to physically show up to open a bank account, prove that you can fulfill obligations, etc. So, there will be much less private uncollaterized loans. This all will make kinda hard for Bitcoin banks to compete with fiat, cause I don't see any reason to take a Bitcoin loan over a fiat loan.

Even if we get a mass adoption. Problem persists on the borrower side. How do we incentivize the borrower to payback just like mu_enrico mentioned. Like there is no legal obligation and threat of recovery by forceful means if you don't pay back. Maximum you will have is that you can't take a loan again on that platform. But then again there would be number of platforms. If we think of some central credit score which every lender has that also doesn't works due to pseudo-anonymity of users. Fake KYC documents are pretty easy to grab. Bitcoin standard might help in arrangement of funds but problem of non-traceability or difficulty in traceability would always hamper lender's power to enforce repayment.

Yeah,but the interest rate can be flexible,so when the Bitcoin price goes up,the interest rate of the loan might go down.I know this doesn't solve the problem of a huge price boost of BTC,that will make the borrower go bankrupt.
Anyway,Bitcoin is a deflationary currency,which makes it really hard to be used for loans.
Inflationary currencies,that are slowly losing their value,are better for lending,because the lender will get interest,that will preserve the value of his capital.
Bitcoin is just like gold.Do you see anyone in the world giving gold loans?No,because everybody expects that the value of gold will go up.
 

I can't see how loan system will work in bitcoin, the supply is limited and there isn't enough in the circulation, if you were to let someone borrow your bitcoin then it will take a long time before they can pay it, loans is a big thing for me because this can destroy financial stability or could help build a foundation to make someone stable, I do believe that this will not work if ever there is a system that will be implemented.

Such a scheme might work in the case when bitcoin was trading at higher levels. Such a loan operation would be similar to margin trading on a cryptocurrency exchange. Thus, the lender receives not only finance in debt, but also earns more on the exchange rate of BTC.

Pretty much this. Even if Bitcoin becomes dominant, the way we currently run our economy still requires a form of inflationary fiat currency.

In a completely crypto dominated utopia this may even be private money in the form of centrally issued tokens, although it's more likely to remain governmental currencies. The thing is, our current understanding of growth-based economy requires a heavy amount of forward-looking loaning to function, ie. businesses borrowing money "from the future" to allow for growth in the present. This system unfortunately only works if the loans are based on an inflationary currency, otherwise businesses end up short on money in a literal way, ie. with a deflationary currency you can't take money "from the future" without it missing somewhere else -- it turns into a zero sum game where any economic growth on one side can not happen without a bankruptcy on the other.

Accordingly I do believe that even in a Bitcoin world most loans would still have to run on fiat. Everything else just doesn't add up, at least as long we insist on our economies to grow or unless economics undergoes a major paradigm shift.

This is the point. We need a big paradigm shift. 
Credit is ok. Banking is ok. In a word: hard money is of.
What is not ok is central banking providing infinite credit to infinite borrowrs without accountability.
This is what is dangerous: not credit per se, but credit without the penalty of the loss if the borrower gets in trouble.

This is what bitcoin fixes. Credit in a deflationary environment urges the lender to accuratley select the borrower's projects to pick the one qwit hthe greatest chance to repay his preciuous ddeflationalry money.

If everyone would use Bitcoin instead of fiat and its value would change as fast as right now nothing would be changed. 1 Bitcoin today is 5000 loaves of bread and tomorrow, because Chinese president make a statement , will be $6000 loaves of bread. That is a problem, but I believe it is a problem only now since Bitcoin is not used enough. Once adoption will be wide volatility will go away and Bitcoin will be way more stable as right now. 

Except in practice this "urge to accurately select the borrower's projects" doesn't work out quite as well. I mean people are sending coins to scammers to double their money FFS (╯ಠДಠ)╯

We need a paradigm shift that goes beyond underdelivering ICOs, cloudmining ponzis and thinly veiled HYIP scams. A new understanding of money and economics. Bitcoin delivered on the first one, but we're still far from the second.

That's a very risky thing to do if you will make loans. You should not rely and settle on the price of bitcoin as its volatility can change its price anytime depending on the market situation. When you will make a loan, make sure that you will loan in USD and not in bitcoin because it can increase the money that you need to pay, and that's worse. The price of bitcoin always change, it is either increase, stable, or decrease.


In most of the discussions, bitcoin's volatility is the main problem that we are facing and we need to deal with that because we had no choice but to manipulate it properly in the market.

I don't think that even if people adopt bitcoin, it will just function just like the same with fiat.

Bitcoin is really unfair when it comes to sudden changes in its price due to its volatility and most of the bitcoin holders are aware about that. That's why you should not loan in bitcoin but loan in USD, because loaning in bitcoin can bring advantage or disadvantage for you. When you make a loan of 1 bitcoin for example, and the price of bitcoin increases in USD, then that's a bad thing for you. But if a price of bitcoin decreases, then that's a good thing for you. But once the price of bitcoin decreases, you are advantageous of the opportunity to pay BTC that you've loaned in a smaller amount in USD.

Yes, the crypto market in general and DeFi altcoins are gradually replacing our country's banks. Loans are diverse and we always have lots of choices. Unfortunately, not too many people are interested in this area of lending in the crypto market. I'm afraid that DeFi will only emerge based on its features but lack customers, which will soon cause the DeFi trend to fade. Technology in the crypto market is always an upgraded technology and it will be difficult for everyone to understand its features. This is also a major barrier for potential altcoins in the crypto market.

Sure, if the people looking to start businesses and purchase houses and cars have to use bitcoin to finance those things--and thus far all of that stuff is financed with fiat, loans or no loans.  Assuming we ever arrive at a world where fiat currency has collapsed and banks have failed, then there might be some serious problems with bitcoin loans, but I don't think that world is coming.  Ever.

I've studied some economics, but by no means am I an expert.  However, I do see how problematic crypto loans have been so far, but whether there's a good solution to those problems or not, I don't think most crypto lending is done to finance important stuff (like the house/car purchases and business startup mentioned above).  Nor do I think there's going to be a huge demand in the future for such loans--not while the banking system still exists anyway.

The idea for this thread came from a discussion in the Spanish forum about the situation in countries like Argentina and Venezuela. These countries have very weak currencies and an "inflationary tradition" - this means that almost nobody has long-term confidence in the value of the currency, and they will exchange national currency to "hard money" when they can.

In these countries a system where cryptos play an important role could be a possible solution. If there were not the problem of loans. However, they're also a problem due to the inflationary national currencies: in Argentina, for example, interest rates for loans are extremely high (50% per year are not uncommon). This drives inflation because businesses have a continuous need for growing income.

Such a "crypto-dominated system" would still be probably not a 100% Bitcoin economy. But Bitcoin is the "gold standard" in this system then loans will be predominantly in Bitcoin or a bitcoin-pegged token.

That's exactly the problem I see. It may also have benefits, like a higher resilience against economic crisis, but the whole economic cycle would be different than today.

Yep, this is one possible way. These "centrally issued tokens" however need also some kind of "anchor" for the value, otherwise there won't be confindence in them.

In the situation I described above (a single country with weak currency adopting a Bitcoin-dominant system) there would be still external currencies to peg it to, so USD stablecoins would be possible. There could be also a kind of slightly floating peg like in the case of the Linden dollar. But in the case these tokens became dominant it would be basically dollarization.

An interesting concept I always wanted to see realized is a token pegged to different commodity prices. Preferently to commodities that are produced regionally, so there would be no need for cross-border trade to get involved in the "peg". The Petro was an interesting step in this direction but failed because the incompetent and corrupt Venezuelan government completely distorted the original concept (https://www.nytimes.com/2020/03/20/technology/venezuela-petro-cryptocurrency.html).

Exactly, that's a core part of the problem. While this would change if this model wasn't possible anymore because of a credit crunch, and businesses would be more dependant on values they have created themselves, the transition to such a model could be troublesome, so a search for alternatives to traditional loans makes sense, I think.

the emergence of CBDCs is interesting to me because it would do the same thing---people have their own wallets so they can cut out the banks.

bitcoin holders do love to see a return on their holdings though---as a group, they love to invest. maybe we'll see the emergence of savings & loan type institutions, which bring together lenders who want a return and borrowers who need loans. maybe we'll return to the days of wildcat banking, where bank notes are inherently risky.


you can't have your cake and eat it too. austrian economists say perpetual growth as a goal is ridiculous, and that we should get used to economic stagnation as the normal course of things.

if you want to build a global economy on a currency with a completely inelastic money supply, you better prepare for a big slowdown in growth. austrians welcome that. if you want bitcoin to replace fiat money, then you should too. :)

Yep, that would be basically the P2P lending business. It could be perhaps refined, if banks would take care of risk management and could give a pseudonymous rating to those who want to borrow money, according to the securities they show as collateral.

I don't think this is a desirable scenario. At least, there should be some possibility to invest in an asset that is at the same time secure and simple to understand, like money now. This perhaps could be commodity-backed currencies like those I outlined in the previous answer.

Economic stagnation would be okay if we have already a world in which basic needs are guaranteed to everybody, like today in "First World" countries. In this case, efficiency and productivity gains due to technological progress would be enough to continue to rise the living standards. We're unfortunately a bit away from that still. Above all in the "Venezuela" scenario I mentioned before, a mechanism should exist which would help to build up the economy - above all infrastructure - fastly. This is today achieved by loans and growth.

It isn't necessary that this mechanism is based on loans, I have some hopes with respect to better bartering systems, maybe based on cryptocurrency technology. At the end the economy always boils down to a trade of goods (including work and services) for other goods, the intermediary "glue" (which is fiat money, in the current economy) is the interesting part where the mechanism would work.

a savings & loan would usually be organized like a credit union, where the institution is mutually held by the depositors and borrowers, who have voting rights re how it is run. i think that's much more attractive in terms of liquidity vs p2p lending, since depositors pool their money together in a joint venture. creditworthiness would probably be handled similarly to financial institutions today.


it comes down to a question of free markets. the wildcat banking era (also known as the free banking era) came to be because of a lack of regulation or enforcement mechanisms around banking. what was the ultimate solution? creating the fed!

pick your poison, i guess. :D


the problem is it's not just fiat money that is the intermediary glue, but robust systems of credit. interbank lending, collateralized lending, central bank QE, fractional reserve based retail lending etc etc. i dunno how robust these systems would be in a bitcoin-based economy.

that hard cap on the bitcoin supply really lends itself to hoarding.

Keep in mind that central banks existed when there was a gold standard. There is no reason there couldn't be a lender of last resort on a Bitcoin standard. However, as your wrote, since the banks are backed by reserves (instead of a printing press), the reserve requirement could not be as low as it is now.

I don't think it would result in a credit crunch since the value of the money would increase until the supply is sufficient to meet demand.

If the loans with interest, we return to the pre-1971 point where you will need a lot of money but you do not have sufficient cover for this money. The governments solve this problem by printing more money, but we cannot do that. In other words, in the long run, lending will fail using Bitcioin.

Second layer may be a solution to this problem, and one of the scenarios that can do this is this project ---> https://github.com/omnilaboratory/OmniBOLT-spec.


This feature will provide the possibility of lending in BTC/ALT/stablecoins, such as USDT, and Bitcoin can act as a partial reserve system.

Again, you come up with a Bicycle-starting it with the fact that instead of a round wheel, put a square one. Why BTC and not another cryptocurrency? Why can't I use any stablecoin for lending? Why replace all Fiat exclusively with cryptocurrency at all - this will not give the expected effect, but will only lead to the change of one Unicode character to another? So many questions and so few answers...

That doesn't address the cost of borrowing money, which may be prohibitive given BTC's scarcity, or the potential lack of lending liquidity that could occur for the same reason.

Let's say the world population quadruples, or increases 100x for that matter. Bitcoin's money supply would of course stay the same, but in order to sustain this population, we would obviously need a much higher economic output.

How does Bitcoin scale in this scenario? How can it be effectively distributed to every borrower in the economy who needs a loan? And how do you get lenders to keep rates cheap enough that borrowers can keep their heads above water? As demand increases for borrowing liquidity, rates will increase. As the population increases, demand for loans increases. This is a vicious cycle. I don't see a way out.

In general first thing of taking loans is that you take it in currency you get income in. So if you get salary in CHF you dont take loan in Euro. Or the opposite. IF you get salary in Bitcoin you dont take loan in USD. Not now not in 10 years time.

Assuming that economies continue growing, Bitcoin is deflationary. That means that its value grows to meet the demands of the world's economies.

Higher interest rates are ok. Borrowers that cannot afford debt should not borrow. Excessive borrowing is destructive and low rates encourage excessive borrowing.

I have seen that the NEXO platform offers loans at very low interest rates at 5.9% they demonstrate that they are competitive in the global market to reach a loan on your platform you need to approve KYC and deposit in your bitcoin wallet and you can receive the 50% of what you have in the deposit.
OP has mentioned that banks could have bank accounts with less deposits, I think there will be supply and demand for fiat.

Since interest rates would grow with the population, it's inevitable most of the population (including otherwise viable businesses) would eventually be unable to obtain credit, through no fault of their own. It wouldn't have to do with excessive borrowing but rather scarcity of lending liquidity.

That doesn't seem okay to me. Ideally a currency should scale to the size of the economy, not break the entire credit system as the population grows.

What lending does to regular currency is creating money that doesn't exist. Let's say there are three people, A and B and C, these three people have a total of just one dollar, person A has 1 dollar and person B and C do not have any money at all.

Now, there is just 1 dollars in between them right? Let's assume person A loans the money to person B, that means Person A has rights for 1 dollar and could spend 1 dollar saying he will be paid back by person B right? And Person B has 1 dollar because he got it from person A as a loan.

Now, let's say Person B gives it to person C, same happens, now person B can spend 1 dollar saying person C will pay him and Person C has 1 dollar because person B gave it to him. Then, we can say there is 3 dollars in the market, person A will get it from person B, person B will get it from person C and person C got it from Person B. In reality there is 1 dollar total, but 2 dollar debt, and 3 dollar total money owned by people. That's the problem with loans.

My contribution to this is that, the reason why fiat seems stable and can be used for everyday transactions as well as for provision of loans and borrowings is because of the regulatory factor and the forces of government in other to ensure that. The moment a particular currency begin to be fluctuate, that is the beginning the of the crumbling of the economy which is something that the country will not take and these seems to put bitcoin at a disadvantage remove all of these interventions and regulations in fiat, it will be the same thing as bitcoin if not worse.

It’s not just about loans, imagine that the world decides to start making use of Bitcoin and there is no more Central bank, how do you imagine the world is going to be? The government will no longer be able to monitor how money goes in and out of the country, things are seriously going to change. And people will be doing whatever they want and acting however they want to without having any problem. When you’re scammed there will be no way to trace it, and if you are rich, since all your money is stored in cryptocurrency anyone can break in and steal everything from you and that’s how you will end up losing it.

After the collapse of famous BTC based lending site "bitjam" (please correct me if it was btcjam or something similar to that), I don't think lending into a complete stranger will be working without proper collateral. Because, to deal against complete stranger, we must need how banks are working on that. Without that kind of mechanism, I'm still not thinking about the possibility of successful lending opportunities in bitcoin world.

I am not sure if the world uses bitcoin as the basis of the state. Bitcoin is not fulfilling beliefs as the basis for the country's economy or anything else in my opinion. for me bitcoin is still vulnerable in security and now a lot of theft in the digital world. if bitcoin as a small transaction payment instrument in the scope of simple needs i agree about it because the risk is not very large. if bitcoin is the basis of the country's assets i am still in doubt because the risk is very large later ..

it's just your mind and some of the crypto fans are fans, it's clear that a market that works in the background can't be sure of anything. In my opinion, Bitcoin and crypto will never replace fiat money and that is also one of the plans of whales. The whales created this market and fomo of the impossibility for traders and investors to be psychologically manipulated, a trick to manipulate and make money easier. Even if the economy collapses, our coins will die, don't expect it to be something that goes against the rules of nature.

Yes, a "Bitcoin Central Bank" would be basically a bank like every other. In theory, one could imagine a state-backed Central Bank even in a society with a Bitcoin standard. Such an instituion could give out Bitcoin-pegged, state-backed stablecoins in times they want to increase supply. A kind of "Government Tether", basically a bond with "character of money". This approach has been used in countries like Argentina (the infamous "Lecop") already, with some (limited) success, although obviously not with Bitcoin but the US dollar as standard.

However this approach would be limited if the Bitcoin price had still a tendency to go up, due to the risk of a state insolvency. It would not be suited for the "Venezuela scenario" I had in mind, but perhaps in the long term when Bitcoin reached a relatively stable price after a period of mass adoption.

I don't understand fully what you mean here. Just the phase with increasing money value would be the one where access to credit would be severely limited.

True, technical solutions like Omnibolt can definitively help. A partial reserve system based on these tools is surely interesting.

What however could be a problem (if my interpretation is right) is the total transparency: Let's say a Bitcoin bank issues partially backed stablecoins. If the level of the reserve goes down because the bank tries to increase liquidity, this would be visible for everybody, and this could unleash a domino effect of sinking trust in this bank and problems to maintain the Bitcoin peg.

One possible idea is to combine the Bitcoin peg with a commodity-based peg. Banks could invest in "real-life" commodities and use these investments to back their Bitcoin-based stablecoin partially.

@extasie: Pretty much this. It would be a systemic fault. While an excessive credit liquidity is also not good, the crunch imo would exceed greatly a "sane" reduction of that liquidity.

Not now but in the future Defi-Style Lending ; Because while DeFi is covering a wider range of areas — from remittances to derivatives and investments — its most promising sector involves credit and lending. That's because, thanks to the openness, security and transparency of blockchains, it's possible to make loans and credit available to a larger pool of people than ever before, while the interoperability of blockchains opens up the possibility for creating a spectrum of new lending products and services.

I never really gave a thought about loans in the Bitcoin or Cryptocurrency World since it might have lots of risk but reading this gave me better insights about it. It also occurred to me that Cryptocurrency might not possible replace cash since its hard to introduce Cryptocurrency to the whole world. We only know that they at least heard about it but not fully knowing its capabilities.

Loaning in the Bitcoin world depends on full trust. If you want your name stained, then scam them BUT nobody wants that since people can get more profit by staying a trustworthy user.

Loans are certainly very risky to use, even in the real world loans can make us poor. So avoid loans in my opinion,
Do not use capital from loans for trading. Use loans only in emergency conditions, and most importantly adjust loans
with our ability to pay.