Bitcoin Forum

The project that the OP and the subsequent discussion has refined is now referred to as







It is similar to other entities in existence, however its primary difference is the infinity to 1, and 1 to infinity component.

Additionally, this network / protocol will not produce its own currency (asset), but instead exist alongside a cryptocurrency (such as bitcoin).

As such, the DAFNE Protocol will not directly produce an asset of value. This is not an altcoin. No select group will profit from this protocol (which is unfortunate, because I have a lot of student loans). Only individual cryptocurrency investors involved in the network will see a return on investment.

In the subsequent discussion, a higher level paraphrasing of the original rambling post (ORP) was created, and is presented first (in bold). Some of the paraphrased points contain more nuance and an exploration of these can be found in the (modified) OP following the paraphrasing (and subsequent discussion thread).

Fractional Reserve Banking is not possible because all coins Are visible at all times; They Uncover the underlying movement of Funds.   This is not necessarily true in second generation cryptocurrencies (Monero / cryptonote).However, the fundamental assertion is still true - fractional reserve banking within the primary blockchain is not possible, because one cannot arbitrarily mint coins.

Primary assumption for the following: The protocol is imagined for a post-fiat world, where only cryptocurrencies exist.

The Problem: Bitcoin (and most other cryptocurrencies) is a deflationary binary currency system.

Coins that are in an upward value trend tend to have incentives to be held, throttling spending; This can be worked with by providing Investment and Spending services simultaneously like Traditional Banks, but with a system that allows it in CryptoCurrencies with no Fractional Reserves.

A deflationary currency might decrease money velocity because of the increasing value of the currency discouraging spending (yes, this is a debate and experiment that we have all just embarked upon). Also, a deflationary currency may negate the incentive to invest. Why risk your money if your moneys going up in value anyway?

A binary currency makes it difficult for conventional banking and lending systems to work entirely within the confines of a singular cryptocurrency network. Binary here is referring to the fact that you either have the currency or you don’t. You either have 1 BTC in the bank wallet or you don’t. You can’t take a deposit from someone in BTC, then loan out 0.8 of that BTC, and still have 1 BTC available to the depositor (without the intervention of a separate banking ledger system). (yes, this is a crude painting of fractional reserve banking, but work with me).

In an effort to introduce a type of fractional reserve banking, more aptly called something like a partitioned banking or something (there's some math word that indicates you've broken something into its smallest pieces but each piece still has the property of the larger piece...)

A Protocol for CryptoCurrency to be moved from Investors, to Businesses and projects, using a Blockchain to Record Records and lock Funds in place.

Thus, I present the Decentralized Autonomous Lending Protocol
(and Granting and perhaps payroll and automatic payments why not)

This is presented in a fashion where the underlying technology is only roughly sketched. Instead I focus on the user experience and the fundamentals of the system in the hopes that someone with expert knowledge of coding and what-have-you can make this into reality.

The idea is to create a lending protocol for the bitcoin network that works within the currency - no creation of a new coin or asset required.

The network gets its security from the same technology that bitcoin does - the blockchain.

Risk Mitigation by Dividing Investment  Sources, maintaining a Withdrawal Reserve and  Rating System on a Merge-Mined Coinless Blockchain DataBase synchronized with the Bitcoin Blockchain.

However, unlike bitcoin, a lending protocol requires something to mitigate risk - that is, if I lend bitcoins to someone, how do I know they’ll pay me back. The protocol will utilize 3 components - 2 of which are algorithm-based, and the 3rd of which is human-dependent.

The protocol primarily mitigates risk by distributing the risk.
A secondary mitigation is a decentralized autonomous reserve
Finally, the protocol allows for a trust network to be built.

The protocol will exist as a blockchain on an alternate chain - a blockchain completely separate from bitcoin, however utilizing the exact same technology in order to capitalize on the network power of bitcoin. To be described later is how participating in validating the Lendchain will provide rewards to miners.

Because this will exist on a seperate blockchain, this protocol requires a secondary wallet, called the lendwallet. This lend wallet ultimately communicates with both the bitcoin blockchain and the lendchain.

Proof of Stake Hedging by Borrower, Funding limits by Account Amount.

How the lending process works:

Jane wants a loan for 100 BTC. In order to take out a loan, she must participate in the network by installing a lendwallet. She must also transfer into the lendwallet some amount of bitcoin. In one variation, we can imagine that you are only permitted to borrow 10X the amount of bitcoin you have placed in your lendwallet. Think of this as a minimum deposit required in a bank.


Borrower Funding Terms and Offer Application submission to Blockchain.

So after Jane deposits 10 BTC into her lendwallet, she selects “request loan” and fills out the details - mainly, the amount, the repayment period, and the interest she will offer. Additionally, there is space in the loan application to provide more information - what the loan is for, or space to include a web address or phone number such that lenders can further investigate the loan request.

She then submits the loan application out to the network, and this is stored on the blockchain. Other people with lendwallets are notified of this loan application, and they can choose to invest in it.

Investment Management Screen integrated into a Investor Social Network transcribing Loan Applicatioins and Commitments to the Blockchain.

When a loan application first enters the network, it is clearly high risk - some random person wants you to send them some BTC. If you find the application convincing enough, you can choose to be the First into the loan. Being the first provides some bonus, because you have taken the most risk in this loan.

So Bill sees Janes loan application and decides to be the First. He doesn’t have much BTC to invest, so he only claims 1 BTC of the loan. Because he can only provide 1/100 BTC towards the loan, he can only claim some % of the First reward. Besides, its in his interest to share the First reward with other initiators, so that they will initiate.

So now the blockchain has stored that Jane sent out a loan request for 100 BTC, and Bill has put 1 BTC towards it and claimed X% of the First reward.

The blockchain has been updated. On Donna’s screen, she sees the loan and a “1% backed, 90% First Remaining””, and now Donna sees that the loan has some backing. Donna thinks “maybe Bill trusts Jane”, so she decides to put 5 BTC in and claim 20% of the First reward.

Now, when Bill and  Donna put their BTC into this loan, what they are doing is sending their BTC to a script that will only release BTC to Jane if the loan is fulfilled. So in Bill and Donna’s lendwallet, they are -1 and -5 BTC respectively, although the BTC haven’t been transferred yet.

This continues, and the information keeps getting added to the blockchain for Jane’s loan application.

By 40% fulfillment, the First reward is probably gone. A lot of members on the network see the loan is 40% backed, and think its a worthy investment, but they don’t want to risk much. So lets just assume for simplicities sake that the remainder of the loan is filled with people putting up 0.001 BTC each….

thats 60,000 people investing into this loan.

Which is totally doable.

Because its decentralized and autonomous and its all stored in the blockchain!

Secure Borrower Lender Blockchain Based Escrow with Repayment Distribution

So the loan is filled. The blockchain script recognizes that the loan has been filled and activates the transfer on the bitcoin network and tens of thousands of transactions occur in order to fill Jane’s loan request. 100 BTC shows up in Jane’s Lendwallet. Jane transfers the 100 BTC to wherever and does whatever she needs to do. And she starts paying the loan back every month.

To make payments, she transfers BTC to the lendwallet, and then goes to “make loan payment”. She clicks on the loan that she wants to pay, and submits a payment.

The payment activates the loan transaction in reverse. When Jane hits “submit payment” button, this information is sent to the blockchain. The transaction that was initiated upon filling Jane’s loan is then found and the transaction occurs in reverse, with Jane’s payment being split 10’s of thousands of ways… because hey, its digital currency!

Payment Distribution using Bitcoin Merge-Mined Coinless Block-Time; Re-embursement for support through Interest.

Lets assume Jane’s loan was for a car, and she asked for 5 years. To keep things simple, lets just say she offered 5% interest (and I won’t compound it because I don’t feel like finding that excel function). So she pays 1.75 BTC per month. So the interest in each payment is 0.0875.

Here’s how the interest would get broken down.

10% to the miners (split evenly between lendchain and bitcoin blockchain)
5% to the Decentralized Autonomous Reserve (DAR)
10% to the Firsts
Remaining 75% go to lenders.

So, the lendchain miners will get a reward for every new block mined. This reward will be funded by some of the interest rate.

5% of the interest rate will go into the BTC transaction for the transaction costs of BTC.

10% goto the Firsts based on how it was divied up, and the remaining 75% goes back to the lenders based on their stake in the loan.

Decentralized Autonomous Reserve loan insurance Dividends.

Now whats this decentralized autonomous reserve?

The Decentralized Autonomous Reserve is a mechanism for the network to provide insurance for lenders. Additionally, it is a means of revenue for those participating in the network (DAR Dividends). In a nutshell, the DAR is a pot of money that can be used to pay back lenders some percentage of a defaulted loan. How much insurance is provided is dependent on how many people have backed the loan.

This prevents any exploitation of the reserve by exploiting the fact that collusion decreases as you increase the number of people involved.

Variable DAR Insurance based on Risk Mitigation Threshold.

How the Decentralized Autonomous Reserve works. How the loans are insured based on the community backing.

< 100 people backing : 0% loan insured
100% insured occurs at 500 000
Insurance rate is exponential from 101 - 5,000 lenders for 50%

For 5,000 at 50%

X = 0.459308

percent insured = (# of lenders)^0.459308

101 = 8.329%
1000 = 23.874%
2000 = 32.8%
3000 = 39.5
4000 = 45.12
5000 = 50%

Then 100% at 500,000
x = 0.29834

percent insured = 50% + (# of lenders - 5000)^0.29834
6000 = 57%
10 000 = 62.69%
100 000 = 79.5%
400 000 = 97%

So here you can see that the loan is only fully insured when 500,000 people have backed the loan. In the Jane / Bill / Donna example above, with roughly 60,000 people backing the loan, only 75% of the loan is insured. And the numbers above can be modified or made to float based on participation in the network.

For example, if the network contains 300 million lendwallets, then the 50% would be at 500,000 and 100% would be at something like 5 million. And perhaps the lower threshold should be 500 or something.

This prevents this type of collusion: Jane goes to Bill and Donna and says “Hey, I’m going to take out a loan application for 100 BTC and totally never pay it. You two should back the loan, and then when i don’t pay it, the DAR will totally put money in your lendwallets!” In the basic plan outlined above, if Jane, Bill and Donna can convince 97 of their friends to collude with them to screw the system, they would only get 8.3% back, split between 100 people.

So for the DDR, its a matter of identifying certain #’s that will provide people security and deter collusion.

An insurance payment will be made based on some TBD set of rules - if a loan goes unpaid for over X amount of months, the DDR kicks in to start paying back on a monthly basis up to the insure point.

Bitcoin Blockchain separation of Risk by Transcribing bitcoins to Lendwallet Blockchain Control; Funds are Encrypted by Local Wallet, Fund Access is Separated by Loan Application Encryption. i.e. All levels of Transactions are encrypted into their respective Categories and Requests for maximum security.

How is money in the DAR stored?

This is where some of the folks with more knowledge of the technology would come in handy, but I imagine it as this:

In the lendwallet there will be two balances - the balance of your personal funds in the lendwallet, and the balance of your share of the DDR. Your share of the DDR is determined based on the amount of BTC you have loaned.

So, if you have loaned out 50 BTC, and the DDR is currently at X BTC, the amount of BTC in your personal lendwallet DDR is at least 50 / X. For simplicities sake, lets say its 1 BTC.

This 1 BTC is stored locally on your computer but is not accessible by you - you can’t spend that 1 BTC, only the network can.

However, because the information associated with that bitcoin is on your computer, the reserve protects itself from being robbed - its decentralized. It also protects itself from being manipulated, because its autonomous.  

Investment Incentives through DAR Dividend, Better Risk Management equals better Return Dividend Bonus to Discerning Lenders.

What is a DAR Dividend?

The purpose of the DAR is to provide insurance against people defaulting on their loans so that people will actually invest in loan applications from strangers. The purpose of the DAR is not to accumulate massive amounts of wealth. Thus, there will be some algorithm that calculates how much money is required in the DAR based on the amount of loans currently floating in the loanchain. If total DAR funds exceeds what is necessary, the difference between these two values will be distributed to lenders in proportion to the amount of money they currently are lending (averaged over the month). This again provides incentive for individuals to participate in filling loans.

Individual Risk mitigation through Micro-financing a diversity of Loan Requests.

Why did all of those idiots buy into Jane’s loan for 0.001 BTC? Surely they won’t get that much back on their investment!


Indeed, they won’t get back on the single investment they made into Jane, but these individuals may have made thousands of different investments. In theory, they could split 1 BTC into 100 million satoshis and thus have 100 million loans out to people. By distributing these small amounts of currencies, these individuals are able to diversify their risk and thus mitigate the risk.

Lending and Borrowing Social Network Block Explorer.

Other network features:
Automatic credit history - all of your actions are recorded on the loanchain, so lenders can get an immediate picture of what kind of borrower you are. No more magic numbers from strange companies.

Grant function - the same mechanism for loan applications can be utilized for grants (a.k.a. crowdfunding). In this case, the BTC are simply not expected to be paid back.

Emergent trust networks - If Jane is a good borrower, Jane might know people in the real world that also need to borrow money that may have no history on the network, such as Ralph. So Ralph puts his loan app on the network, and Jane backs 50% of it immediately. Alternatively, if jane doesn’t want to front the money, Jane can just put the loan app out herself, and then its up to her to get Ralph to pay back the loan. In a way, trusted borrowers on the network may be able to charge a commission to non-trusted borrowers.


Possible exploits (unique to this network, ignoring the existing blockchain exploits)

The Spread The Wealth loan - Someone could put out a loan app with the explicit intention of distributing a portion of the DAR to those that claim a stake in the loan. For instance, one could request a 1 BTC loan for this purpose, and theoretically 100 000 000 people could claim a 1 satoshi stake in the loan. The borrower never pays, and 100 000 000 people get 1 satoshi each from the DAR.

Loan Risk Flagging

One could create a countermeasure by including a “ban” option in the lendwallet, and if the network reaches a simple majority ( > 50%), the loan could be denied. Alternatively, the number of backers required for insurance could be increased substantially.

Social Welfare based Risk Mitigation by removing Investment Incentives and DAR Dividend Recalculations: Those with excess funds can donate Interest Free Loans on a flexible re-payment plan for Social Welfare.

Alternatively, the STW loan could be utilized as a decentralized autonomous crowdsourced way to ease difficult financial times - essentially, create liquidity (essentially what the fed does by printing money, but in this case the money isn’t being printed, its just being released). However, the borrower now has 1 BTC. So if it were used in this manner, the backers of the STW loan would have to trust that the borrower would similarly distribute the loaned bitcoin.

A strength of the system: Autonomous “quantitative easing” - type liquidity measures.

If STW loans are filled, and the DAR is drained, this might causing a decrease in lending, which ultimately decreases the DAR.

However, the decrease in lending would reduce the amount of loans that need to be insured, so the dividend payments for network participants would skyrocket, essentially distributing the DAR anyway.

In general, if market conditions get to the point where lending is decreasing, the amount of money required in the DAR will naturally decrease (because there are no loans to insure), thus causing an increase in DAR Dividends, which would spread the money around and potentially encourage lending.









donations:
Monero:
46aRPgXEgqf23G2VU5fy4oeKBGpU6uXSv57CkXKrz4EbDwDeh573QQhZYeyjriWAMUhNoBHMUwkGV2A 2ppWwAx4JT9HNJ9h

BTC:
16pJUsLr8B6d2ueL4gzL6XgcxiJKRxaUVS

Can't really download it, but there's a fundamental thing that should be solved (unless I'm much wrong). How do you make sure Jane will repay the loan?

can't download because the link didn't work? Or don't trust the filetea?

How to make sure that Jane repays the loan? Trust.

The DLP allows a trust economy to evolve. The "loan app" is not defined - its just some package sent out to the network. Presumably small packet, perhaps includes a web address that as a full profile, or a credit report (in our current currency system), or a phone number(!?!?!) who knows.

If someone originates a loan, they apparently trust jane to some degree (based on loan app). The amount that they trust jane is inherent in how much of the loan they leave for the network to get into.

If I really trust jane, I'll gobble up the whole loan. If I trust jane only so much, I'll only reserve 10% of the loan, and put the 90% out into the network.

Because I took the plunge, I would get some origination bonus. And I can also leave this origination bonus open (percentage of percentages at this point) for other originators to dive in.

Ultimately, the idea is that people, when not being blatantly screwed over by a system, try to be good.

And ultimately, if this network catches like wildfire, individual lenders can have 0.00000001 (or whatever the satoshi is) at stake, so its really no big deal.

but the point is, it gets peoples bitcoins moving!!!

BITCOIN VELOCITY!!!!

Hrm, this idea has been presented before...

http://derekkaknes.tumblr.com/post/71966020365/bitcoin-is-a-credit-scoring-protocol-not-a

though I don't think they fleshed out how the network would work.

(edited because I can't spell )

compare to existing decentralized approaches

http://bitcoinist.net/loancoin-a-decentralized-crowd-lending-network/

http://maclanewilkison.com/decentralized-crowdlending-2/

This is LoanCoin, which at first glance also promotes FatCatism (i'm at work though, can't put my head entirely into this now) - putting the power of lending in the lender, not the borrower. Also works through addition of another asset.

The OP has been edited to display Version 2.0 of the "whitepaper" about my idea.

I stopped reading after the first sentence. You clearly have no clue how banking works.

Please explain. Educate me.

I love the detail, wow and I guarantee you someone is already building it, somewhere out there thinking of setting it up for revenue and others completely decentralized systems with share distribution.

You know you can mitigate risk if you link some businesses together in a completely open manner using a DAC.

If the DAC is completely open it can simply route the money through the Corporation Digitally, marking costs and revenues in Real-Time.

Setting up a good flow for the Coins is essential to fund all facets of a DAC along with labels and metrics for work being done. If this flow is visible to everyone it can be Crowd Sourced, providing revenue for 1000's of investors in Real-Time using your idea. It is quite powerful, when you completely automate it with a Transparent Structure.

I hope everyone understand that a Business is nothing more than a Dispersal of Money to Job Assignments, It is a channel by which money travels through from Customer to Businesses and Investors. To create a Business is to merely understand it's requirements, setup people or machines to carry out work, pay or maintain them to continue that work, observe it being done and provide a Product or Service that channels those Coins effectively through the Corporation; The fact we can automate it is quite impressive, but creating a Market is far more Interesting. A well organized structure can be a platform to bring people and machines together to offer services, forming spontaneous Conglomerations; bringing Consumer and provider into a integrated Directory of Purchasing, Investing and Production.

I think we may soon see Drop in corporations appearing on the web, selectable and openly available for anyone to deploy as a service; The structure is already designed for you, you just have to fill in the positions and advertise it, instant business deployment in any part of the world with a Distributed Investor Structure.

An implementation of a lending market has been described in the OpenBazaar docs here (https://github.com/OpenBazaar/OpenBazaar/blob/a732825c43cb4812c8db8e557d99e8816a396f44/docs/markets/03%20P2P%20Lending.md), but since the project is still in beta, along with other stuff, implementing a lending market may take a long while. I'd be willing to commit code to this project if there's already an existing Git/Github repository for this, or make one for it if there isn't already.

Hmmm now this is interesting. But how do you make it easy for people in the lendchain to know what Jane's idea is with using with the money. Is it like a web based thing where you would write a business plan etc. and then apply for the loan and people would sort of shop around at different peoples ideas and say maybe I want to loan 0.2 bitcoins for a water reclamation project. That's certainly an interesting idea.

Saying that fractional reserve banking is not possible with bitcoin is a myth that is not based in reality. In fact fractional reserve BTC banking is exactly as much possible as in FIAT.

MtGox takes 1 btc deposit from a customer and gives an IOU to the customer. The customer sees this IOU on his computer screen every time the customer logs into MtGox website to have a look at his balance. The customer does not have an real and genuine BTC after the customer has deposited it into MtGox. It is now MtGoxes real and genuine BTC and MtGox can do whatever they want with it. MtGox lends out 0.8 of the original and real BTC and leaves 0.2 BTC into MtGox wallet. Fractional reserve banking has just happened.

MtGox does not have the full 1BTC available to cover their IOU and to pay back the depositor but that is exactly what is also true in FIAT fractional reserve banking. They also do not have the full 1 USD available to pay back the depositor but instead only a fraction of it.

However it all works in practice because there are a large number of depositors and statistically they do not all want to withdraw at once. Exactly the same  principle why the banks get away from not having the full amount of real money available in FIAT world and why it is also possible in BTC.

Actually in BTC world fractional reserve banking is EASIER than in FIAT world because in BTC world there is nobody to enforce the reserves whether they exist at all. In FIAT world there are all kinds of red tape and accounting rules and whatever that FIAT banks would love to get rid of to be able to do exactly as they want with nobody stopping them. In BTC world the banks got exactly what they want. No red tape from any government or anybody else at all.

Yes, but how do you have fractional reserve banking without being linked to fiat. I think what the OP is saying in a perfect world where fiat does not exist and there are no conversions back how do you have fractional reserve banking?

Do you even know what fractional reserve banking entails?

1) The reserve requirement is set by a central authority

2) Banks are now allowed to lend out a percentage of other peoples demand deposits based on the ratio. This is the step where we talk about creating money out of thin air.

3) The loan comes into existence as an entry on a computer by the bank. The bank then enforces the "loan".


You know what you need to watch. That parliament hearing in the UK on the financial system that was posted here a week or so ago because there are politicians more knowledgeable than you on the subject.

How are you going to create bitcoin out of thin air? How are you going to accomplish step 2 of fractional reserve banking? Tell me how how how

You lost me right here. How are you going to create bitcoins out of thin air without some sort of link to fiat or some sort of fraud. You can't just mine coins into existence with a stroke of a pen like they do in modern banking.

You're wrong it's a fraction of a demand deposit. But in the bitcoin world there is no fraction. You either hold the coin or not. To say fractional reserve lending is possible bitcoin is akin to having 1 bitcoin with the same identification in two different wallets at the same time. Who owns the rights to the coin. It doesn't exist.

Some people want to make this whole thing of fractional reserve banking to sound more mysterious than what it is by saying that the creation of money out from thin air happens at the time when the loan is given out. Actually the creation of money from thin air happens at the time of depositing.

When the customer deposit real money to bank and bank gives out an IOU to the customer that is the moment when money is created out from thin air and it works exactly the same way in BTC as in USD banking. After this creating money from thin air at deposit time the bank now has the original and real money in their hands that they can give out to somebody wanting a loan.

The creation of money from thin air happens when a bank offers an IOU to the depositor instead of real money. An IOU that both BTC and USD  banking customers see on their computer screen as their balance. That is not real money. That is just an IOU created from thin air by the bank.

You are making it sound mysterious because you don't understand.

Tell me how in what you just described it would not entail ownership of a coin in two different wallets at the same time...

All these regulations, interest rate setting, and the FDIC exist to mitigate the risk of fractional reserve lending (creation of money out of thin air).

By this I mean when 2 parties hold the rights to one single note of money. Hence bank runs. How can a bank run exist. You've lent out a note to someone else to spend into the economy that was already being held by another party.

There is only one original and real bitcoin involved and it starts out in depositors wallet. From there it moves to banks wallet and from there to lenders wallet and from lenders wallet to whatever vendor the lender wants to buy stuff.

There is no other second bitcoin involved. Both the depositor but also the bank have lost the ownership of the real and genuine bitcoin once it has been loaned out from the bank.

In addition to this one real and genuine bitcoin there is an IOU presented by the bank to the depositor as the depositors balance. That bitcoin is not real and does not exist in anywhere else than pixels on computer screen created from thin air.


These do not exist in BTC world. There is no mitigation of any risk in BTC world. Happy fractional reserve banking to everybody as they please without limits or regulations.

@ab8989: The entire point of the above gist in the OP is to explain how a lending system similar, and I repeat: similar, to fractional reserve banking. Also because of the reasons outlined above, fractional reserve banking would even be possible. What the OP was trying to present was a system where everyone would have, and be working with, real BTC, and not IOU's of the real thing.

Now, is there anyone who wants to help code this up? I know Python and some JavaScript.

I think this is the point where I go out for a drink and some grub and say I don't know anything about programming.

Yes, unfortunately I also do not have any ability to code. I am happy that I just achieved the ability to control two headless linux boxes in my house using ssh! Slowly but surely, I am learning to accept The Terminal.

And yes, to clear up some of the above discussion, the idea is intended for a post-fiat world - a world in which only crypto exists.

This was included in the original PDF version. I have modified the OP to include this assumption.

re: theblacksquid, go for it! Set up a github! Cause I dunno how! I will glady contribute anything I can, but when it comes to the coding, I fall short.

re: jdbtracker - I need to revisit your response when I can give it more time (maybe later tonight - got some chores to do), but it seems what your talking about is similar to some of the other lending DACs that are out there - they create another coin system and another asset, which I believe muddies the system.

And thank you all for responding! I thought I was going crazy when no one responded to my version 1 - I may be in a manic swing, but this protocol has the ability to completely disrupt banking. There will be no need. It will also disrupt credit agencies - because a lendwallets credit history is stored in the chain.

You've laid out most of the structure so now, we have to develop a work flow

The Interface for Lenders and Borrowers
Investment directory
Secure Blockchain to send Bitcoins for Consolidation and Distribution
Investment Contracts
System Statistics
Ratings Service
API for DAC support(for monitoring operations by investors and secure Transfer of funds)

A destination can only get clearer when you have a map.

*someone from the background shouts* THANK YOU SO MUCH, CAPT. OBVIOUS!

Oh, and the Github repo, I'll get one up. Links to come.

Well, in an ideal world usury would not exist.

Given increased usage from increased population growth leading to increases in velocity of coins and increases in productivity from the private sector in a closed box system the currency should gradually increase in value based on those factors. This is based in a system of scarcity. Why the scarcity? I don't know, people are greedy. It shouldn't be this way but, it is unfortunately.

Would not the idea of lending be moreso, I have more money than I need right now let me essentially help some other people out. I guess in the long run I would like to see what your proposal is with no usury? What about an interest free loan? Is not usury a symptom of an inflationary system? What would happen with your system?

I guess what I'm saying is what about in an ideal world where usury doesn't exist (I'm thinking very long term here). Doesn't that throw the dividend and risk mitigation out the window? What if someone wanted an interest free loan? How does the math work there in your example? I'm not saying right off the bat. This is a great stab at a modern way to lend money using bitcoin architecture. I'm just saying if it ever got to a point of an interest free loan. What would happen? Right now I see that people would need incentive but, maybe down the road the incentive is my bitcoins will buy more 5 years from now tied up with someone else paying me them back than it would in my pocket right now collecting dust due to productivity gains in producing consumer goods. Or maybe the person is simply generous as you see with a lot of the tipping that goes on in the community.

I like it though. You could call it crowdlending. I also like that the terms of the loan are up to the loanee instead of the loaner.




"Give to the one who asks you, and do not turn away from the one who wants to borrow from you."

Indeed - how would the system work with an interest free loan? The short of it is that, similar to the standard BTC network, some fee would be added to cover the efforts of the miners. Or, no fee - and the loan has the same problem as an fee-free transaction in the future BTC network when there are no new coins to mine.

An interest free loan could come about in two manners - 1) the borrower requests an interest free loan, or 2) the lender decides to fund a loan interest free.

In option 1, the workflow is no different than described in the OP - the loan (and all of its associated transactions) would suffer the same consequences as a BTC that doesn't have a fee. Maybe additionally there is a stipulation that interest free loans aren't insured by the DAR (because they are not contributing)

In option 2, Bill see's Jane's loan and goes "damn I want this to happen" and clicks a button to fund the loan entirely without interest. To keep things simple, this action supersedes any previous by ins to the loan. If the loan was 50% funded and Bill decided to stretch his philanthropy muscle, all the people in the 50% get washed out.


Okay, jdbtracker - thanks for entertaining this idea with some structure. Okay, so now we're at the point where the hardest part is figuring out if everyone's on the same page talking about the same thing....


Okay, the interface I can draw out or mock up with some crude powerpoints or one of those online animation doohickies or just pen and paper this thing and snap a pic. Any preference?

I don't understand what this refers to. I imagine this directory will ultimately manifest in the lendwallet as the searchable list of loans available for investment.

Okay, so in my imagining of this, the loanchain is essentially building a transaction (lets call it the Singularity, because it is one thing (the loan application) that is drawing all other things towards it (people lending into that loan) that is in suspended animation until the 100% mark is met. Once this occurs, the singularity is then activated on the BTC blockchain. So the loanchain itself does not send Bitcoins... but of course this is obvious and I might just be explaining things to here myself talk (or type). I apologize! But the building of that transaction needed a name, so we now have it.


Okay, this is more or less the loan application, correct?


So this would be just a way for any end user to see how many loans are in existence, how much is in the DAR, etc.


This would more or less be an equivalent of being able to search a blockchain. I say for now, we keep it simple. Longest chain of on time payments, number of loans repaid, total amount ever borrowed, total amount currently borrowed.



^^^ honestly, I think all of these things would be in the lendwallet, right? But yeah, an API indeed.


Back to the usury comment real quick - I dunno if it was because I didn't explicitly state it, but in this system, the borrower sets the interest rate. Granted, a borrower is more likely to get a loan if they offer 30%, but there's nothing stopping them from asking for a 2% loan.


All right... I will work on what I can ( some mock up of the interface, I guess... or a more detailed workflow).

In the meantime, I'll put up the original PDF. This filetea service is volatile, so this link will only be active as long as my browser window posting it is open.
 
https://filetea.me/t1sWbpemht3RCCB9ylFYPqRxw

checksum: C537CA3491E3E69036A4CA7E2ABFC25442B5CE48

Yes, this is exactly the idea. People will know what Jane's idea is because it will be displayed in the Lend tab of the lendwallet. Because the lendwallet uses the same blockchain idea, all loans that exist on the loanchain can be displayed in the lend tab - obviously, the lendwallet will only display those loans that are still accepting funds.

Hrm, yes, it could be a web based thing - but I imagined it as an application similar to having a bitcoin wallet running on your computer - but indeed, a web interface would be a logical phase 2 after the core is built.

But yeah, like anything decentralized, it will need people participating in full node support (blockchain storage and hashing) in order to maintain the network, and this would be rewarded with some amount of BTC, as described.

The largest and most common misconception of the bitcoin community as well as newbies and others looking into bitcoins is that Bitcoins is an actual currency with the expectation to replace cash as we know it. This is not what this currency was for. Bitcoin is a digital currency meant to provide a better way to transact cash itself. Not to replace it. But intelligent people know if you really understand currency trading and banking operations in addition with money transfer companies and policies, Bitcoins has the ability to make the Big Banks ( not the currencies themselves) but the BIG Banks to go bankrupt.

All Banks do not create money, Money is created by one central bank only and is based on something. Gold, imaginary gold, how many fish are in the sea, whatever they base it on. It also only has a certain  amount that can be created. the more they create the less value their currency is worth.  The need a high value currency to trade it with other countries to buy and sell goods and services.

Why can bitcoin bankrupt Big Banks, 3 reasons: Bitcoin has the ability to destroy the Foreign Exchange market where the banks make 4 Trillion dollars daily trading currencies for a profit, as well as destroying the need for those hugely profitable contract options they sell, and lastly Bitcoin has the ability to destroy the need for ATM and Debit cards with a visa , mastercard logo on them. Loosing Debit cards is a HUGE hit to banks, Most banks make millions of dollars a month from the ATM fees when you use an ATM that is not your own banks ATM, not to mention the fees they charge the account holders, insufficient funds fees, low balance fees, overdraft fees. Why deal with these fees when bitcoins can accomplish the same goal and incurs tiny amounts of fees, 2 to 5 cents usually.

So Bitcoin was not created to replace cash, and never will, but it has the ability to destroy big banks who make their profit from the foreign exchange market and account holder debit card fees. It will not destroy all banks you local no name bank who is not a market mover will survive, but Bank of America, JP MOrgan, Barclays and other market moving banks like these will be bankrupt within a year of true adoption of bitcoins and their value of sending money anywhere in the world virtually for free.

Indeed, the "revenue" version is:
http://maclanewilkison.com/decentralized-crowdlending-2/

I haven't seen a share distribution yet

Here I'm confused with what you mean by "link some businesses together in a completely open manner". I understand DACs - the DALP is sort of a DAC, but there's no revenue associated with it - it just exists alongside the BCT network to provide lending service to the BTC network.

So, I assume you mean mitigate risk as in mitigate the risk associated with being a lender. So perhaps by businesses, you mean the people on the borrowing side of the equation? So, borrowers could pool together somehow to present to the DALP a loan application that involves multiple parties? Yes! This is fantastic!



I'm lost.

Okay, I think your thought chain may have forked from my original thought chain, or I'm losing something somewhere... but it could be me. I'm running on fumes here. I should really sleep. But sleep when you're dead, right?


Okay, here I think your presenting your conceptualization to the full.. and I get it... yeah! Use the DALP as a means for a business to essentially run its finances. In this case, the borrowers are branches of the company (the ones doing the jobs), and they submit (what I've been calling) a loan request  to the network. The Top of the company are here the lenders, and they can allocate the funds to the branches appropriately. And then the branches can report their success simply by "paying off the loan".


Hrm, might need to elaborate more.


Whether or not we ended up talking about the same thing, some great things happened just there.

And is this .... good?


Perhaps. And perhaps that was the same thing said about paper money at first.

http://en.wikipedia.org/wiki/History_of_the_United_States_dollar#mediaviewer/File:Continental_$50_note_1778.jpg

I understand your point but I disagree, and thats fine. I see a different future for bitcoin and cryptocurrencies, regardless of whether satoshi envisioned BTC to replace fiat or not. I doubt the folks that came up with IOU's for gold back in............ whenever.... never thought "Hey, in 500  + years, this piece of paper will have value simply because we all agree it should."

from the mighty wikipedia: "Present-day Federal Reserve Notes are not backed by convertibility to any specific commodity, but only by the legal requirement that they are issued against collateral."

Do we have a "name" or something that identifies this specific flavor of decentralized P2P lending? I'm making a Github Organization and repo.

yes, fractional reserve banking is possible with BTC, but I don't see how provable reserves (100%+) wouldn't become the standard that consumers demand in a free market.

In other words, say you want to put some of your bitcoins in a bank instead of self storage.  Do you choose the bank that isn't provably solvent, the bank that proves their reserves but only has a fraction of their actual holdings, or the bank that has 100%+ and can prove it?  I know which one I would choose.

Sigh... The OP not only doesn't have a clue how banking works, he doesn't understand "money". There are several different things commonly lumped under the label "money". How to explain this in simple words....

OK, OP's original premise is that since you can't increase the supply of Bitcoin (once all coins have been mined), fractional reserve banking won't be able to "work" because lending by commercial banks increases the money supply (the latter is true) - banks use every $10 of deposited money to make $100 loans.

The conclusion is false. Note that commercial banks are not allowed to increase the supply of physical currency (e.g., dollar banknotes). This is called "monetary base" - the currency in circulation. Only the central bank is allowed to do that. That doesn't prevent commercial banks from increasing the broad money supply by creating fudicary equivalents of money. Basically, they create an accounting entry, creating virtual money out of nothing.

Yes, this is basically a fraud. Banks create "double ownership" on the same amount of money (multiplied 10 times), because both the depositor and the entities that have taken loans from the bank have valid, contractual claims on the same money. Yes, if the depositors all demand their money at the same time, the bank will become insolvent, because it doesn't have them.

There is absolutely no problem perpetrating the exact same kind of scam with Bitcoin. Banks won't be able to create new Bitcoins - but they will be able to create multiple claims on the same bitcoins.

Yes, if you make a 100% reserves requirement that will no longer work. But the whole point of fractional reserve banking is that it operates with fractional reserves - 10% instead of 100%.

I've been calling it the DALP (decentralized autonomous lending protocol). Though if I understand jdp correctly, the underlying core of the protocol (building transactions in suspended animation and then triggering them at some point), there are many applications beyond lending and granting.

Hrm, Decetralized Autonomous Financial Network? (DAFNE)

though some would say this is what bitcoin is, but bitcoin doesn't explicitly really allow you to network currency.




and back to this:


I get your point, and I understand the argument, but I don't agree that its right or good.

"they will be able to create multiple claims on the same bitcoins."... and issue these claims with, what? as stated earlier in this thread, if we imagine some future bank of be a holder of bitcoins, we assume that your "account" in this bank is the equivalent of the bank having a wallet file for you that they store in some fantastic unbreachable system. The only way they will be able to simultaneously claim that you have 10 BTC in your account and that they can claim 9 BTC for lending is if they use some type of reserve note created that is backed by BTC and issued by that bank.

Otherwise, your BTC really isn't there. And yes, maybe this is how it worked back in the day of gold banking - I don't know. Maybe this is why, for the better part of, I dunno, history... people don't trust banks.

Ultimately, my point is: banking has its pros and cons. The pro is that it moves money around and can make things happen - lending is essentially our ability to say "yes, I believe in the future". The cons are that the manifest game of smoke and mirrors can obviously go very very very wrong (see 2008 crash).

Ultimately we may not need to do this anymore.

Maybe though we should keep it simple at first and just focus on the lending component. Either DALP or DAFNE will work. Or The Singularity Protocol.

https://news.yahoo.com/rage-ago-bitcoin-sputters-adoption-stalls-203435730--sector.html

"Analysts also provided Reuters with data that shows liquidity in the cryptocurrency remains limited."

"John Ratcliff, a software engineer at Nvidia who has done extensive analysis on bitcoin transactions, estimated that monthly liquidity is about 10-20 percent of the entire 13.6 million bitcoin in circulation. The rest are either being hoarded or don't trade because they're fractional in size."

DAFNE / DALP can provide a way for bitcoins to start moving around. I'm guessing right now that there has evolved a bitcoin upper class that is sitting on their coins mainly because there's nothing one can do with them besides hope they go up in value.

Loan app for 100 BTC. Loan app gets filled by thousands of BTC holders. Loaner probably converts BTC to fiat. Does stuff with fiat. Uses fiat to buy BTC to payback the loan. Bitcoins move. Around the world. Grains at a time.

We could probably also use the DAR to secure against deflationary lending problem to some percentage. Loaner gets 100 BTC to pay back at 5%, equals 35000 USD. Converts to fiat. BTC goes up to 400. Loaner essentially owes 42000 USD now. Something to consider.

Also should probably include an option in loan application where the borrower can ask for deflation insurance, like they'll only pay back up to 20% deflation. Again, this makes the loan less attractive to lenders, but its something that can be done. 

The DAFNE / DALP also promotes BTC stability (if adoption is widespread), because everyone involved in the lending network has a vested interest in a stable currency value.

I need to look into this more, but some of this code may exist in Ripple.... but their focus is exchange.

https://github.com/ripple/rippled

That's true, they focus more on exchanging tokens that are IOU's of the currencies that are "deposited" to gateways.

BTW, I like how DAFNE sounds like. I'll use that for the Organization name and the Repository. But, Alas, I may have to hold off until monday. Is there anyone else who could do it?

I did something, dunno if its what I was supposed to do.

It can be found in github under Gingeropolous / DAFNE

Awesome. Can you put a link to the op to the Github Page (https://github.com/Gingeropolous/DAFNE)?

Yes, but before Bitcoin, provable reserves weren't even remotely possible.   Currently, its not only possible with Bitcoin, its already been implemented in at least one company.
So, the only way fractional reserve banking can happen with Bitcoin is if consumers allow it to happen.

https://www.lendingclub.com/ is pretty nice too.

I made a Paraphrasing of the OP's post to present the ideas in a high level for scope and implementation focus.




   
Reply with quote  #1
Primary assumption for the following: The protocol is imagined for a post-fiat world, where only cryptocurrencies exist.

The Problem: Bitcoin (and most other cryptocurrencies) is a deflationary binary currency system in which fractional reserve banking is not possible because a bank can’t create bitcoins out of thin air.

Both of these aspects make it difficult for bitcoin to integrate into our contemporary financial system as a currency.

Fractional Reserve Banking is not possible because all coins Are visible at all times; They Uncover the underlying movement of Funds.

A deflationary currency might decrease money velocity because of the increasing value of the currency discouraging spending (yes, this is a debate and experiment that we have all just embarked upon). Also, a deflationary currency may negate the incentive to invest. Why risk your money if your moneys going up in value anyway?

Coins that are in an upward value trend tend to have incentives to be held, throttling spending; This can be worked with by providing Investment and Spending services simultaneously like Traditional Banks, but with a system that allows it in CryptoCurrencies with no Fractional Reserves.

Thus, I present the Decentralized Autonomous Lending Protocol
(and Granting and perhaps payroll and automatic payments why not)

This is presented in a fashion where the underlying technology is only roughly sketched. Instead I focus on the user experience and the fundamentals of the system in the hopes that someone with expert knowledge of coding and what-have-you can make this into reality.

The idea is to create a lending protocol for the bitcoin network that works within the currency - no creation of a new coin or asset required.

The network gets its security from the same technology that bitcoin does - the blockchain.

A Protocol for CryptoCurrency to be moved from Investors, to Businesses and projects, using a Blockchain to Record Records and lock Funds in place.

However, unlike bitcoin, a lending protocol requires something to mitigate risk - that is, if I lend bitcoins to someone, how do I know they’ll pay me back. The protocol will utilize 3 components - 2 of which are algorithm-based, and the 3rd of which is human-dependent.

The protocol primarily mitigates risk by distributing the risk.
A secondary mitigation is a decentralized autonomous reserve
Finally, the protocol allows for a trust network to be built.

The protocol will exist as a blockchain on an alternate chain - a blockchain completely separate from bitcoin, however utilizing the exact same technology in order to capitalize on the network power of bitcoin. To be described later is how participating in validating the Lendchain will provide rewards to miners.

Because this will exist on a seperate blockchain, this protocol requires a secondary wallet, called the lendwallet. This lend wallet ultimately communicates with both the bitcoin blockchain and the lendchain.

Risk Mitigation by Dividing Investment  Sources, maintaining a
Withdrawal Reserve and  Rating System on a Merge-Mined Coinless Blockchain DataBase synchronized with the Bitcoin Blockchain.

How the lending process works:

Jane wants a loan for 100 BTC. In order to take out a loan, she must participate in the network by installing a lendwallet. She must also transfer into the lendwallet some amount of bitcoin. In one variation, we can imagine that you are only permitted to borrow 10X the amount of bitcoin you have placed in your lendwallet. Think of this as a minimum deposit required in a bank.

Proof of Stake Hedging by Borrower, Funding limits by Account Amount.

So after Jane deposits 10 BTC into her lendwallet, she selects “request loan” and fills out the details - mainly, the amount, the repayment period, and the interest she will offer. Additionally, there is space in the loan application to provide more information - what the loan is for, or space to include a web address or phone number such that lenders can further investigate the loan request.

She then submits the loan application out to the network, and this is stored on the blockchain. Other people with lendwallets are notified of this loan application, and they can choose to invest in it.

Borrower Funding Terms and Offer Application submission to Blockchain.

When a loan application first enters the network, it is clearly high risk - some random person wants you to send them some BTC. If you find the application convincing enough, you can choose to be the First into the loan. Being the first provides some bonus, because you have taken the most risk in this loan.

So Bill sees Janes loan application and decides to be the First. He doesn’t have much BTC to invest, so he only claims 1 BTC of the loan. Because he can only provide 1/100 BTC towards the loan, he can only claim some % of the First reward. Besides, its in his interest to share the First reward with other initiators, so that they will initiate.

So now the blockchain has stored that Jane sent out a loan request for 100 BTC, and Bill has put 1 BTC towards it and claimed X% of the First reward.

The blockchain has been updated. On Donna’s screen, she sees the loan and a “1% backed, 90% First Remaining””, and now Donna sees that the loan has some backing. Donna thinks “maybe Bill trusts Jane”, so she decides to put 5 BTC in and claim 20% of the First reward.

Now, when Bill and  Donna put their BTC into this loan, what they are doing is sending their BTC to a script that will only release BTC to Jane if the loan is fulfilled. So in Bill and Donna’s lendwallet, they are -1 and -5 BTC respectively, although the BTC haven’t been transferred yet.

This continues, and the information keeps getting added to the blockchain for Jane’s loan application.

By 40% fulfillment, the First reward is probably gone. A lot of members on the network see the loan is 40% backed, and think its a worthy investment, but they don’t want to risk much. So lets just assume for simplicities sake that the remainder of the loan is filled with people putting up 0.001 BTC each….

thats 60,000 people investing into this loan.

Which is totally doable.

Because its decentralized and autonomous and its all stored in the blockchain!

Investment Management Screen integrated into a Investor Social Network transcribing Loan Applicatioins and Commitments to the Blockchain.

So the loan is filled. The blockchain script recognizes that the loan has been filled and activates the transfer on the bitcoin network and tens of thousands of transactions occur in order to fill Jane’s loan request. 100 BTC shows up in Jane’s Lendwallet. Jane transfers the 100 BTC to wherever and does whatever she needs to do. And she starts paying the loan back every month.

To make payments, she transfers BTC to the lendwallet, and then goes to “make loan payment”. She clicks on the loan that she wants to pay, and submits a payment.

The payment activates the loan transaction in reverse. When Jane hits “submit payment” button, this information is sent to the blockchain. The transaction that was initiated upon filling Jane’s loan is then found and the transaction occurs in reverse, with Jane’s payment being split 10’s of thousands of ways… because hey, its digital currency!

Secure Borrower Lender Blockchain Based Escrow with Repayment Distribution

Lets assume Jane’s loan was for a car, and she asked for 5 years. To keep things simple, lets just say she offered 5% interest (and I won’t compound it because I don’t feel like finding that excel function). So she pays 1.75 BTC per month. So the interest in each payment is 0.0875.

Here’s how the interest would get broken down.

10% to the miners (split evenly between lendchain and bitcoin blockchain)
5% to the Decentralized Autonomous Reserve (DAR)
10% to the Firsts
Remaining 75% go to lenders.

So, the lendchain miners will get a reward for every new block mined. This reward will be funded by some of the interest rate.

5% of the interest rate will go into the BTC transaction for the transaction costs of BTC.

10% goto the Firsts based on how it was divied up, and the remaining 75% goes back to the lenders based on their stake in the loan.

Payment Distribution using Bitcoin Merge-Mined Coinless Block-Time; Re-embursement for support through Interest.

The Decentralized Autonomous Reserve is a mechanism for the network to provide insurance for lenders. Additionally, it is a means of revenue for those participating in the network (DAR Dividends). In a nutshell, the DAR is a pot of money that can be used to pay back lenders some percentage of a defaulted loan. How much insurance is provided is dependent on how many people have backed the loan.

This prevents any exploitation of the reserve by exploiting the fact that collusion decreases as you increase the number of people involved.

Decentralized Autonomous Reserve loan insurance Dividends.

How the Decentralized Autonomous Reserve works. How the loans are insured based on the community backing.

< 100 people backing : 0% loan insured
100% insured occurs at 500 000
Insurance rate is exponential from 101 - 5,000 lenders for 50%

For 5,000 at 50%

X = 0.459308

percent insured = (# of lenders)^0.459308

101 = 8.329%
1000 = 23.874%
2000 = 32.8%
3000 = 39.5
4000 = 45.12
5000 = 50%

Then 100% at 500,000
x = 0.29834

percent insured = 50% + (# of lenders - 5000)^0.29834
6000 = 57%
10 000 = 62.69%
100 000 = 79.5%
400 000 = 97%

So here you can see that the loan is only fully insured when 500,000 people have backed the loan. In the Jane / Bill / Donna example above, with roughly 60,000 people backing the loan, only 75% of the loan is insured. And the numbers above can be modified or made to float based on participation in the network.

For example, if the network contains 300 million lendwallets, then the 50% would be at 500,000 and 100% would be at something like 5 million. And perhaps the lower threshold should be 500 or something.

This prevents this type of collusion: Jane goes to Bill and Donna and says “Hey, I’m going to take out a loan application for 100 BTC and totally never pay it. You two should back the loan, and then when i don’t pay it, the DAR will totally put money in your lendwallets!” In the basic plan outlined above, if Jane, Bill and Donna can convince 97 of their friends to collude with them to screw the system, they would only get 8.3% back, split between 100 people.

So for the DDR, its a matter of identifying certain #’s that will provide people security and deter collusion.

An insurance payment will be made based on some TBD set of rules - if a loan goes unpaid for over X amount of months, the DDR kicks in to start paying back on a monthly basis up to the insure point.

Variable DAR Insurance based on Risk Mitigation Threshold.

How is money in the DAR stored?

This is where some of the folks with more knowledge of the technology would come in handy, but I imagine it as this:

In the lendwallet there will be two balances - the balance of your personal funds in the lendwallet, and the balance of your share of the DDR. Your share of the DDR is determined based on the amount of BTC you have loaned.

So, if you have loaned out 50 BTC, and the DDR is currently at X BTC, the amount of BTC in your personal lendwallet DDR is at least 50 / X. For simplicities sake, lets say its 1 BTC.

This 1 BTC is stored locally on your computer but is not accessible by you - you can’t spend that 1 BTC, only the network can.

However, because the information associated with that bitcoin is on your computer, the reserve protects itself from being robbed - its decentralized. It also protects itself from being manipulated, because its autonomous.  

Bitcoin Blockchain separation of Risk by Transcribing bitcoins to Lendwallet Blockchain Control; Funds are Encrypted by Local Wallet, Fund Access is Separated by Loan Application Encryption. i.e. All levels of Transactions are encrypted into their respective Categories and Requests for maximum security.

What is a DAR Dividend?

The purpose of the DAR is to provide insurance against people defaulting on their loans so that people will actually invest in loan applications from strangers. The purpose of the DAR is not to accumulate massive amounts of wealth. Thus, there will be some algorithm that calculates how much money is required in the DAR based on the amount of loans currently floating in the loanchain. If total DAR funds exceeds what is necessary, the difference between these two values will be distributed to lenders in proportion to the amount of money they currently are lending (averaged over the month). This again provides incentive for individuals to participate in filling loans.

Investment Incentives through DAR Dividend, Better Risk Management equals better Return Dividend Bonus to Discerning Lenders.

Why did all of those idiots buy into Jane’s loan for 0.001 BTC? Surely they won’t get that much back on their investment!


Indeed, they won’t get back on the single investment they made into Jane, but these individuals may have made thousands of different investments. In theory, they could split 1 BTC into 100 million satoshis and thus have 100 million loans out to people. By distributing these small amounts of currencies, these individuals are able to diversify their risk and thus mitigate the risk.

Individual Risk mitigation through Micro-financing a diversity of Loan Requests.

Other network features:
Automatic credit history - all of your actions are recorded on the loanchain, so lenders can get an immediate picture of what kind of borrower you are. No more magic numbers from strange companies.

Grant function - the same mechanism for loan applications can be utilized for grants (a.k.a. crowdfunding). In this case, the BTC are simply not expected to be paid back.

Emergent trust networks - If Jane is a good borrower, Jane might know people in the real world that also need to borrow money that may have no history on the network, such as Ralph. So Ralph puts his loan app on the network, and Jane backs 50% of it immediately. Alternatively, if jane doesn’t want to front the money, Jane can just put the loan app out herself, and then its up to her to get Ralph to pay back the loan. In a way, trusted borrowers on the network may be able to charge a commission to non-trusted borrowers.

Lending and Borrowing Social Network Block Explorer.

The Spread The Wealth loan - Someone could put out a loan app with the explicit intention of distributing a portion of the DAR to those that claim a stake in the loan. For instance, one could request a 1 BTC loan for this purpose, and theoretically 100 000 000 people could claim a 1 satoshi stake in the loan. The borrower never pays, and 100 000 000 people get 1 satoshi each from the DAR.

One could create a countermeasure by including a “ban” option in the lendwallet, and if the network reaches a simple majority ( > 50%), the loan could be denied. Alternatively, the number of backers required for insurance could be increased substantially.

Loan Risk Flagging

Alternatively, the STW loan could be utilized as a decentralized autonomous crowdsourced way to ease difficult financial times - essentially, create liquidity (essentially what the fed does by printing money, but in this case the money isn’t being printed, its just being released). However, the borrower now has 1 BTC. So if it were used in this manner, the backers of the STW loan would have to trust that the borrower would similarly distribute the loaned bitcoin.

A strength of the system: Autonomous “quantitative easing” - type liquidity measures.

If STW loans are filled, and the DAR is drained, this might causing a decrease in lending, which ultimately decreases the DAR.

However, the decrease in lending would reduce the amount of loans that need to be insured, so the dividend payments for network participants would skyrocket, essentially distributing the DAR anyway.

In general, if market conditions get to the point where lending is decreasing, the amount of money required in the DAR will naturally decrease (because there are no loans to insure), thus causing an increase in DAR Dividends, which would spread the money around and potentially encourage lending.

Social Welfare based Risk Mitigation by removing Investment Incentives and DAR Dividend Recalculations: Those with excess funds can donate Interest Free Loans on a flexible re-payment plan for Social Welfare.




Yes OP, using your system as a Business Deployment Platform... Business Templates could be provided to members; This would facilitate forming successful investments by taking a few steps out of the equation, things that we can provide.

The loans can go to high level ideas and trust that it will be Re-paid or The Businesses Structure could be routed through the DAFNE to pay employees or Divisions within a Corporation. This would give investors real time access to how their funds are being used... giving Investors greater Security.

A fully running system would have Templates for different Businesses, providing a structure dictating what skills, resources and equipment are needed. Since these Templates run through The DAFNE Investors can monitor their funds being allocated in real-time, even allowing them to see as individual purchases are being made by customers.  

I wasn't arguing that it is right or good - I was arguing that your claim that Bitcoin makes it impossible is false.


Contracts.


As I said, you don't understand how banking works.

First of all, if you deposit 10 BTC in the bank, these are no longer your BTC. (If you deposit $10 in a bank, these are no longer your dollars.) You have just lent 10 BTC to the bank and the bank has the contractual obligation to repay them with interest according to the terms of the contract. Unless, of course, the bank fails, in which case you become an unsecured creditor and are basically screwed (especially if you live in Cyprus), unless the FDIC makes you whole (by practically stealing via borrowing and inflation from the rest of the population).

Second, using these 10 BTC as reserves, the bank is allowed to make 100 BTC in loans - not 9.

Third, these aren't any particular BTC. Just because you can track their movement on the public ledger does not mean that the bank has the obligation to return you the very same BTC you lent to it by depositing them - or to lend to somebody else exactly the BTC that you deposited. All it has to do is return you 10 BTC (any BTC) according to the terms of the contract. Unless, of course, all depositors demand their deposits at once, in which case the fractionally reserved bank (any fractionally reserved bank) fails, no matter whether it takes deposits in US dollars, Russian Roubles, Zimbabwean dollars or BTC.

Fourth, when a bank lends, it doesn't create physical currency out of thin air (only the central bank can do that) - or on the blockchain, if we are using BTC. Instead, it creates an accounting entry, saying that the entity that took the loan is now allowed to do payments with that amount of money. Which usually means transferring parts of it to other accounts at other banks, because nobody in their right mind takes loans in order to extract physical currency from the bank and stuff it under a mattress. In the case of BTC, it can be a sidechain transaction that extinguishes itself once the loan is repaid and no-one being the wiser that virtual money supply was temporary increased out of nothingness.

Again, I am not arguing whether it is right or good. I am just explaining you how fractionally reserved banking actually works.


It's not your BTC any more. It's the bank's. It just has to return you the same amount of BTC (but not necessarily the very same coins) according to the terms of the contract.


No, it didn't. Even then fractionally reserved banking worked the way I explained to you. It's just that there was no FDIC, banks were failing much more often and people were more careful researching where to put their money, so the panics were more frequent but less damaging.

Now, before fractional reserve banking was legislated into existence, things worked more like you imagine they ought to work. You stored your money in the bank (because they had better security and storage facilities than you did) and paid them for the service. The bank gave you a note (or many notes) saying basically that the bearer of this note is entitled to get back from the bank X gold coins on demand. The note didn't contain your name (but usually did contain the name of the bank) and you could use it to "pay" somebody to whom you owed X gold coins - so that he would get them from the bank instead of you. Occasionally banks issued notes for gold coins they didn't have in storage, hoping that most people wouldn't demand theirs at the same time - but this was illegal way back then and when the bank's customers got a whiff of what the bank was doing, that bank failed pretty fast. Oh, yes, and occasionally the banker would sniff a good lending opportunity and would offer it to you (for a small commission, if you accepted), but it was ultimately your decision whether your money was going to be lent out and to whom and at what interest.


I agree with you here. And my point is that the fixed supply of Bitcoins does not make this game of smoke and mirrors impossible, as you seem to think that it does.

^^^ thank you so much for the thorough explanation and your patience, and yes, I can see now how even with BTC, fractional reserve is possible.

I know this may be retrograde logic, but perhaps my point was that its difficult for fractional reserve banking (FRB) to exist with BTC using just the BTC network and the BTC currency. Your explanation below indicates that for FRB to work, you will end up with contracts, and in the BTC world, these contracts will probably end up as coins on a secondary blockchain (perhaps).

Ah yes, you even suggest this in point 4 to address the accounting issue with lending etc. (As I've linked to before, I believe some form of this has been created in Loancoin: http://www.reddit.com/r/Bitcoin/comments/2l5mw0/loancoin_a_decentralized_bankcrowdlending_network/ )

But yes, the point has been laid to rest. FRB is possible with BTC using the same accounting practices that exist today, and it can thus lead to the same house of cards being built in a room full of smoke and mirrors that our present day money is capable of.

I will modify the OP.

Alternatively, we can find a way to avoid the need for conventional FRB in the BTC world. One way is to combine  the fractional capacity of digital currencies with the interconnectedness of a peer 2 peer network.

And JDBtracker, awesome!

and squid, you mean in that .md file? done.

This is an interesting concept.

Well, I really like your idea and I think that it just might work.

Time to Flesh out the Obvious Structure.

The Interface can be Web based, as an App, or Program.

  Web based would require a little work with Javascript, CSS, PHP. I'm thinking it would be a good idea to import a client from C++ to asm.js for web deployment on Firefox and Chrome Nacl; This way we do minimal work and it deploys in a web browser.
  If as an App? will simply have to be built using Android or Apple Tools, Looks like Java though, not sure.
  For Program design we can definitely just use existing code, C++ or Java is fine, though I like Java's portability.

This Interface would require a Login Screen, Statistics page, Financial management screen, Proposal List, and settings.
 
  The login screen can be using Persona, OpenID, or any Social Network 0-auth solution; it can be good to start a Financial Lending Frenzy. :)
  Can also just use the built in encryption of the Bitcoin Client, you prove you locked it, you can have it.
 
  For Statistics I'm think a broad scope of Formulas and algorithms available for clients would be a good idea. Having a broad scope of Points of View and the ability to share that point of view, secure in the scientific foundations of such assertions... you know, economics. Charts and system metrics to understand what is happening within the DAFNe, i'm sure their is some code out there, something like Gapminder that we can incorporate easily.  This would have to be built with access right to the Core of the Client, to give live update information of every change.

  The Financial Management Screen is where people can check their personal statistics for Investments, Loans, Grants, etc. All financial actions should be available from this Screen,

  Proposals screen, where Members can look up available Investment Opportunities, Requests, Grants, Offers in a well Categorized manner.

  And Settings, places where you adjust your preferences regarding the security of your client, Layout, network security and level of support to Network(Hard Drive space, Memory, stuff like that) 


The Core, where all the work is done; The Blockchain, Infrastructure, API and DAFNe Rules.


The Blockchain is just a Database, I was thinking of swapping out BerkleyDB and putting in Apache Cassandra for a more manageable blockchain, Neo4J, or CouchDB. The Database we choose can be very important for deciding what features we have, Cassandra is distributed and has self management features, Neo4j is just wild to have that level of dynamic association in a Database, CouchDb is a Distributed database, it would be interesting to use any one of these.
  We can merge mine the Blockchain, set it up with parameters to be hashed that will lock decisions in place in the Blockchain Database. As people make their decisions they will enter their Bitcoins to be locked as part of a Investment Trust, releasable or Reversable according to terms... Basically, We take Bitcoins Given to the Lendwallet, Encrypt them, let it manage the Coins Virtually, pledging them to Proposals, but not moving them on the Bitcoin Blockchain until Conditions are met and all these decisions are internally managed by Merge Mined Hashes determining Block Time,(Bitcoin Mining Becomes our Metronome).
 
The infrastructure is how do we connect the database to the client? A web interface can be used for anyone willing to host a server and a web page; Code it with some PHP to a server (http://"https://bitcointalk.org/index.php?topic=9304.0").
Smart Phone Apps too, will need an interface.
Anyone who has a computer can just run the full client, with the whole Database. I was even thinking that why not make it like a Virtual Private Network? So People could connect to anyone hosting a Full Client from the web.

The API is for anything that wants to connect can connect to grab statistics, authenticate remote sessions or update client information. This can be helpful for people to share information on their social networks, or to gain more insight into investment trends. Someday you may just check Facebook to see how your friends investments are going.

And the DAFNe Rules? those are the rules the Database follows, These are already laid out in the OP, I believe.





Open Source Projects could fund themselves managing funding in an Open Manner from within the DAFNe. By this I mean that as funds are provided to an Organization of any type, that it can link to other members providing Services or sub-divisions of the Organization within the Decentralized Automated Financial Network.
   The CryptoCurrency funds are managed by the lendwallet securely and automatically on it's own Blockchain before commiting them for Proposals and eventual withdrawal from the lendwallet, making a single transaction with possibly thousands of Wallets. The network gives a safe place to manage bitcoins without worrying about the 7tps limit, all the coins are never commited to anything on the Bitcoin Blockchain until someone wishes to withdraw, by which time the DAFNe will give them their Bitcoins.
  In this Safe Virtual playground Bitcoins could have their own rules, organizations can setup payment structures, Individuals Could automate finances, Programmable Finances for any type of Venture at any scale. And we don't have to stick to one currency, since control of the account has been given to the DAFNe, all it's managing are private keys to carry out an operation on the blockchain, It just has to be linked to the appropriate Blockchain for verification.

  I was thinking even a market for templates of an organizations structure, A Business can have templates for managing a construction company, a store or Open Source Project. The DAFNe simply provides structures to manage the accounting... yes brother: Distributed Accounting Software linked to the market.
  Why chase around after Invoices with phone calls, e-mails and letters? Just link the damn systems together to save time... accounting is hard, no need to make it harder.
  Managing a fully open system is not that hard, For a Store Investors could see the inventory and view purchases in real time; A corporation may have multiple divisions categorized according to their focus and location with individual expenses and purchasing. It may even function as a CrowdSourced Business model, investors able to see operations live can dictate Business Focus through Suggestions or mutual agreements.
  These can further be linked from within the DAFNe, each Corporation, Business, Charity, Institution having it's own ability to exchange products and services within the directory. The DAFNe could begin acting as a product service database providing services on request from Affiliated Organizations.

It's Interesting structure is very similar to a Traditional Bank, Coins are held in a safe vault, Invested and loaned, deposited and withdrawn, businesses manage payroll, credit, etc but everything is Open to prove the funds exist while  never ever moving. Yeah someone may just spend the coins in the wallet but the lendwallet will be looking out for that, taking appropriate measures to prevent releasing funds by confirming Account balance. or the wallet may be encrypted locking the coins, but if you give the password to the DAFNe it can manage your wallet directly.

Could you put a flat fee to every loan. Say 1-5% on top of what the loan is for.

Say you want to construct a loan for 100 btc. Say the fee is 3% this would add 3 btc to the principal over the time of the loan.

For instance over 12 months. The monthly payment would be roughly 8.58 btc. My thoughts are if it came to a point where there were interest free loans the system could collapse. The fee would be a flat fee for mining power as well as go into the fund to hedge risks of loaning.

Additionally, one concern of mine is and maybe I'm reading this wrong is a sole loaner is at a disadvantage. For instance, what if the car dealership or real estate dealership wanted to get into the loan business. This would allow them to circumvent banks and offer loans and the incentive would be interest payments on top of what they were already making. However, the protection is for small loaners as oppose to a single loan. How do you encourage say a car dealership from picking up the lend wallet application, making a web based interface and trading property for bitcoin in this system?

awesome! So glad that its clicking with you. Sorry I didn't have time this weekend - we were entertaining house guests.


Indeed. I'm curious if this is the best venue for this? I mean, the forum has the benefit of offering full community participation and witness, but the to and fro using the quote function can get old. But its fine.


Yeah, I think any way forward is fine, and at this stage the simplest version is the one to go with. I don't know which of the above is the most simple.


Yeah, at its simplest, that list you provided is it!


There should definitely be a broad scope of formulas - something that presents the actual inner workings of the DAFNe. Regarding some of the Key Numbers utilized in the system (# of loaners required for insurance and to prevent collusion), I think it would be great to get the opinion of an expert.... my wife thinks Social Psychology would be the field. I could actually probably just look up the literature myself.


Indeed. I'm envisioning like an overall summary on the splash screen, and then you can select through your lists of investments, loans. Should we call these financial products? A Grant really isn't a product. Maybe we can call them Outs.


One of the things that would be nifty to have in the settings is an automatic option. So you can setup the following "if a loan application with credit score X and at least X% backing hits the network, automatically invest X"

I defer to you on these points, because I don't know what database is best.
Indeed, the DAFNe rules are in the OP. But we will nail them down and hopefully get some more expert opinion on the Numbers.


Yeah man! It seems like the applications of DAFNe Protocol easily go beyond lending! I like your term Safe Virtual Bitcoin Playground (SVBP)


Thats what I was thinking, at least for the DAR part of it - the coins are locked and only controllable by the network. As for the the coins you put in the lendwallet for staking purposes (allowing you to make loans), those can be spent as if the lendwallet was any other wallet. But yeah, once you back a loan, the lendwallet would lock that amount of BTC in your lendwallet, so you can't spend them.


Yeah, that would totally work! just another option on the loan application, and something that would influence how attractive your loan is on the network.


Hrm, interesting... I don't know how to encourage, per se. One possible workflow is that the car dealership , when selling a car, would fill out the loan application for you. Then they submit it to the network. They immediately stake a claim in that loan - something ridiculous, like 50%. This loan then becomes very attractive to other borrowers.

Hrm, another possible way to have a loaner trust system somehow. That way, a sole loaner can somehow take advantage of the security of the DAR.

I'm starting a mockup of the program (whatever the platform may be) using google presenter

https://docs.google.com/presentation/d/1uRQ4I4EYVENhCIehga_Cwei2IzP06OhWnOa2c9q_lkE/edit?usp=sharing

Feel free to add to it or comment.

So I guess for each instance of the client, there are actually up to 3 wallet files.

wallet #1 is the normal wallet. Funds are transferred here simply so that moving funds within the program is easier.

wallet #2 stores the coins waiting for the loan to hit 100%. So, when you claim a stake in a loan, the bitcoins are transferred from wallet #1 to wallet #2, so that these committed coins can't be spent. These coins can be transferred back to wallet #1 if the user pulls out of a loan. They might decide to do this if they staked into a loan that is taking a while to fill... i.e., if a loan has sat at 80% for more than 2 weeks, you might want to pull out and use your coins elsewhere.

Hrm, this might be technically tricky.... I always forget that BTC aren't actually digital things (or are they??) its really just a ledger entry that you have transferred value from you to someone else. Or is there an actual digital entity that can be locked up somewhere? In this case, wallet #1 and wallet #2 may actually be just 1 wallet, and the program will be written such that if you have committed X BTC, the lendwallet application will not allow you to make a transaction from your lendwallet address that would cause your balance to go below X BTC.

wallet #3 stores the coins for the Decentralized Autonomous Reserve. These coins can not be accessed by the user. Somehow we will have to find a way where if a user bails on DAFNe, the coins in their DAR vault make it back to the network.

A fourth # of bitcoins is also displayed to the user, and this is the amount that the user currently has invested. This is not really a wallet, its just the output of loanchain data for which the users wallet #1 address has sent BTC. This number is utilized to calculate the DAR dividend that the user receives.

This sounds like a very great idea,

I'd gladly run a node and mine to help secure the network,

Not sure how I could contribute at this time, but I'd love to see the project move forward.

I had another thought the last night... Is lending for interest possible at all with a fixed-supply currency and fully-reserved banking? Let me start with the premises:

1) You have the whole society operating on Bitcoin or some other cryptocurrency that has a fixed supply. If this premise is not true (e.g., if you have fiat currencies existing in parallel, then there are no problems).

2) All the economically mine-able units of the currency have been already mined - its supply no longer increases. In other words, this isn't a problem now, while the supply of Bitcoins is still being inflated.

3) You operate in a fully-reserved banking environment, where the banks are not allowed to inflate the money supply - not even temporary.

Now, you want to make, say, a 10-year load of 100 BTC at 1% interest (total, not annual interest). In other words, by the end of the 10-year period, the debtor has to repay 101 BTC.

Question: Where would the additional 1 BTC come from? Before you try to answer, let me clear a few other things.

Money is not wealth - money is only a medium of exchange, a measure for wealth. Wealth is created by the productive members of the society - the larger the society is and the more productive its members are, the more wealth it generates.

With a fixed-supply currency, the purchasing power of the currency will increase with time, as more wealth is generated by the society but there is still the same amount of money chasing it. In other words, the prices of goods and services will decline. Let's not argue whether it is good or bad right now - I am trying to make a different point. Per se, Bitcoin doesn't have a problem with that, because it is very divisible. The problem lies elsewhere.

Where would the additional BTC (necessary to repay the interest of the loan) come from; I mean from the society as a whole? Remember, the amount of bitcoins in the society no longer increases - only the wealth of the society increases. You can repay the interest with wealth - but you can't repay it with money.

On the surface of it, for a single person, it's easy. You have invested the money from the loan, have produced wealth with your work, have sold it and you repay the loan (with interest) with the money you get. But where did you get the additional 1 BTC? Somebody gave it to you in exchange for the wealth you have produced. But where did that person get it from?

He could have performed a similar trick - sold the products of his labor for money and used that money to buy the products of your labor. But the question remains - the additional 1 BTC has to come from somewhere within the society in order to move through the chain of payments and reach the original lender in the form of interest. But one of the premises is that the supply of money is no longer able to increase.

This leads me to the conclusion that lending for interest in such a society is not possible. (In addition to this problem, the deflationary character of the currency would mean that the lender would have to account for it - i.e. ask for low or even negative interest, in order to account for the appreciating currency and still expect somebody to be willing to take the loan.) Any attempts to implement it would result in unfair wealth transfer from the debtors to the lender - and that would be just a temporary setback until the whole economy collapses due to a shortage of money to pay the interest on the various debts in the society.

Methinks, there was a good economic reason why the old religions prohibited loaning money for interest - at that time the society was operating on a gold standard, which was essentially a deflationary currency, since its supply increased slower than the wealth of the society due to population and productivity increase. The "jubilees" (forgiving of all outstanding debts every 50 years) probably served a similar purpose.

Yeah, I agree with this concern and it was one of the things that I tried to get my head around concerning lending with BTC, or BTC in general. Hence one of the 2 premises of the whole original ramble was something like "deflationary currency makes lending difficult".

Where will the extra 1 BTC come from? As you suggest, I think it would mainly come from a transfer of wealth - the markets of society will transfer wealth from different sectors, and the market value of these sectors, and the players in them, will change.

But that might not solve it as you point out.

Ultimately, I don't know. This might be the experiment that we need to run. One could argue it was run centuries ago when there was only non-fiat.

I think the primary difference between an economy of those times and the potential future economy of BTC is that BTC can (and hopefully will) be truly global. The "extra" 1 BTC may come from the fact that the buying power of a BTC is currently very weak in India compared to Venezuela.

So what might then happen is person in India is paid 3 BTC for every one of their whatsits, whereas in Venezuela, a person is paid 1 BTC for every whatsit. So now the guy in India has a lot more BTC to throw around in the DAFNE, and he can invest in Venezuelan whatsits.

And also, the fact that all of the worlds cultures have different market values for things may influence the ability of a deflationary currency to "create" the extra 1 BTC.

Or, as was presented some posts above, some claim that BTC was never meant to be a currency on its own, but instead exist alongside fiat. But even then, this wouldn't solve the problem, unless the DAFNe works in fiat anyway, and just uses BTC as a medium of exchange, which can also totally happen.

If we build it, I guess we'll find out.

But I'm of the opinion, with good velocity of money it won't be a problem, A Good system will have a good flow of money that rewards everyone participating sooner or later. And things always appreciate in value, you just get more with less. Negative Interest it will be, bets on how valuable it can become.

I figure if it continues at this trajectory it will reach a point where it is measuring the entire economy and any additions and subtractions will be visible according to it's value. Things depreciate in value, Perishable Goods expire, and new things are made all the time, we may be able to see this in real time some day.

I agree with your well thought out assessment. While bitcoin operates in parallel with existing money supplies it could work. But long term in a closed system it would fail. There's no greater evil in society than people who make money off having too much money.

But I still think you would need fees to offer incentive to people who maintain transactions and the infrastructure. So, I wouldn't think a flat fee would be out of the question.

Well, we may have run into a problem. I found an excel spread formula online where you can calculate how much a loan will cost you, compounded monthly (like a credit card).

https://docs.google.com/spreadsheets/d/1Z_4lBsfJtIZws_8jFLtpvgcpjDXtqEujs5P5SM_LIrY/edit?usp=sharing

If we use the numbers laid out in the OP (a loan with 3% interest, and with 5% of the interest going to the miners, and we assume 10 minute blocks)... and we assume that everyone's getting car loans of 50 BTC with roughly 5 year payment schedule...

and there are 2000 of these loans (!!)

then the average block reward is ~0.0015 with a standard deviation of 0.0008. I used average and stdev because not all loans are going to originate at the same time...

I don't know if thats enough to sustain participation in the network... This might discourage pure miners...

One participating in the network would be rewarded, though, with dividends from the DAR based on their amount invested.

However, if we take full advantage that the current BTC network doesn't need transaction fees (because blocks are rewarded with the current disbursement), we could utilize 10% of the reward portion (labeled as the "miner cut" in the spread), then the numbers are:

0.003 with a dev of 0.0017

But the spreadsheet is fun to play around with...  if there are 10,000 loans, then we're at 0.015 block reward.

And if we increase the average interest to 5%, then we're at 0.026 +- 0.013 .

Hrm, so if there are concerns of 51% attack, then we might need to think something up.

I'm starting to develop the wiki of the github page. I'll reserve this thread for standard discussion, but any type of conceptualization or code mapping or psuedo-code that I may write up will be on the github. I'm assuming this will make the moderators happy (i'm surprised they haven't moved this thread already!)

https://github.com/Gingeropolous/DAFNE

BTW, did I set up the github properly? Can others modify and add stuff and make commits fly through the night sky?

and I finally cleared up a concern I had that I didn't understand things properly. Bitcoins don't exist. Only transactions exist.

http://www.coindesk.com/information/how-do-bitcoin-transactions-work/

No, that won't work. This is precisely why I emphasized that money is not wealth. In a healthy society, wealth increases so this seemingly isn't a problem. But the problem arises from the fact that loans of money are repaid with money - not with wealth. Yes, you sell the wealth you have produced to get money - but that works only on a person-to-person basis. If in the society, as a whole, money supply is constant, it is simply impossible to repay (society-wide) monetary loans with interest with money, even if the wealth of the society keeps increasing.

The only solution is not to loan deflationary money at interest. Normally, the interest is the reward the money-lender gets for taking the risk that the loan will not be repaid and for postponing his consumption by lending his capital instead of spending it. But money is just a means to achieve that - not the goal. A deflationary currency should keep appreciating. You can make a 100 BTC 10-year loan at 0% interest and still be rewarded with wealth for it because by the end of this 10-year period the 100 BTC you get back will have more purchasing power.

Then what is the incentive to loan at all? Why not just sit on your pot o' gold? There's no incentive to risk an investment. Are people going to do it out of the good of their heart?

While I do think its too soon to say that a global economy using a single deflationary currency would not have local differences in wealth that might subsequently modify the value of money (I'm not a fan of saying things are impossible.... I'm a scientist by training, and I'll trust the experiment, and the experiment has not been run, even though we used deflationary money in the past, we weren't able to send this money to the opposite side of the globe instantaneously)


...... we can effectively kick the can down the road on this one.

Right now, bitcoin is technically inflationary, even if people keep losing coins.

The protocol could also be modified to work in the hybrid fiat-crypto economy, embracing the "bitcoin as a payment system" ethos.

And the protocol can ultimately be used for a cryptocurrency that is inflationary.

The thing to do is offer the option for usury in the short term as a necessary evil while still applying a standard fee for miners and people that maintain the network.

In the future in a perfect world anyone that would offer to pay usury would be a fool. They would realize that's it's going to take more goods and services to pay back the loan with no interest let alone another 5%. Any additional interest would be crippling. But you can't legislate for stupidity can you? Neither can you program your way out of stupidity. More options is likely better than few options is what I'm saying.

I don't think interest is much of a problem. The extra 1 BTC you are talking about in that scenario could be acheieved by working and saving for it over the years or creating profit from whatever you did with the loan.

I think the bigger problem might lie in the price volatility. Lets say someone this year was to start a loan request for 10 btc to be paid back over 10 years. Right now the price of the 10 btc would be worth roughtly 3500$. Now lets assume they are repaying 1 btc every year. 5 years from now the price of btc could be worth 3500$.

This would not be a problem if the loan applicant kept their loan in btc. But right now I would assume most loans would probably be sold and used as fiat only to rebuy btc later to repay the loan.

In this scenario people could be left in a position trying to pay back 10x the amount of money they ever borrowed in the first place. Clearly that would be their own fault, but it still could be a drawback to the average person looking to exchange the btc loan for fiat.

Definitely needs metrics for people to consider this situation.

People are smart, we simply have to be able to give them the information they need to react appropriately.
With out a doubt we are going to have negative interest rates according to the terms of payment, people should be able to choose their level of risk; That is what the settings would be there for. If the system detects parameters of the Bitcoin economy are shifting it can begin alerting the user of the change as it happens, with key information that supports the Geopolitical, Supply Chain Management, Technological and Market forces at work... if it's speculators, we can ride out the storm with the long term forecasts.

Best part, we can upgrade the system later, Add components and metrics that we were simply not aware of before we started the project, driving better Investor and Borrower outcomes.

For example if the short term metrics are pointing to a dip in Bitcoin, then short term contracts are adjusted and suggestions are given to the Lender and Borrower to maintain the same forecasted level of Interest for the term. Long term forecasts would get better and better, filtering out speculative Information, sticking to facts and helping long term loans achieve a favorable outcome.

There are going to be a lot of things we are going to be learning... If people can make their own connections in the system choosing their level of risk, many new business models will be coming out, well have to adapt to those. Adding new information, plugging security holes, better metrics, and refined interfaces will be a constant.

Timed Terms may not be the best solution for this system, market conditions will be unfavorable at any moment, increasing risk at random times. Automated Payment Conditions may be required.

That would be interesting. The protocol alerts its users to changes in the market...
Indeed. I was actually thinking that multiple DAFNe's may pop up that have different Key Numbers - i.e., one insures at 1000 participation, while another insures at 5e12, etc
Hrm, yes - but this requires pegging Bitcoin (or any crypto) to something else, right?. Currently that is the dollar, but in a potential future without another currency... then what? The DAFNe is somehow fed information about the price of actual commodities?

Also, "suggestions are given to the Lender and Borrower to maintain the same forecasted level of Interest for the term".... but there are potentially thousands of lenders per borrower. We can't expect all of them to be actively managing their investments at this level.


Ultimately, I think the answer is to just build the system with the option to work in either pure crypto or fiat-crypto modes. In fiat-crypto mode, the ledgers are all kept in fiat, and the front end does the conversion based on the current BTC valuation.

You are confusing money with wealth. Extra wealth worth 1 BTC can be created as you describe, no problem. The problem is that, within the society as a whole, the additional 1 BTC (as money) cannot be created because the money supply is fixed.

Again, there are two points you must not forget. 1) The problem is the needed extra amount of money, not the needed extra amount of wealth and 2) the problem occurs with the society as a whole, not in a particular person-to-person transaction.

Between two people in the society, the second one will most likely find a way to get the extra money by selling the products of his labor. But the totality of loans (with interest) in the society requires increased money supply (for the interest) - and with a fixed-supply currency this is not possible.

I still don't have a good answer to the person who asked why lend at all. Of course, every individual member of the society will make his own (different) economic calculation. Some will offer loans at a small interest, others will offer loans at no interest (hoping that the money appreciation will reward them sufficiently), yet others might even offer loans at a negative interest, hoping that the currency will appreciate more than the nominal loss of principal. Some of them will be right and prosper, others will be wrong and go bankrupt; that's normal. But for the society, as a whole, interest with a deflationary currency is not possible and there is a strong motivation not to lend.

Hrm, could also use the DAFNe in some type of crowd-buying effort, similar to groupon's core model, or related to stock purchases...

say you wanted to buy something at 1 BTC, but the price is currently 1.2 BTC.

You put a buy ticket out on the DAFNe, and people can opt into the buy ticket. The transaction builds until enough people have gotten into the transaction, and the seller triggers the transaction at 1 BTC.

Or crowd selling effort.

Or you put a sell ticket into the DAFne, with a trigger of 1000 buyers. The transaction builds until the condition is met and then BAM, money moves.

In this instance, yes, there would just be a flat fee, because there's no money going the other way.

Probably useful in stock markets or something.

I'm thinking about refining this whole rambling mess to submit to https://www.boost.vc/ jan deadline. Yay i'll get to make a youtube.

Oh wow, you are thinking very ambitiously... sure, let's give it a go, See what we can do.

I'll start up a list of available programs we can use to collaborate better, and we need people who are willing to invest their time, for possibly no immediate reward.

I was thinking of channeling the Bitcoin's to the multiple Blockchains and just through the DAFNe, but how do we setup the incentives to protect the system?

so far we have incentives for the Miners to protect the system through fees, but still have to think of the Volunteers/Developers, Investors, and the nodes running full Clients. I am sure they would like to be supported by the system that they are helping.

yeah, we'll see if we can get it in.... I actually have a NIMH grant due in february (that I should be working on nonstop until then) but whattaya gonna do. Gotta take a break somewhere.

Cool. I think slack (www.slack.com) is a good one. Github actually has some stuff built in.


Nodes running full clients - I think they will be incentivised because they are participating in the lending (for that version of it) - they are invested in a secure network because their $$$ is on the line. Also, a full node can also technically be a miner, so they'll get block rewards. Also (in the lending use of the protocol), they'll get dividends and interest.

Volunteers / developers / investors - I was thinking about this too - because this side chain / alt chain theory, with no immediate asset of its own, doesn't provide much incentive to develop. Thus, we could incorporate some time-limited percentage for developers. Say, 5% of the interest is distributed to developers until 500 BTC is reached or something.

"need people who are willing to invest their time, for possibly no immediate reward"
Or, in a manic daydream, we present this to that VC, they see it for what it is, then we can just put bounties out on the code, or just hire people out in silicon valley. Because ultimately, as you pointed out, the core of the DAFNe is this "virtual bitcoin playground" that has a trigger point... and this could be used in a lot of different ways.

Or we could just suck it up and make another damn coin, but treat it as a "share" of the company. This would definitively transform the DAFNe into a DAC, which is fine. But it would be cool to incorporate a way where the block reward is directly proportional to the amount of activity in each block, such that shares of the company aren't produced just because its mineable - instead, this would couple share production to actual business activity. I think it would also be good to change the block reward mechanism such that all miners are rewarded when a block is found, similar to the way that mining pools operate now. This would encourage mining, would encourage solo mining, and would truly represent the amount of "work" you put into the "company", as opposed to the current currency model of block reward which is meant to distribute currency in a random fashion to promote... well I don't know exactly.

Ultimately, the share could be used for voting purposes (with those heavily invested having more of a vote), and voting would be performed by sending to an unpayable (but trackable) wallet address. In this system, shares would always be rewarded (no decrease in block rewards over time - shares always produce in proportion to activity in block)

welp, one thing to legitimize the effort would be a web page. I saw some folks in the above threads that wanted to contribute but can't code - getting a website going would be great.

I'm currently working on the white paper. At the least, I'll host the whitepaper and that can serve as a web page why not.

so I've successfully registered dafne.bit on the namecoin network, so in 12 blocks it'll be verified or whatever.

Now how exactly I develop a .bit is beyond me. Nameserver what? Anyone know?

well that seems crazy complicated. I also just got dafnep.com ....

hrm, trying to figure out if ethereum and/or mastercoin can do what we wanna do..........

Ethereum might do it, but its not even released yet. We can build something now, and integrate with Eth or any other 2.0 tech later

Trust me this is buildable now...

It's like setting up a website, you got your interface, your distributed platform and a Database.

and besides they are trying to do it by creating a new coin; we can do it without one bypassing any legislation anywhere in the world. We are not touching any of the coins merely encrypting the private key into our Blockchain and moving it around internally without ever moving the Bitcoins.

We know what we have to do, the technology is already setup... now the hard part; The parameters need to be ironed out, good settings will make the difference whether we succeed or fail for the deadline.

Does anyone have any skill in creating web animations for the required youtube video?

When I get back to home PC, I will create a slack channel.

lookin through adam drapers thingy, came across this

http://www.pylonloans.com/

no idea how their system works though. "on the blockchain" would indicate to me THE blockchain.

@jdbtracker: Do you think we could build the DAFNE using python with c/c++ libraries that has python wrappers?

All libraries are good, We'll want to throw everything we have at it at this point; Once we have something working we will be able to fine tune it and plug any security holes we may have later.

Just so everyone knows, I am only a beginner at Programming but have been checking out the code for a lot of the Cryptocurrency projects for almost two years now.

so, I can read C/C++, Python, PHP, Javascript, Java, HTML5, CSS3, XML, Ajax, ATS... If it looks like  C I can tease it out. but we will need people who actually can code rather than just build the layout.

So, slack requires the use of email to login. If you want to make a phony/new email address and then PM me, I can send you the invite.

I think i finally distilled this thing into its essential components. here is a draft of a digestable whitepaper.


Decentralized Autonomous Lending
made possible by the

Decentralized Autonomous Financial Networking (DAFNe) Protocol
A peer-to-peer transaction distribution system
+
LendWallet
Wallet software controlled by the DAFNe
+
Decentralized Autonomous Reserve (DAR)
A distributed reserve for cryptocurrency





Abstract. Economic instability has plagued societies throughout history. We present the supposition that this instability is an unintended emergent property of lending within a fractional reserve system. To recreate the benefits of conventional banking without fractional reserve, we present an alternative type of banking called the Decentralized Autonomous Financial Networking protocol. This protocol exploits heretofore underutilized aspects of cryptocurrency: extreme currency partitioning and a worldwide network of currency holders. This solution requires the addition of a sister blockchain network (the DAFNe) that interacts with a cryptocurrency's primary blockchain. In this network, transactions are built in partitions, wherein a party creates a contract and additional parties fill this contract until there are no more partitions, at which point the contract is complete and the constructed transaction is submitted to the primary blockchain by the DAFNe. Proper function of the DAFNe requires a unique wallet software controlled by the DAFNe. To provide risk mitigation and incentivize lending in the network, a decentralized autonomous reserve is created to provide an insurance pool for defaulted loans. Ultimately, a lending network is created where only those partaking in lending and maintaining the network receive revenue.

1. Introduction
Lending is an important function of money that allows a society to literally invest in the future. Investment mechanisms combined with fractional reserve banking, however, have repeatedly been shown to introduce instability into world economies. Here, we present a software suite that allows lending and investing to maintain the simplistic function of one party transferring money to a second party under contract to return the money with interest. Using cryptocurrencies (either as a payment system or a currency) in combination with the DAFNe, LendWallet, and DAR, we can create a worldwide banking platform that mimics conventional banking without the need for fractional reserve and maintains economic stability through algorithmic management of the financial network.

2. Contracts
We define a contract as a ledger entry containing the receiving addresses and the sending addresses. For the lending network, the receiving address is fixed, and the sending addresses are not fixed. A contract is initiated by one party (the borrower), wherein they submit the contract to the network and the contract contains a set point – in the lending case, a loan amount. Participating nodes in the network recognize the ledger entry and report to end users that the contract is unfilled. Lenders stake a claim in this contract through a digital signature – similar to making a transaction in a cryptocurrency network – a lender is sending a stake to the loan. The ledger records the amount of stake and the required cryptocurrency address in this secondary blockchain, and the network nodes communicate the change in the contract. This continues until the contract reaches the set point, at which point the network submits the constructed transaction to the cryptocurrency network.

3. LendWallet software
In order for the DAFNe blockchain to function with the primary cryptocurrency blockchain, the DAFNe must be able to lock funds in place once they have been committed to a contract. This is achieved using specialized wallet (lendwallet) software that monitors the DAFNe blockchain and identifies when the lendwallet's address has staked a claim in a contract. This information locks that amount in the lendwallet by preventing the user from withdrawing funds below that amount.

The lendwallet also functions to autonomously submit the transaction to the bitcoin network when the set point is reached. The lendwallet “mines” the sister blockchain, and rewards are derived from interest and fees associated with the contracts in the sister blockchain.

4. Decentralized Autonomous Reserve
In order to provide an insurance mechanism for loan default and to incentivize lenders, a reserve system is created that provides dividends. The reserve insures loans based on the number of investors in a given loan. Collusion to defraud the system decreases as the number of investors grow, thus the percent of the loan that is insured increases as the number of investors increases. The reserve remains decentralized using the locking mechanism of the lendwallet, wherein the coins are stored locally in the nodes wallet, but under the control of the DAFNe.

5. End Result
The suite of software described above creates a banking system in which money velocity is encouraged by exploiting the extreme partitioning capacity of cryptocurrencies and the ability to include infinite parties in a single transaction. In this network, hundreds of thousands of individuals can claim stake in an individual loan. By staking these micro amounts of money, the “cost” of the loan felt by an individual is insignificant, but the net effect of the network is the transfer of a significant investment.

6. Other applications of the the DAFNe protocol
The primary technological advancement of the DAFNe protocol is the ability to build and secure a virtual financial transaction to be submitted to a cryptocurrency network. The fundamental contract can be utilized for other purposes – such as buy and sell orders, where a particular set price or number of participants is what ultimately submits the transaction to the primary blockchain. The DAFNe can also be utilized as internal business infrastructure, where branches of an organization place requisitions to a central actor. The lending protocol, as described above, can also be utilized as a crowdfunding (granting) platform. The DAFNe protocol also provides an immediate means to create and monitor credit history.

7. Conclusion
Here we provide the means to recreate the benefits of conventional banking without the need for a fractional reserve system by exploiting the extreme partitioning of cryptographic currencies. This achieved using a sister blockchain alongside the primary currency blockchain and wallet software that is controlled by the DAFNe protocol. Finally, a dentralized autonomous reserve is introduced to provide insurance and incentive for participating in the network.

@GingerAle: Slack is a very good way to coordinate better, you can send me an invite at theblacksquid2012(at)gmail.com.

@jdbtracker: I mostly have experience in Python and JavaScript, and I'm reading up on C++. I highly reccomend using Python as a base language, as there's a bigger open source community that could help write the could and get us off the ground.

As for the application stack, this is what this is what I think its going to look like, based on what I understand from the project. What do you guys think?

Node Consensus-generated blockchain (eg. Ripple) --> Internal API --> Smart Contracts --> DAR --> Lendwallet (Ripple? POS Coin fork? Build from Scratch?!) --> External API

I've heard about python as well. I've heard complaints that its slow, but ultimately the first iteration can be python, and then others can translate it to a faster language.

I'm figuring out how to modify a Blockchain at the moment, I really think that for legal reasons we should stick to a coinless Blockchain. A Blockchain that just takes the Coins keys without generating it's own, takes it's fees from the incoming supply of coins for the DAR and R&D, then secures them using the Bitcoin networks Hashing power.

Some of the Currency will have to go to us to make sure we can develop it, I guess we will be the first ones to use the system to fund ourselves. lol
It will have to scale properly and we have to come to grips with the fact that it will begin to fund things that are questionable to people in power. They will come after us for developing this venue for re-allocating funds outside their control... of course we can go completely Not For Profit and live off Donations, giving us some sense that we are doing this for Freedom! Just look at what happened to Shrem, got arrested for mentioning/knowing that people are going to use it for nefarious purposes... how many Billions does HSBC Launder? In the Land of the Blind, Ignorance is Bliss and to be Wise is Folly. I certainly like the fact that no-one but the people get to decide what is funded and what is not, but this will have to be done with the utmost caution.
  Liabilities will have to be figured out, a way to put the onus, in software, squarely on the Lender and Borrower.

awesome. blacksquid and I were chattin in slack last night, and yeah, modifying the blockchain is probably the first thing to tackle. I agree with the coinless blockchain.


We'll see. Who knows if the draper thing will work out. And there's always kickstarter. Or this

http://jumpstartfund.com


Hrm, interesting legal points. For these reasons I think we should keep any "profit" out of the picture. I never imagined this to create pure profit, but only capable of return if indeed I were to utilize the DAFNe to invest in something.

Indeed, good point.

At the end of the day, we're really just making software. Granted, viruses are software. So perhaps, yeah, somewhere in the process, it is clearly stated that the individual making the decision to submit or receive in the DAFNe is their legal responsibility.

I think, generally, that the DAFNe is not a mixing service because the participants need to be trusted actors with DAFNe-derived credit histories and or existing credit histories.

But yeah, I guess it would be technically possible for an individual to create an entire DAFNe alter-ego, where people think they are investing in a car loan but really its something else.

Hrm, I just realized a fundamental weakness of the whole thing is the lack of collateral - i.e., conventional lending works because the bank technically owns the car (or the house)... could an autonomous decentralized network "own" something? Then again, the purpose of collateral is to incentivise repayment of a loan, and as we saw when push really came to shove, people just walked away from their homes anyway. So really, once again, the main incentive an individual would have to be a good actor would be continued participation in the network. 

Excellent we are on the same point on this: Legalities & Functionality.

We do need a way for the regular financial system to interact with our system, making it useful for everyone.

My Philosophy is use all the resources available... Standing on the shoulders of Giants to see further than we have ever before.
I figure that if we make our idea public as we build it, other people will work in tandem with us on their own time, posting as they can snippets of solutions to our overall Vision. We may get some more helpers later on, of course it does bring competition, but in the OpenSource world, I'm okay with that. Have you seen the structure of Horton Works, Map R, Cloudera; Each one is running on a different idea of Complete Openess, Opacity and Proprietary... It may be a good idea to allow the DAFNe to be very flexible in how it operates, maybe even put everything we can think of into it and let the market decide what options they want; Pretty much overwhelming the user but giving excellent choice and possible data to observe to see which are the most popular settings to apply to the top menu's.

Multiple channels for Cryptocurrencies to move through the system and maybe even blend the cryptocurrencies in some channels; Provide secure channels of verified information to flow through and unverified information in other less secure channels: A Broad Scope, Integrated into one solution.

I've got it. Instead of some % going to devs, lets put some percentage towards wikipedia. That way we'll never have to go through these pledge drives ever again.

I do like what the Wikimedia foundation has done; It would be a good idea, free information for all, forever. Very Decentralized thinking, if everything was running like this, key infrastructure could be funded by open market applications.

http://techcrunch.com/2014/12/21/crowdsales-funding-innovation-by-bitcoin-and-its-community/

interesting approach. Create "coins" that are software keys.

Hrm, I think this is related: perhaps we could use this to incentivise mining by coupling a "coin" to some ability to participate in the network. The details of this type of thing would have to be really ironed out, and ultimately the coins would be so superfluous that they wouldn't have any extraordinary value on an exchange. For example, every new block dumps like thousands of coins to all users (in a proportional way as suggested before, instead of the lottery fashion of bitcoin, the hashing network, from the beginning, is set up like a pool).

And the "coins" in this system would be different, because it would be a one way ticket to burn when you "spend" a coin in the network. For instance, when you want to put a loan application in, it requires 1 coin. When you want to put stake into a loan, it requires the same amount of coin as the percent of the stake (or some other amount. 0.1 coins? it ultimately doesn't matter because their will be so many of them). And then when that "coin" is spent, it doesn't come back. The network eats it.

Hrm. I'll need to think about this harder, and think of the network ramifications of this approach. I.e., say a newcomer comes in - he either has to buy some coins on in an exchange, or set up his own miner - he's guaranteed to get coins by mining, because the whole network is one pool. Doesn't matter if he's hashing 256 at 2 terahashes per second, or 400 hashes per second, he'll get a coin at some given interval.

Perhaps thats it. Everyone participating gets 1 coin every block for running a full node. Or once every 144 blocks (1 day).

And this could also be used to get investment in the software through what is essentially a pre-mine. Some people could buy loan token (loken) before the software is made, such that when the network launches, this investor group has more lokens than those just joining the network. In the beginning, this gives them the ability to spur the network on - these investors obviously have money to give out, so they'll be able to place stakes in many loans right from the beginning (due to their investment in the loken before the launch)

but once the network builds and more and more individuals are participating with full nodes and the lokens are just being created and burned left and right, the effect of the premine is gone. This investor group almost immediately has the same network power as someone joining after launch.

What do you guys think?

We'll, it'll be tough to sleep tonight as my mind churns over the ramifications of this. damn these thinkings.

yeah I read that, sounds pretty good, a nice idea to create encrypt able Tokens, great idea.

So, your thinking of Creating a Shared Minting Coin, Everyone who participates gets paid... hmmm I like it, Combined with the above idea, we can create Tokens with Encrypted Bitcoin Keys... it simplifies the Blockchain Database significantly. Awesome. If the coins are pledged they are either returned to the Lender or Opened by the Borrower.


This is one reason I would like to merge mine with Bitcoin: I want to free users computers for running the nodes... so it would require two rewards above the Shared Coins for the nodes and miners; Something to incentivise them. Double Tokens for Mining, Triple Tokens for running a node and mining. It makes our network secure, and I do think it should scale if required just in case there is a shortfall of Tokens during busy periods.

This coin of course would throttle the system, we are not sure how many people would be using it at any given point or how many loans may be in circulation. It would have to be used to pay for the DAR as well; This part I believe needs to be handled like a coin-op, crypto goes in your Token, network receives appropriate levy, loan pledge goes through and Dividends get paid back to all Lenders when they decide to cash out same way through the Tokens.

But I'm not so sure a pre-mine is the best way to go, we would need funds to focus our efforts, but either options means offering up favorable coin generation to make their investment profitable or giving up a bit of the DAR.

Yeah I know the feeling... I toss and turn at night just thinking about ideas. Love it.

Hrm, I don't understand the "tokens with encrypted bitcoin keys" part. Ah, I think what you're saying is that the tokens carry the information that is added to the loan ledger - they act as a vehicle to get the information into the database??

yeah, totally - merge mining is the way to go - definitely a reason to stick with SHA256. So yeah - bitcoin and loken rewards for mining. Double tokens / triple - details to figure out eventually. Scale - indeed. With these networks its so easy to monitor network activity, and just have token creation some multiplier of network activity

Throttle - it might, but that would only be if it was scarce, right?
Pay for the DAR - i don't get this part.... you mean cash out as in leave the system? I don't think there is a cash out - you wouldn't get your lendwallets portion of the DAR if you close your node - it just gets reditristrbuted to other dars.
But the DAR is not going to exist at any significant level until after probably years of network activity.


Dude, seriously - join us on slack. Send me a pm with an email address so I can invite you to the team.

I will, I will, just doing stuff... so at what times are you guys on slack?

I agree with jdbtracker that we need some sort of means to incentivize funding the development of the DAFNe, but it would have to be done in a way that we only get compensated in a publicly trackable way, and only in proportion to the amount of wiork we pu in. We don't want to look like another scam attempt on the community.

@jdbtracker: And "Tokens with encrypted keys", do you mean tokens that contain the private keys to an asset (btc, drk)?

@GingerAle: The lokens are a great idea for prventing someone from DDOS'sing th network. And if they are only gonna be eaten by the network along the way, you may want to look into Freicoin's implementation of Demurrage.

BTW, I can't promise I could get on Slack everyday, my internet got cut off and I have to rent a public PC by the hour when I get home from work.

Gotcha.
Yeah, read about freicoin before. So, if people are just sitting on lokens, they disappear. Makes sense.


right, yeah, nobody expects that. Bummer about the internet getting cut off.

BTW, about dev funding, we could use something like Tip4Commit (https://tip4commit.com/), or something similar because it integrates into GitHub.

Hey, to do the thinking all that is required is a pen and paper... it's amazingly versatile. Just keep on thinking on how to work with it; definitely need to figure out a way to fund development... can't do much if we have to focus all our energy on something else everyday...

and yeah, private keys inside the cointainers, I am now quite interested in figuring out how to use neo4j... it becomes quite a lot easier to arrange and distribute a group of tokens with correlations; Though Cassandra would be much more manageable. With the design setup as a Vault in a Token, the tokens can be piled up into Contracts, discarded when opened, Returned if canceled, and through Neo4j graphable and distributable in a less data intensive way than the Bitcoin Blockchain, with adjustable security and failure resistance.

and someone on the forum figured out how to safely transport Keys to another blockchain... great idea. I must search for it.

I like the tip for commit, will definitely need to guide people to make sure they know they can tip or donate.

http://jumpstartfund.com/#!/
I really think we should find a way to submit to that. What do you guys think? I never got a clear feeling from either of yah. In general I'm surprised that this thread hasn't garnered much attention, and that website above (or this VC we're gonna find a way to submit to) might be a good way to spread the word.

What we're trying to build falls into the whole "Bitcoin 2.0" shtick. But its not a sidechain, because the coins don't ever "leave" the primary blockchain. And its not like the other 2.0 stuff (megacoin) that work on top of bitcoin and gunk up the blockchain with more data. It works side-by-side..... Its essentially a metaledger - cause bitcoin is really just a ledger, and this is a ledger of that ledger. So its a sister chain (and her name is DAFNe.....)

well that sounds good.
you talking about sidechains?

JumpStartFund looks like a good idea, but I dont think they would accept bitcoin as a funding method. The BoostVC funding would be both great and would provide us with some publicity, not to mention that it might also get us in touch with some likeminded people.

is this project "dead"?

I'm still interested in it :)

There hasn't been any actual code development (as the github is straight up empty).

Can you code?

unfortunately  no :( but i like the idea of this project. Is strange to me that all this decentralized ideas like this project has not the attentions from developers.

This all sounds more like btcjam or bitlendingclub to me , you take a loan and earn trust slowly
But their are people who default and we can't do anything much for that , that;s the main problem here.
But hope it will al work out fine if you have some good guidelines and backing. Though this seems kind of dead

Still here, sorry for being inactive for the past few months. Just got out of the hospital. Let's get to work!

Good god man! Hope you're feeling okay!


those two services are centralized. Lending service is one of the things I think should be decentralized. Why should people be getting paid simply for going "hey, uh, you got some money. They need some money. So I'm gonna take your money and give it to them, and then they're going to pay me back, then I'll take a fee, and then give you most of it" . What did they do to earn that fee? They've built trust?



I've been getting involved (in the way that a noncoder can) with monero. From what I gather from talking to folks, a lot of devs are hard at work on the core coin software for all of these coins out there. Thats not to say that I don't think that DAFNE should be developed now, but thats why there's no "interest".

Also, its because we've developed a Wall of Text, which apparently most people don't read. If you've ever noticed official ANN pages for coins, they're all broken down into bite sized thoughts.... a drastic contrast to our massive OP.

You're pretty right but let us suppose you do all that and have a wallet and a decentralized lending system , still the only thing we do is just trust the person , what if they default on the loan , is there any insurance or something?

Yeah, its in the OP. Basically, part of the interest charged to the borrower gets put in a Decentralized Autonomous Reserve, which is an algorithm controlled wallet that is distributed amongst all members. 

So that can be called fees in a way , what if there won't be so many scams and what will happen to that btc in the so called Decentralized Autonomous Reserve.
Also , this gives a win-win situation to scammers, they just get away like that.
Anyways , i will look forward to this , it has some really nice ideas though it sounds pretty sketchy because of scammers but everything works out somehow and am sure this will too :)

if you read the OP, its all there. the DAR accumulates fees so that all loans out on the network are insured. Anything above this limit is distributed to those participating in the network, as a dividend. If you have currency available to loan, then you get a dividend.

Scammers - the current design of the network prevents collusion (multiple parties working together to try and screw the system), but it won't prevent an individual from scamming the system.

Like any traditional banking system, the fundamental component of this is trust - trust that you'll pay back. And this trust is all in the loan application process... you publish something on the block chain, people respond - they bid into your loan or not.

Yes i read the OP clearly and i do understand this is a great system with very less flaws but nothing can be perfect and this can be Se'ed by scammers. Though i would really like to see it implemented .

Cool! Thanks for reading the whole thing !!! :) Need to work on condensing it.

Sounds Great to me !

That will be amazing idea but i hope you are keeping in mind some way to for those individual scammers
I was looking a site today and they wanted id verification , where they asked to keep the documents ready and a person will visit to pick them up , i forgot the site(not good memory) but that sounds a really good idea
Though that will need a big team but how about all lenders need to do this verification , that can actually avoid scammers
JUST A THOUGHT :)

Oh wow! this has gotten a lot of attention, been away suffering from the winter lul... horrible, just not enough sunlight.

  but everything is there, risk mitigation is pretty much left to the lenders, all we can do as a DOA is to incentivise the participants to use the system, because they get a share in it's success. yeah scammers suck, but scammers are usually stupid, going for the short term win instead of the epic win that the system is meant to foster.

  the best I can come up with would be built in data tracking options, if a borrower wishes to be trusted they can opt to allow the money to be tracked on it's respective blockchain. Once the DAFNe releases the funds out of it's control it just begins tracking the money on that network and mapping known Cryptocoin addresses... basically, keeping a directory of Crypto accepting businesses and choosing from there to continue tracking that portion of the funds or not for investors to know. The more information a borrower gives to establish their stake in the system the more likely they will receive funds. If they fail to do so they will have to start all over again and establish their reputation all over again... making this process as difficult as possible and the rewards for continued service must be huge... hence the Reserve.

I was looking at NXT and thought It may be implementable through that system,

I think this thing could be easily built in ethereum, as sort of a test. Because we wouldn't be able to move / use actual bitcoin, but ppl could lend ethereum to each other.

necro bump

“I THINK THE REAL ISSUE WITH LOANS IS CONCENTRATION OF RISK, NOT THE INDIVIDUAL DEFAULT RISK.”

https://news.bitcoin.com/andreas-antonopoulos-case-reputation-identity-systems/

obviously supports the dafne concept.