Bitcoin Forum

I started to think about it. How a bank and folks could issue loans to people?

Currently, when you need to borrow money, your banker just edits your balance account and create money magically. You then pay back monthly.
Banks won't be able to do that with Bitcoin with its limited supply. You can't print bitcoins.

But now, between folks. Let's say I'm the banker and you're the customer looking to borrow money to buy a house. I can lend you the money but how to be sure you will pay me back with full interests? With banks, the solution is easy, the bank seizes the house and you can't do something. But the average Joe hasn't the same 'power' than a bank to collect a debt.

As I heard centralized crypto currencies are having a option to control the transaction by higher end but it in block chain nodes i am unsure about it.
Here you could  find a board how people are issuing loans with collateral or other things.
You may check the thread link here.
https://bitcointalk.org/index.php?board=65.0

Why wouldn't it work the same way? With dollars, banks are legally required to keep a certain proportion in reserve. The rest can be lent out for interest. Why can't banks take Bitcoin deposits the same way and then lend them out in fractional reserve?


Through the courts, they do. If you draw up a contract with a borrower securing the debt with their house, that contract is enforceable in court the same way it is for banks.

Loans issued in Bitcoins is a win win situation between the borrower and lender. If the  price of Bitcoins goes up after issuing, the lender has more to pay in fiate and vice versa for the borrower.

Exactly this. If you have a loan or a mortgage from a traditional bank, and you cease making payments, the bank don't just send some employees round to strong-arm you in to making a payment or handing over you house keys and paperwork. They take the contract which you signed to the relevant local court and begin proceedings for debt recovery, foreclosure, repossession, or similar. There is no reason this couldn't happen with a bitcoin loan, provided the paperwork was altered as necessary and full KYC procedures were carried out.

Banks don't deal with Bitcoin not because they hate it, but because it doesn't have determined legal status, and regulators would probably get very suspicious if a big company started using it, as Bitcoin has reputation of being used in money laundering. If governments gave green light to use Bitcoin, banks would totally do so, it's just another currency for them, another opportunity to earn profit.


It's another problem with regulation, if Bitcoin is not viewed legally as money or as commodity, it can create loopholes which can lead to much harder collection of debts.

If banks are accepting bitcoin deposits, they can just lend out those bitcoins and ask for interest in return. One simple way of looking at it or perhaps I'm missing something?


Before agreeing to loan terms, create a contract and make it so that both parties will never break the rules of the contract. The average Joe always has the same power to collect payment when payment is not fulfilled by the debtor. They can always come to a court of law and file a case against the debtor. The problem is, if bitcoin isn't considered as money on where the loan is fulfilled, it would be difficult for the loaner to collect payment from the debtor as the courts would surely be scrambling around thinking what case could be filed as bitcoin isn't defined on their law.

How is it a win for the borrower if the borrower has to spend more to just pay back the bank its Bitcoins?

It only adds more risk and cost to the side of the borrower. One way or another, there is always one party that's losing if you deal with a loan in Bitcoin. Also, it's not even sure that the bank has won when the price has gone up because it depends on the borrower to pay back first, and by the time the debt has been settled, the price may have corrected again.

It's more likely that loans will be handed out in tokens like Tether. You can print them whenever you want or just do it based on the demand for them, and there is way less risk involved for both parties.

Yes, he edits number on your balance but that's not something magical because behind those numbers there is real money, they can't lend more than they can. For example there is some percent of money taken from every deposit and saved in reserves for every bank, ie you deposit 100$, bank can only lend 70$ from it, 30$ must be in reserves.
Yes, average "joe" has same power too, just agreement is different, you have to go in notary beauro, sign contract and etc, there are a lot of details in different countries which can't be written here well.

There are some points we need to consider:

1) The person requests a loan of $100,000 payable in bitcoins
2) The person requests a loan of 12BTC (~$100,000)
3) the lender is a banker
4) the lender is a joe average

A question coming is, should contracts settle in fiat or Bitcoin? What about the interests.
If the contract is in dollars, for example, the lending portion of 12 bitcoins ( $100k) you repay 1% per month,  $1000 (without interest)
If the contract is established in Bitcoin, the loan part 12 Bitcoins and you repay 0.12 BTC per month (without interest)
You can end with a very very cheap interest rate to buy a house.

As a bank, it's easy if the borrower doesn't pay, it goes to the court, the bank seizes the house. remember in 2008 how many people in The US lost their house. Whatever, you will always have to pay soon or later.

For the average Joe, it's a bit more difficult. Yes, he can hire a lawyer and go to a justice court. How many time it will take? 3 Years or more to see a judge? A judge that will surely say he's not competent to give a judgment since he doesn't even know what you're talking when you say Bitcoin and the chance that Bitcoin itself has not really a legal status in the said country.

I don't say it's impossible but the average Joe it's not so easy as banks, not the same power. Since we claim 'Be your own bank', let's say I lend you 50BTC and you're supposed to repay 1BTC per month during + 4 years. The first year, you repay me regularly without incident, the second year you start to ask for a delay, the third year you're gone. Will I be able to seize the funds on your bank account as banks can do? No

Let's say now we use a smart contract. Not sure which, for exemple, if the total amount isn't repaid after 5 years, the house bought with the money changes its ownership to the lender. Will, it even be considered as a legal contract? you can't send your smart contract to the land registry and say now it's mine.

Why cant it work the same as a bank? The bank doesn't magically create money, it uses money from deposits to lend out. That could be done with bitcoin. Also, an individual very well can have the same level of claim as a bank to say...your house. You could sign a loan to an individual and put your house up as collateral. The issue is not whether that can be done, but actually collecting on a default. That process gets very expensive and requires lawyers, which may not be as easy for an individual to pursue.
Another issue with loans denominated in bitcoins is most likely, that person is cashing out the coins to purchase something. With a dollar that isn't a huge deal as deflation is a percent or two per year, but a bitcoin that can gain huge gains overnight, there is a very large risk that the borrower could never pay the loan back and that the collateral quickly becomes worth less than the loan amount.

It absolutely does. I'd suggest having a read of this article from the International Monetary Fund: https://www.imf.org/external/pubs/ft/fandd/2016/03/kumhof.htm. And if you are really interested and have the time, take a look at this paper published in International Review of Financial Analysis: https://eprints.soton.ac.uk/372866/. A relevant quote from each below:



Essentially, if you take out a new loan of say $100, the bank creates both a credit of $100 and a debit of $100 in your name. You are given $100 of new money and also given a $100 debt to repay. The bank's balance sheet doesn't change, and they don't move any money out their reserves to cover your loan. The $100 loan is brand new money created out of thin air.

This is impossible to do with bitcoin, since if you were to take out a loan the bank HAS to give you the relevant amount in bitcoin so you can transact it.

I think your confusing the properties of magically creating money with that of fractional reserves. There is nothing magic about it and they cannot do it indefinitely, which they would be able to if it was indeed "magic" as you suggest. The same fractional reserve can be done with bitcoin, you just need customer deposits.

A crypto bank will be an interesting concept but it’ll be equally difficult to operate it as many county’s law do not support bitcoin hence if the person taking loan doesn’t repay there’s nothing you can do about it. One way to go about this is to accept a valid collateral, or hire an escrow agency that will help you recover your debt. In my personal opinion it’s very difficult to continue running a crypto bank, as there’re lots of hassles involved in it.

I know people with credit card debts that have never been arrested or made to pay up. Even banks can have a hard time going through the process and sometimes you just compute how much you can get out of it. If the legal costs exceed what you can gain, then sometimes you'd just charge it up to experience.

So with individuals, the risk is even higher. Again, I know people who lend out cash and some of those never got paid back. That is why the "loanshark" usually charge a higher interest than banks, they have to make up for money lost from defaulting customers.

Back to bitcoins, if everyone is using bitcoins, wouldn't there be pressure to pay up if everyone sees who's receiving what? Maybe a condition for giving a loan is to make the borrower's receiving address public. What I meant is to link the borrower's identity with the address he's going to receive the money with. The lender would also list his receiving addresses for payments.

People would know who's not paying who. If someone is asking for a loan, people can just look them up more easily. Default on debts a few times and soon no one would be lending you anything. The records are also there if the lender wants to pursue a case. I think it'll be just back in time where people live in smaller communities and know each other, there's a negative incentive for ripping off others.

Just same as the fiat money loan,give loan only after collecting valid collateral like documents of house,if the borrower didn't pay you back the lend amount then you can seize the home as per the agreement you made earlier but it is possible only if government makes crypto as legal form of asset or money or there will be no actions can be taken if the borrower refuse the pay back the money.

Banks will still be capable of operating on a fractional reserve basis, even if the loan is denominated in bitcoin.

Much like how we suspect a lot of exchanges and hosted wallets right now to not be keeping full reserves all the time. It's not something impossible to do at all if their operations involve transactions which require coins to be transferred into the receiving entity's sole possession, which is what happens the majority of the time with hosted wallets anyways.

But this involves a ton of trust, and I doubt that a lot of bitcoin users will buy into a fractional reserve system like this given the fact that one of the fundamental aspects of bitcoin is its trustlessness - that you don't need to trust anyone to hold your wealth when it's on the blockchain. But given enough demand, even traditional banks which already have mortgage operations can simply re-denominate loans into BTC, while maintaining the same legal hold over the collateral of the mortgage (the property).

But if that 100$ is money made out of thin air...the the debt is also made out of thin air, right?   ;D ;D

And let's say after the bank has created this free 100$ out of thin air, I decide with that 100$ to come back and pay my debt in full. What happens to the money?
The bank erases your debt, takes back the money and everything is just as before you asked for a loan.
So, paying back your debt is ...burning money made out of thin air?



Neah, it's far easier and faster.
Two stores had an unpaid debt to our family business, it took us about 3 months to go through the paperwork and have their bank accounts frozen, the debt amount taken and reimbursed.

In my third job, I didn't get paid one month because of "problems" , when the payment day for the second month expired I went to the department that covers workers protection, signed a declaration, attached a bank statement proving I have not received any funds in the last two months and in 30 days I had all the documents I required to go go to a collection agency and ask for their funds / good/ property to be put on a distraint order.
Got my money in about two weeks.

As long as you have a legal contract certified by whatever needs to so to be valid in your country jurisdiction, lawyer, register, notary, you can act the moment the terms were breached.

But yeah, right now, you can stick your smart contract....in a usb port :PPP
You need a real thing.

If he doesn't have the strength to ask for a debt, he won't lend it to others. Maybe he has a gangster power behind him and nobody knows it. and when the debtor wants to escape, he can use his forces to suppress it. This is quite simple because I know some crypto lenders and I understand how it works.

The banks have to have in their vaults, in a way or another, certain % of the money they borrow.
For Bitcoin this will be certainly 100%. It will be in the same way you can borrow an object (eg hammer) from your neighbor.
The banks will have to have those coins, meaning somebody will have to "deposit" coins and get some advantages off that.

This was the wonderful and shiny theory.
In reality the banks certain services will try to offer custodial wallets so people keep money there without getting paid.
In reality those services will try that instead of sending out the loaned money to a certain wallet, make the user keep the money in their custodial wallet.
The result is that they can borrow thin air (I-owe-you notes) and we are back to square 1.


If the borrower needs the money to pay for something as big as a house, it can be done by anybody in the same way the bank does. Only a proper lawyer is needed for the papers.
The things get more complicated for the loans where people don't "put down" something valuable for the loan. The banks get their cut from the next paychecks, here's their power, where I don't know how can average Joe compete.

I think that will depend on the agreement before the lending was made so they can have a deal what will happen if the borrower cannot pay the money to the banks. But the truth is I don't know if the banks will make a deal with bitcoin because they don't know about bitcoin (or they did know), but they don't use bitcoin for loans. So I think if we want to loans in bitcoin, we should use the website which is support for cryptocurrency or institutions which support for cryptocurrency too.

What you're referring to is more like how governments work when you owe them whatever amount in tax. They will threaten to throw you in prison or seize all your assets they can get their hands on.

If you contractually set up all terms and rights as bank, there isn't much that can go wrong outside the risks banks already are exposed to. The asset doesn't really matter at the end of the day.

I have seen banks even facilitate the exchange of properties and other goods, so it's not that they haven't dipped their feet into non crypto based loans and whatnot. They know how to cover their risks.

Fractional reserve is related, but different to what I'm talking about. Let's say a bank gets a deposit of $100. They keep 10% of it, $10, as a reserve, and loan out $90. That $90 is deposited by another customer. They keep 10% of it, $9, and loan out $81. That $81 is deposited by another customer. They keep 10% of it... and so on. Take that to its limit, and that $100 deposit will end up funding $1000 of new loans, creating $900 out of thin air as I previously described.

Here's another article, from the Bank of England this time: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654

This is true, but not everyone pays off their debt. In the US, for example, consumer debt is now over $4 trillion, and increasing. Include mortgages in that figure, and household debt is over $13 trillion, and increasing.

People often get angry about government's printing new money to pay their debts or increase spending or whatever. The stats suggest governments only account for about 3% of the new money entering circulation. The other 97% comes from banks making loans.

I guess OP not talking about getting loan of bitcoin from banks,its like individual loan issuing from one person to another who you may know personally.In that case agreement can be made just like how banks are making the agreement with us for any kind of loans.

What Op has requested is a good question which we need to look onto for the growth relative to bitcoin similar to the fiat banking system. Already we've got loan providers for limited funds on the services section. With banks loans were issued on proper collateral. Mostly what we provide as collateral is valued big than what we get as loan. This keeps the banks on the safer side and similar process can be tried with cryptocurrencies with the help of intermediaries like bitpay.

That's why we will always need banks, whatever if it's to borrow $ or Bitcoin. Banks will always be able to provide some services than us, as the average Joe looking to 'be your own bank' can't provide. Who, as a person, will be ok to lend money to someone if there is no guarantee behind?
The justice takes too long and it has a cost. A bank just takes the money from your next paycheck.

Now you gave me a problem?  ;D

There will be an agreement applied that will have a notary public seal and so on and forth of what else the government does with this kind of contracts.
After all we will still go back to our governments for legalities which is really cruel right?
So better not just loan anything.
After all it is a bad thing to borrow money, you will just get used to it.

If an ICO or a gambling site requires KYC before joining do you think loan business cant?. Its more right to ask for personal information if you will borrow or lend money but when the time comes that there are establishments who really loans bitcoin, the KYC would be on his personal life and his BTC address, not his BTC account.

Still, banks don't have a complete relationship with the bitcoin, so we should get a loan in bitcoin on the individual who has bitcoins. Maybe we need to sign the agreement meant with the person we are choosing for loans. Previously some exchange is having option lending bitcoin loans but many people have cheated the system. Now the only option we have is from the individual.

Why always banks? Bitcoins were created because bankig system is completely wrong so getting loan from the individual is the best possible way for now but in future of bitcoin is the majoor form of payment then we may have some companies which give loans on legal basis after collecting the valid collateral documents.

I think issuing loans with Bitcoin is not suitable right now because people are still used to make profit out of cryptocurrency with their own local currency. I don't see any use cases were an individual use to loan Bitcoin or other cryptocurrency just to buy items or even make a business online.

The only way is to make an agreement, of course this must be done by using the services of legal agencies that have legal status. Because these third parties are needed to avoid things that can later be risky for either party.

Don't say what you don't know. Banks does not just edit your account balance to what you need, that doesn't happen. If you're taking a loan from bank, the money they are crediting to your account is coming from their own account. They don't just grab digits from the air and fill it up to your account. So stop saying what you don't know. Stop acting like one of these crazy Bitcoin enthusiasts that are always saying shitty things about banks, it makes no sense and is leading you to no where. And by the way, banks always collect collateral when they are giving you a loan, if you don't pay back they will sell the property you used as collateral to get back their money. That's the same thing Bitcoin loans, before you take loan from any Bitcoin loan service, you will submit your crypto that is worth the amount of loan you need as collateral. I don't even see any difference between them and traditional banks,, they are all the same.

In order to see if this could work out, we have to solve following two limitations:
1. It is impossible to issue loans and charge interest in terms of Bitcoin until Bitcoin becomes primary currency in the economy.
2. Banks can't maintain big reserves in terms of Bitcoin unless Bitcoin becomes primary currency in the economy.

So this returns us to the basic question, Can Bitcoin become the primary currency in the economy? If this could turn possible then issuing loans in Bitcoin is no big deal. Banks don't magically generate money. They do this through a process known as 'Money Multiplier'. The process is also possible with Bitcoins if people start depositing Bitcoins in the bank as it will lead to the maintenance of reserves with banks and secondly, borrower conduct his business in terms of Bitcoin. So yes, corporate lending is possible with Bitcoins but the basic assumption for it had to be the acceptance of Bitcoin as primary currency.

But Bitcoin with its limited supply can never become primary currency in the economy. Hence, all ancillary economic activities associated with currency like deposits, lending, etc. are also not possible at all at bank level. However, it may be possible at individual level like 'Lending' section on the forum but that is also not very successful due to limitation of valid collateral. Not everyone possess altcoins before taking Bitcoin loans.

The problem is how can this gangster power find it? whereas bitcoin is a decentralized currency, should borrowing in crypto have to enter into an agreement? And now there are no clear regulations regarding crypto loans.

Maybe banks have guarantees when they borrow money from customers, but if in bitcoin you might find it difficult to collect your debt if there is no guarantee, because this bitcoin is not wooded by some governments so with this we are deceived by parties owed then  we cannot claim that Kate Bitcoin has no legal force in some countries

well then they have to go back to the "honest banking" system instead.

which means you lend what you have instead of lending more than you can afford. and they will lend actual money (in this case bitcoin) instead of credit. and having limited supply is not a problem! imagine if price was 1 million and you wanted to loan $100k you simply take 0.1BTC!

but also there is another rout they could take, which is probably what they will too. and that is the same methods of using "credit" instead of actual money. for example when you loan money to buy a house you take a check and pay the check to other person and that other person deposits that in his bank so there is no need for real money to change hand but only numbers in their databases!

If you want to issue the loan you need to you have the collateral first from the users who want to lend from you. If you want to start the service in this phone there is a separate board for you to do that.
In forest and collateral I am not so sure about it you could check with the lenders who do that service in the forum.
Observe some banks are coming up with the loan offers via cryptocurrencies. Maybe soon they could have help you.

Issuing loans in Bitcoin committee is not such a good idea. There were a lot of websites like BTCjam and others which used to provide loans to the users and even this form provides loans who need them. But I will still suggest taking loans from banks is a much better option then in cryptocurrency. You can seize digital assets or any other collateral in the online world if you want to provide loan to others but in banking factors, they do not accept digital collateral instead they need physical mortgages.

agree... when a bank issue a loan, they need sufficient money to fund the loan
as a borrower you will want to withdraw that loan in real fiat money... hence bank needs to supply that

imo, that's not creating new money but reusing money in circulation to create new credit line
and the problem is, in our social life we treat and use this credit line the same as money

it's possible... think of exchange or custodial wallet
"the relevant amount in bitcoin" transacted only when borrower withdraw bitcoin to his own wallet
user sends real btc to deposit address in a custodial wallet and his account balance adjusted properly
a custodial wallet issues a loan to user account, and real btc transacted only when user withdraws
so the custodial wallet can act just like a bank (managing it like a real bank may run into some issues)

a bank will collapse when all depositors take their money at the same while bank doesn't have enough reserve balance
the same thing can happen to custodial wallet who tries to become like a bank or misuse users' funds

With bank systems when you are given a loan you are obligated to pay it back with interest, because in real life they have all your info and details and they can pursuit by law and police if you don't pay it back in time, but with bitcoin it is different, first you have the price of bitcoin constantly chagrining which means paying the loan back will vary depending on the price, and also bitcoin is supposed to be anonymous so there should be no personal details that would be given, details like where you live, and if someone does not pay you back you can't do anything about since bitcoin is not regulated by the law and government has no power over it, however there has been a p2p landing site a couple of year ago called BTCjam where people post their projects and how much they need and people will give them btc and they expect interest in return, but i shut down a while ago fir unknown reason.

I take your point, but with fiat, banks can just change numbers in a database without any money actually moving. If you try to spend loaned bitcoin anywhere other than sending it to another user of the same custodial wallet, then they have to have enough bitcoin in reserve. Fractional reserve could only work with a very high fraction in reserve.

The contract for any loan would simply state whether the repayment value is based on BTC or fiat.

I think they only lend BTC to people in the same country as them and they can manage their information. because loans need to be very careful in determining the identity of borrowers.
otherwise, I think they will only lend money to big businesses because they are reputable enough to repay the debt.

I feel like loans are the biggest reason why we are in this mess to begin with. Banks give you loan and expect you to pay it back with interest but if too many people do the same then there would be eventually someone who couldn't find the interest, there is a finite amount of money and unless you give out the exact amount expecting more back is the problem.

Lets say bitcoin is capped at 21 million and all of them were mined by just one person, he gives 21 million bitcoin as loan and expects you to give him back with interest, since there is finite amount you can't give him interest back since it doesn't exist. Well if we do small loans even at 1 satoshi eventually the amount of loans given and couldn't get back will reach 21 million and above, that is when inflation and money printing happens in fiat and we don't want that in bitcoin.

#1 is only impossible at scale (like major retail banks today). It's already done on small scales. For example, see the lending board right on this forum. Loans are made in BTC everyday.

Regarding #2, I think it's implied that banks can't lend out BTC until they start accumulating adequate reserves via deposit accounts. Eventually, retail banks will offer BTC depository accounts alongside regular checking, money market, and other accounts. We may see this start on a small scale (like a small regulated bank offering a niche use case) long before BTC becomes a "primary currency in the economy."

BTC doesn't need to be the currency. It doesn't have to replace fiat money. Enough people just need to have faith in it as money to start seeing these use cases popping up.

I think it's just part of how the financial system works. Even if loans aren't likely going to be paid back, you can always repack multiple potentially unprofitable loans and turn it into a financial instrument you can sell.

Banks have been doing that for decades and that's where things tend to go wrong. If you also add that governments might jump in financially, the larger banks don't have much to worry about.

I would say the risk for these banks is pretty low in that regard. It sucks that things are like this, but as long as there is demand for debt banks will continue to turn you into their slave at little to no risk.

One of the easiest thing is to write a contract between the Bitcoin borrower and lender. If it meets standards of their jurisdiction, the contract will be legally enforceable (raising chances for collateral liquidation if borrower defaults).

   It's correct that the number of bitcoin's is limited and the bank just can't print the number of a loan on your banking balance that way.
   In such case I think the bank should to buy as much bitcoins as it can. If such function will be taken by some banks then the price of bitcoin will fly high, cause of the demand will raise.
   I doubt that banks will work that way honestly. Cause first they will have to buy bitcoin's, which price is totally unstable. If the person who took a loan will bring back all bitcoin's he took and the price fell down sharply the bank will stay in minus. But again, if many banks will follow that the price for coins will raise constantly, due to demand.
   Hmm its interesting thing to think about really.

It could be simplified if it will be done locally like bitcoin being partnered with a banks. As of now there are banks that has already accepted and integrated cryptocurrency and one of it that I know is the unionbank and is also been here in the Philippines. I never thought of this to happen but the unionbank has already stated that they are partnering the satoshi group.

I think the best case scenario would be making it a paper work like the banks do it with their regular loans but also having the governmental back for it as well. Like when I give you bitcoin and expect you to pay it back and than you do not than I have no power of claiming that loan from you.

However, let's say a bank gives you a loan and you refuse to pay it than they come to your door with cops to take away your stuff for a lot cheaper than they worth and sell your items to pay your loan for them. Which means if we can get that type of support for our crytpo loans from the government like giving the lenders cops to go get that money like mafia (which banks are actually mobs) than we can actually issue loans without any problems since it would be easy to reclaim it back.

crypto currency and loans very difficult subject to handle even though we have escrow based transaction yet it is get back payments on time in this decentralized world is difficult

Indeed. The only assurance that the guy borrows the money can give is to provide some valuable assets to the guy that borrows him the money.
In that case he will be obliged to send the money back.

 I am just wondering here. Lets assume that there is this 3rd person in addition to the guy who gives out the loans and the guy who takes it. All this guys have bitcoin addresses. So the 3rd guy is the one who is saying that this guy ( who is taking the loan) is stand up guy and will repay you, i vouch for him. THen all these 3 parties are tied together with smart contract and here you go you have a smart contract.

Well in theory, banks just play with people's deposits, one person's deposit is another person's loan. Btw, commercial banks cannot print money, only central banks/Federal reserves can.
When an average Joe wants to lend bitcoins, he can sure lend, but it all comes down to how he wants to lend his money, the terms he lays down etc etc

What people usually would tend to do is get the borrower's personal details, verify it and then lend money. Also all borrow requests aren't fulfilled by the bank, so an average Joe isn't obligated to accept all his requests.

Wait a minute....
If people would pay their debt back, there would no money printed out of thin air.

So the real ones to blame for this are not actually the backs but the people who take the money and don't pay them back?  ;D
You realize this is a pretty strange thing to say, especially in this topic where we already labeled banks as the evil of the universe:P


Putting online two ATMs that convert fiat to bitcoin does not mean the bank is accepting bitcoin deposits or has "integrated" cryptocurrency.Also, who the hell is this "satoshi group" ?

The way you just described, it' seems dumb. How old are you, 6? If you are an adult you wouldn't be saying that banks are creating money magically. When you take loans from banks, they are giving you the money from their own wallet and expecting you to pay it back within a giving time and also pay the interest. So the money is not being created magically and digits poured into your account balance. Even when you want to deposit money into your account, do you go there and tell them to create money magically? It's the money you give to them that is being kept and recorded for you.

Such a contract will be very difficult for the borrowers to accept it even if it's me, let alone the borrower has offered the collateral. If he defaults to pay the loan the lender can still take the collateral with no punishment for the borrower. More clearly if there is already a collateral then there is no legal contract.

Still a difference between how the country will cater the entire crypto currency, with countries who embraced this market this particular practices will be able to be comply by enforce ruling inside the countries jurisdictions while out from this it will be hard to implement and hard to established any possible
rule outside the given premises.

What if the person who loans and person who give the loan are came from different countries? I think it is also immeasurable to get the documents in order to be a collateral to the loan. I am also thinking about the payments. For example, I loan 10 bitcoins when its price is 10K dollars but I pay 10 bitcoins when the price is 3K dollars. I think it should provide some rules when we loan through bitcoin.

The only way you the lender can get your loan with interest is by way given out the loan to who have equivalent collateral of the sum of loan amount you give to the person.

I think it is in the beginning Stage So I don't know how the procedure is going out and I don't really do it it previously that's why if anyone really make the loan like this in it will be definitely helpful by sharing your thoughts.

On the contrary. The money would still be printed, it would just be absorbed back in to the bank's finance books upon repayment of the loans.

If everyone paid back all their debts quickly, then banks would have very few outstanding loans, and as such, have much lower exposure to risks of defaulting whilst also be collecting very little in the way of interest. I suspect they would address this by starting to offer larger and riskier loans, which would make the problem worse rather than better.

That's exactly why I would never take a loan in bitcoin.I in the life already faced a situation when I took on credit the car in $ but not in national currency.After some time, $ began to cost 2 times more,respectively, and I had to pay 2 times more.Since the salary I received in the national currency and not in $ and the salary was at the same level.

Mind explaining your situation a bit? This is what I think have understood so far; you took out a loan through a foreign institution in USD, but used that to fund the car in your own country's currency? If your native fiat currency is so weak that it halves in value, why take out a loan in USD? Problems with fiat currencies that lose value play for a long time before they really tank against USD, so it can't catch you by surprise.

That being said, I didn't know you could take out a loan in a currency completely different to the currency you are being paid with. I would have assumed that a basic check of your finances would expose the risk and for that reason the loan wouldn't be granted to you. Perhaps things are different outside Europe.

That's what I also wondered, how did he get a loan in a currency other than his own? I supposed he took the loan from the car dealership, as it's been trending since. They don't do basic check correctly, sometimes not at all. Even if they did on his case they couldn't estimate a potential currency crash

Good point. You wouldn't want to take a loan in BTC (and spend it) if your only income is in fiat currency. That's effectively shorting Bitcoin. If the price rises, it becomes that much harder to pay off the principal.

It works fine though if your income is paid in BTC. In a world where salaries and goods/services are commonly paid for with Bitcoin, BTC-denominated loans will make more sense.

The problem will be :- the changing the price of Bitcoins .
If you are giving someone 0.1 BTC and it somehow changed into millions would you still be okay ? With not taking the current amount and taking only the past amount ?

That's something that will be problematic.
Also people take money to actually buy things of Everyday life therefore they will have to convert this into normal money that would actually be problematic since you will be paying a lot more .

From a debtor point of view it is pretty problematic.

in this case it does not guarantee that collateral will have equal value when prices move, imagine when you give loans in bitcoin and with altcoins as collateral and when prices move differently then the value is not the same as at first, this is a risky business in this industry

That's how the capitalist system works, with the conditions that you signed before you borrowed funds, you wouldn't be able to do
anything if you couldn't pay the debt. the bank would easily lend money because he didn't lose anything

There are crypto-based lending platforms out there. Some require collateral via another crypto, so not sure how effective that is. They also require you to verify your identity, so I'm sure, but they may be able to take legal actions if necessary. We're currently creating an infographic on the subject. Some names to look into are: Celsius Network, Nuo Network, Dharma.io, Compound Finance.

Have a good day,
The Cyberius team.

If, as he says, his national currency has halved in respect to USD over a short period of time, then he certainly lives in a country with rampant inflation. It's likely that some companies will not sell products or give out loans/credit (especially for expensive products like cars) in the national currency if it is so unstable. This will be doubly true if it is a global company rather than a national one.

Let's assume he lives somewhere like Argentina. 5 years ago, the exchange rate was around 5 pesos to the dollar. Now it is around 40 pesos to the dollar. It makes sense that companies don't want to expose themselves to long term loans and risk in such a rapidly devaluing currency. What doesn't make sense is OP taking out a loan knowing that his own currency is devaluing so quickly.

Savvy Argentinians like to take out loans in pesos and save up in USD (or more and more in BTC). In fact, if they don't do it more it's only because the interest rates are ginormous and the banks won't give money so easily, but there are many ways you can use inflation in your favor with a bit of imagination.

If you lend money to someone, let's say 5 BTC, you expect to receive back the 5 BTC + interests. No matter if the price jumps to $1 million, all I want is what has been written in the contract. Like if you lend 100k € you want the same in Euros no matter if the USD/EUR decreased by 10%.

What's the problem with exchanges, what will be paid more? When people really need money they are ready to accept anything.

This is the sad thing about loaning cryptocurrencies it's either you offer them another cryptocurrency as collateral or you have to offer something else in return. That something else I'm talking about is something you cannot just send virtually for you to have a loan, these kinds of exchange requires to be in written form to bind them legally stating that if the loanee didn't pay what he owes (+interest) the loaner will have the full ownership of what he have given them as collateral. With this where I think you need to appear physically in a bank I think it makes no sense for you to still get BTC rather than straight out Fiat currency if you still plan to convert it to fiat later on.

they are many projects which issue loans on bitcoin but finally they didn't survive the loaning mechanism on bitcoin so i feel blockchain based loans may nt be successfull

Its too messy for it to work and traditional banks lend out money they don't have.  Bitcoin doesn't work with fractional lending since you have to actually own the btc to lend it out.

Legal action? That is when you are dealing with someone within the lender’s jurisdiction, I mean maybe the same country, imagine someone in United Stated lending Bitcoin to someone is China, how would he take legal action when the person defaulted, I think there is still more to this crypto lending that I am yet to understand too.

I have never thought of going into cryptocurrency loan business or think of getting a loan through it, but I think we all have to learn more on this for better understanding, because I really can’t seems to flow along when I see issues on cryptocurrency loan.

although I have not opened the requirements that must be fulfilled to get a loan, but I am not interested in borrowing it, as you have explained, whether we will be carried away in international law, I do not understand. but it is very scary to imagine it

I think Bitcoin lending businesses will have their own management. Sure, they will not be able to give another person their country and only provide National ID.
they can only lend to those who can pay interest and they can control their whereabouts.

Maybe we can do it in a technological way? I mean I know people will find loopholes and so forth and that is guaranteed to be abused but if we can do some sort of "Ethereum blockchain and ICO issuing" type of deal in reverse that would be at least a right step towards it. Like you send someone funds and that person will take it and spend it on whatever they want but when the time comes the system sends your loan back to you with interest from his wallet, if he doesn't have any then when he gets any money at all in there you will get your money back automatically.

Obviously, there are millions of possibilities like not using the same wallet anymore and like that but you can find stuff like lock it on your pc and force it to receive all new coins and what not, I don't know how it could be done but that type of automatic system might be at least a right step into a good lending system.

Do you remember the site BTCJam? Why do you think the site failed? Because people weren't paying their due back. What lenders have been able to do? Nothing
IRL, it will be almost the same thing. you ask collateral, you will still lose money if the person doesn't repay. You can say to go injustice, you will still lose money with the cost to go in court.

LeGaulois, this is one of the things that the bitcoin world needs--a good and safe way to borrow bitcoin.  From everything I've seen of the lending section on the forum, it's a nightmare to do so.  I would imagine that any crypto bank would have to collect collateral for any loan being issued, which is what traditional banks do anyway unless a person's credit is solid.

The problem with loans on bitcointalk is that they're often being requested by people who have no or inadequate collateral, and a lot of them have no intention whatsoever to pay back the loan.  In addition, there's the anonymity factor.  A crypto bank would likely have to verify the identity of the borrower.  It could work, but there would have to be major security features implemented on the part of the lender.  Loans would look much different than they do currently, i.e., less anarchy, less trust, more collateral and identification verification.

Didn't Trendon Shavers try this?  Not sure if he was loaning out money, but he did try to start some sort of crypto savings and loan thing.  Look what happened there.

I really don't know about this kind of wastes are also available in the cryptocurrency field to get the loan with the cryptocurrencies but if it is giving the helpful things for the people then I also ready to try this but I need some guidance.

If there was full support of government for cryptocurrency, I would have seen it as an easy thing to go into crypto loan business, at least there would have been regulation then that may bind the borrower and the lender, which will make it impossible for the borrower to default in payment, and maybe with support and regulations, we would have crypto banks that can easily manage such activities and the risk involved.

Cryptocurrency is a peer to peer system, which usually does not involve personal contact before a transaction can be carried out, so I am really wondering how crypto loan activity can be easily carried out and how it can be managed if there is an issue with paying bank, if the borrower refuses to pay, I dint think authority will meddle in this as they are not authorized to engage in anything that is against the law yet, which may even land the lender in trouble if reported.

I think that crediting users in Bitcoin is a very dangerous way to implement certain services.  Today, things are already very bad with the popularization of cryptocurrency, and if due to loans in Bitcoin the same problems arise as with the banking system, then confidence in cryptocurrency will generally fall.  At the same time, the whole situation can be aggravated by price instability.

This can be sought with the gold loans from my understanding, in traditional banking we get used to gold loans where gold is given as the collateral. Here the value of the collateral gold is valued 75% and the sum of amount equal to the gold is got by the borrower. Further for this interest is being levied which need to be paid along with the borrowed amount to get back the gold. This way can cryptocurrency bank function same as the traditional banks.

As stated collateral through our forum is purely on trust and lot many have got cheated, this can't be made perfect as it is impossible to collect collateral as well as do KYC. A physical banking system is the possible way to provide loans with proper collateral. These days there were apps that are issuing loans in fiat, and here we're supposed to accept legal norms and if we didn't pay our loan within the quoted tenure with the interest they have the rights to take legal action against us. If we pay the loan properly then we can request for an increased amount. This is a limited amount service where initially what we can get as loan is just $100.

There was a company that did something about loans with collateral and it was literally automatic. I know people are not really fans of doing it since they could literally just sell whatever they have if they were so much in need of money instead of give it as collateral but as a service for people who are looking for it that was a start.

You would for example get 100 dollars loan from them in bitcoin and give them 120 dollars worth of ethereum to them, they charge you lets say 5 bucks as interest and when you pay them 105 bucks back in bitcoin they gave you 120 dollars worth of ethereum back. Now, this makes no sense since if you need money you could just sell your ethereum instead of giving it as collateral but at least it was a start and you could have used it. Kabbage literally started out this way and became one of the biggest digital lenders in the whole world.

It is easy for everyone to just sell their investment anytime they need money, but the concept of crypto loan is to give people the opportunity to still hold their cryptocurrency without using it while they still have access to what they would have pulled out of their portfolio to meet up with whatever thing they need it for.

But come to think of it, if they pull out the investment directly from their portfolio, there are some people that made their investment during the last ATH, let’s say around $19800, and probably their investment is now $11k, and they believing that one day in future, bitcoin will climb back to such amount for them to recover their full investment back, do you think they will be willing to completely lose their portfolio now, they will prefer to take loan for certain period of time, while they still give opportunity for their investment to climb.

You can be given loans through bitcoin…but they don’t give you bitcoin, they give you fiat .how it works is that you will submit your coins as collateral, coins that are worth the amount you would like to collect as loan. You submit the coins and then collect fiat and after you pay back the money you borrowed, they will give you back your coins, and when paying the money you will also have to pay the interest that is on top. But what you can’t do is give loans in cryptocurrency exactly, nah you can’t do that. If you do it then what are you using as collateral? That doesn’t work.

As long as there's a contract it's possible to enforce the collection, and if not possible, you can take the collateral.
It's pretty the same with your example,  banks loan to people with collateral, in your example, that's a mortgage loan, and will just forfeit the collateral when a borrower is unable to pay, that's kinda secured and a typical joe can also do the same thing as like I said, as long as there's a contract.

Borrowing bitcoin and paying back bitcoin and borrowing bitcoin and paying with dollar are two totally different things.

For example, if you get a loan in bitcoin and you want to later pay it back by buying bitcoin when you have money the price of bitcoin may have gone up and it may have a trouble for you to buy that much bitcoin because of the price increase, or maybe it will be easier because price went down and you will get more bitcoin for the same price.

However, if it is just dollars, like you get a loan in bitcoin form but 1000 dollars and will have to pay 1100 dollars back, that would be easy and doable because people could totally pay back in dollars but in bitcoin form. So you are basically getting dollar loans but the transaction is made in bitcoin, that could be a good start for this.

@zikzag

I disagree with almost everything you say here.
 

I suppose first there is a language problem, bitkonda=Bitcoin? What the anonymity has to do here? Yes, Bitcoin is pseudo-anonymous, then what?  I could use potatoes as currency, it's untraceable, it doesn't mean I will lend money (potatoes) to someone I don't know. There are legal papers etc (it could be a smart contract btw), anyone mentally stable won't lend money to someone unknow in the street.



Why not? Definition of "currency":  medium of exchange, unit of account,  store of value. Bitcoin has these 3 functions all in one. It could be the potatoes too!

The dollar isn't stable, it changes every day.

An example below, there are a few others
https://blockfi.com/

There is a project I saw on this forum they issue loan in cryptocurrency, including bitcoin, I have not lay hand on it again to read their whitepaper so I see how they intend to factor dumping, so their loan won't be in trouble. Banks should be about to issue loan to customers in the future, the price of bitcoin will just be increasing as more and more persons size the privilege.

Since, bitcoin is to serve as currency, it would have actually served for this purpose also, but that can only be when the volatility of bitcoin has reduced because the volatility makes it a little bit difficult to be able to cope with the loan repayment, Imagine that someone had bought bitcoin or borrowed it at $10000, if the person was to repay back now, the person will be paying more of bitcoin to the creditor which will favor the creditor the more when the price finally rebound and even if the price does not rebound, the creditor must have still gotten his own crypto value back.

I would not really ever advise anyone to actually go for bitcoin loan or any cryptocurrency loan because of its volatility, but if we are to look at the interest rate being charged, it is by far better that borrowing money from the bank which will attract a huge interest rate, but we cannot have our cake and eat it all.

I believe that there is already a bitcoin lending service going on in this group with the likes of Darkstar giving loans to people with and sometimes wihout collateral, i believe that the same method could be used by banks to give loans in cryptos to their customers.

Through some stepped process and escrow services loans were provided after collecting collateral. This is almost the same as the banking services. We need something better and easy, and this happened after looking at a mobile application that is developed to provide loans. Here our identity gets revealed, and further everything signed electronically. In 24hrs time loan amount is deposited to our account. Initially one is eligible to get $50 further upon the way he repays one can get upto $3000. This is truly good for people from third world countries. Maybe similar systems can come with cryptocurrencies in the future.

The only option for that is p2p lending because bitcoin is decentralized so I think there is no way to have a great system for that. p2p lending is the best option, we have a lending section here in forum, so I think that will be enough just provide some collateral or just simply having a trusted account profile will be enough.

In terms of lending money in Bitcoin, it is partly due to the lender itself because the borrower wants to repay you in what currency you want them to pay if you want people to compensate you in Bitcoin. that would be pretty hard in my opinion, but the fact that you want that person to pay in currency is simple because Bitcoin is an accepted virtual currency that can be exchanged for cash and use a natural way

Thats really a nice question. While i don't really have any ideal on how such thing can be pulled off. But i will wait for others input then fter i go through their comments and reason how possible it is to acheive each of the stated points.

It is possible to make a loan for bitcoin but not in the banks because bitcoin is still not accepted by the government and banks do not also have the assurance that they can get protected by it if ever they needed the money because we know the value of bitcoin and that is very volatile. So, banks may not going to accept it unless government wanted to make it happen.

I think it’s going to be difficult to issue and make loans using bitcoin. Cryptocurrency price varies depending on what season it is, hence making it risky to loan and borrow because of its volatility. If ever someone borrowed btc and its price increased after he’ll have to pay more than he borrowed.

Another thing, its much more complex to have a crypto bank as it would definitely need some personal information, hence users need to provide for security reasons of the lender. If you would compare this concept to banks, this is certainly much of a hassle because it’s just going to be digital transaction unlike in banks where it requires physical appearance of the borrower. There should also be a contract stating the terms and conditions if the borrower wasn’t able to pay the amount and its interest on time.

The idea is nice, but risky. I honestly don’t know how we can pull this off. Maybe if concrete policies were be given, it can happen. Hoping to hear more opinions about this matter. Will read the new replies to this thread.

Its just like lending someone cash no different.  You either get it back or you don't then you have to legally deal with it.  Bitcoin is no different.  I dont think banks will get into lending bitcoin because lime you said they would have to have 100% coverage meaning they cant just loan bitcoin magically...but they can lend their own coin  ;)

If that is the case, it will be difficult for those who borrow bitcoin in countries that have not legalized bitcoin. Lending and borrowing conventional cash money has been accepted by everyone and every country has prepared related regulations. But bitcoin is a little different because not all countries recognize it. How?

I will not advise anyone to issue loan in bitcoin.  I don't think it will be possible for someone to come out with good profit at the end of the payment. Bitcoin is a decentralized currency which it will be hard for such loan to be granted to anyhow person in the country.
Many people go to bank to collect loan to improve their businesses and also Carter's for their family too. Collecting loan from bank, depend the amount of money collected that will determine the interest you will be paying every month to the bank,to balance up within a year. Many people find it difficult to balance up within a year because of the interest attache to it, is too high for me, that is making them not to meet up with their interest that caused them to lose their properties and other valuable things.
I don't think, it will be easy for someone to issue loans in bitcoin and expect that person to meet up with the payment .when the price is going down how would that person meet up with the loan unless interest will not go to be involve in such loan because if intereste involved no way the person can meet up the way other people use to Meet up with bank loan in the country.

This can be an interesting one after the implementation of the whole process. I am thinking it's afterward situations. It can be expanded with zero-sum and non-zero-sum theory. That means it can be a win-win situation for both just because of increasing the price of Bitcoin. Because the supply is limited, so the price of it can be increased anytime. Sometimes this win will work for the lender and sometimes it will work for borrower.

People can do same thing like what banks do. They can create a contract of agreement between the lender and the borrower just to make sure that everything will be okay until the end. A normal lender has its own power even if he is just an ordinary person and not a bank. There are many things to think of, people borrows money when they really are in need. When loaning with bitcoin, I think it is better if you would loan the amount in USD but in the form of bitcoin for if the value increases, the amount of money borrowed will also increase.

Contract is the most value, however, for loans with collateral, I think it's hard to measure how much is the value of collateral if the collateral is a property, as anytime bitcoin will pump or dump, that would give the borrower an option whether to pay the loan or not and just let the collateral be foreclose.

Ultimately you would issue a loan with Bitcoin in the same way you would issue many other loans, except you would probably peg it against the USD value of bitcoin. Many people all around the world borrow in USD, but they can suffer badly if the exchange rate goes the wrong way - many loans made in Turkey face this problem for example. Ultimately it is the lenders who will have to judge whether it is possible to do this and if the returns are worth the risks. They will expect a large amount of collateral due to the volatility of cryptocurrency and it is unlikely that many borrowers will consider it to be a good deal. They might also only offer it to high net worth individuals and those with an impeccable credit report.