Bitcoin Forum

Everyone knows I do not work outside of Bitcoin anymore, and they also know that I'm not running off anywhere (I'm already in the place I'd be running off to!), so let's get to the bacon.

While I'm running the Bitcoin Magazine, DCAO, DialCoin, smallpla.net, BitDex and a few other still unmentioned projects in the Bitcoin world, I brought one of my colleagues in from Peru (Vicente) to work together. With expectations to work closely as a team I signed a contract for a 2-bedroom apartment here in Seoul.

Current deposit: $5,000 USD0
Current rent: $750/mo. USD

Due to a mutual agreement, we've parted professional ways and I no longer need a 2-bedroom apartment in the expensive and bustling side of Seoul. In fact, what would suit me better is an apartment where I don't pay rent (they have those in Korea!). The way this works is, I pay a hefty deposit and they eat the interest off of it instead of charging rent.

A $2,500 deposit for a one-room apartment can have your rent at around $400, whereas in the same neighborhood a $20,000 deposit on a one-bedroom apartment can mean nothing or next to nothing in rent. Don't ask, it's a Korean thing and it's why land owners here are billionaires.

Now it is possible for me to move, but until someone comes into this apartment, I can't touch the $5,000. Furthermore, even if I had the $5,000, I'll still be stuck in the same boat of being a slave to the rent machine.

So here is what I propose:


I will ask to borrow anywhere between 2000~4000BTC to get an apartment that doesn't require rent.

There is collateral in the current apartment of $5,000 that is released back to me when the contract ends or another person moves into this apartment.

I am not 100% sure about this proposal, and I welcome criticisms, advice, corrections and reasons why it's insane. I also might change my mind tomorrow because someone decided to buy this apartment off of me tomorrow. That said, my reasons for doing this here are:

• Foreigners can't really get home loans in Korea (even after they get their F-2s or Dual citizenship-- racism at its finest)
• Being in Korea, Bitcoin is ideal for sending money for me (especially since all of my businesses pay me out in Bitcoin, not fiat)
• I want to set a positive precedence for public loans in the community, and increase my trust in the community overall.

Let the flame war begin!

(Note: Even if I do find some borrowers willing to lend or I never find any, I'll keep this thread unlocked and open for educational and entertainment purposes.)

This has to be one of the greatest loan in bitcoin so far.

At least one of the largest publicly visible private loans. I know of larger numbers passing hands in the background on a day-to-day basis.

What is the interest you would be willing to pay on the loan?

That has graced this board. I know for one pirate's program could be loads more then this one.
On a side note, you could post your repayment plan and the interest you're willing to part with here too. Easier for the borrowers to calculate their finances.

I'm not even sure what's fair for something like this. I've never done a home/apartment loan in my life. I've always paid in cash or had rich people just lend me on favor. That said, I don't mind paying realistic rates (so long as it doesn't exceed a balance of cost of opportunity + current rent rate).

On second thought, it would almost seem like you are trading one payment for another. If you get this loan, and your interest rate is anywhere need the normal rates on this board, you would be paying between 5-10% per month to service the bitcoins borrowed.

An example might help:

Borrow 2000 btc at 10% interest per month. You monthly payment on the principle would be 200 btc per month or at this moment, over $1k USD.

If your rent is cheaper than this, you are better off staying on the rent treadmill.

If you get a better rate, things may pan out in your favor.

That does make sense, except you're forgetting that the new apartment has a contract that is renewable, so as long as I want to stay there, I just keep the deposit there with little or not rent, whereas the rent I'm paying now would just be throwing money away.

Apartments in Korea = literal savings account.

This is true, I was going to do it when I was there but didn't have the up front cash. I did lease for a year at a time and got a good deal.

I guess you are planning on staying awhile :)

Well, been here 7 years so far. ^_^

Matthew,

What are the terms you are wanting? 2000 or 4000 btc? What interest rate are you willing to pay? How often will you be paying the interest and principle on the loan?

These are questions you will need to answer to get any serious offers.

I would also recommend setting up a good spreadsheet to keep track of this as the amount you are requesting will more than likely be funded from multiple people.

.. and based on USD, Won or coin?

I guess I was fishing for people who knew more about rates and policies at first, but if someone is willing to do 4000BTC, then that's ideal (way better opportunities real estate-wise). I guess I would need 3 different options then wouldn't I?

• 2000BTC (12 month) plan - $10,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
• 3000BTC (18 month) plan - $15,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.
• 4000BTC (24 month) plan - $20,000USD borrowed, $833 USD (principle) + $167 (interest) paid monthly.

The plans I wrote above are roughly  20% interest.

I am not exactly sure how these types of loans work, but the way I figure it the following basic terms would be safe and logical (correct me if anything seems "non-standard"):

• Paid back monthly
• Based on USD/KRW, not BTC
• As a penalty, if in any given month the principle cannot be paid back, an additional fee equal to the interest will be due that same month.

Good point. This is a fun learning experience so far. What exactly would be in the spreadsheet? Exactly what I had said here in this post?

Thanks. I realize. I can't imagine a sane reason in this ridiculously volatile market to borrow any significant amount of coins. It could double tomorrow.



EDIT: To clarify (since someone asked me on Skype and was confused), I would be doing a USD fixed loan but accepting it and paying it back in BTC.

True, and it's not a bad interest rate in "real-world" terms, since the loan is denominated in USD. With the plan outlined above, however, there is no incentive for any lender to go above 2000. For 4000, a lender gets 20% return over two years, and for 2000 the lender gets the same percentage over one year.

Are you sure the costs to incentivizing a loan won't end up exceeding the actual rent you'd be paying without the deposit. As far as lenders here are concerned, currency risk is eliminated (assuming people want USD) by the loan being denominated in USD, but counterparty risk (I don't think you're dishonest, but we don't know how solvent you are, etc.) is still present. Your landlord, on the other hand, has your identity and the full power of Korean law to go after you if something goes wrong, so the risk is actually lower for him/her. Assuming other things equal, that would lead to lower costs for you if you figured something out with the landlord.

Of course, this is all making a lot of assumptions. But naively, I'm not convinced it's in your best interest to take a loan from us, unless it's partially intended as a bitcoin experiment for its own sake.

Edit: also, who would lend to a horse?

Pffff. I've been trying to get a one-year mortgage for a few days.

As Copumpkin and his fiscal acuity pointed out, this doesn't make sense financially. As a BitCoin experiment, it might. A better experiment would to get your landlord to accept BitCoins.

I see this as a Rent 'Short'.  Ingenious if BTC goes down, no so much if it goes up.

How's the magazine coming?

Not commenting on this other than to say that I also live in Korea, and Matt's description of the various rental/deposit systems here is pretty much spot on. So if you're sitting there wondering WTF is up with that, well, welcome to our life.

And make sure when you come to Korea to bring a small fortune if you want to live a normal life.

..unless you're planning on working some job in Korea that gives you an apartment but I digress.




The two are mutually exclusive.

I'm seeing three people now talk about problems and dangers etc regarding using bitcoin for the loan.

I'll restate this a third time:

The loan is fixed USD loan, just paid in BTC. I cash out of BTC as soon as I get the loan. I buy BTC for spot value of what I am paying back when I pay it back. I fail to see why that is "dangerous" or "non-beneficial".

I acknowledged this in my post. I don't think there's any currency risk in this loan, but bitcoin lenders have more counterparty risk than your landlord would, so I'd expect you to get shafted more here than you would if you just paid the standard rent rate. Assuming rational behavior all around, that is, which might be a pretty big assumption :)

I get it now.

Even people who are long on Bitcoin will still have to spend their coins eventually. Money is meant to be spent  ::)

What is the landlord's incentive for this? On the figures Matthew posted, the landlord would need to earn around 20-25% p.a. on the deposit to break even with lost rent compared with a "normal" lease. How much is the standard risk-free interest rate in Korea at the moment?

I honestly have no idea. I've run the numbers myself a bunch of times and it really makes no sense to me at all. Benchmark rate is about 3 or 3.5%. They must just really value cash in hand instead of dealing with monthly cash flows or something. I would assume there is some kind of regulations in place concerning what they can do with that money. I can't see them being allowed to reinvest it in anything with any real risk/rate of return.

It's just weird.

An unsavory tenant would likely not destroy a dwelling if he has $20k to lose for doing so. However, with lower amounts, the value of being lazy & otherwise unsavory may exceed the value of the security deposit.

Similar to punishment through law. If the punishment is $250, I don't care too much about possibly violating it and taking my chances being caught. If the punishment is 10 years in rape-ville, I would not take a chance at violating the law except in extreme circumstances.

I think he's talking about incentive as in "How does the landlord make any money", and the truth is, the "free" apartments I'm talking about are typically much more expensive than what I mentioned, but I know a few places that the rent would be about $100 with a $20k deposit.

Rule of thumb in Korea is, larger deposit = cheaper rent.

As long as the asset isn't depreciating significantly in value (which it likely won't [outside of normal wear & tear] given the huge deposit), there is very little risk of the landlord losing money, so revenues can be much lower while still keeping a healthy profit factoring in bad tenants across many samples -- similar to wanting FPGAs over GPUs for mining. That lower risk of bad tenants probably also relieves the landlord of stress, time consumption, and sudden needs to spend funds on repair in case of property damage.

I still think you're missing his (and my) original point.

Normally, you would pay rent. That is where the landlord's income comes from. I think the question he was asking was "how does the landlord make any money?". And the answer was my response.

I think you're expecting me to be able to comprehend what I read.  :) Reading the OP thoroughly (I originally thought it only said "near-free"), no, I don't see how that makes sense for landlords, unless maybe they really regret getting into landlording but can't sell the properties.

In actuality, it is "near-free" in most cases (unless you drop $200,000 down). Even with $20k, I would expect to pay $100 at least for rent but that's better than $750.

Is it true that loans in korea run for like 70% interest per day? I'd already heard that koreans use property as a savings account, but I wasn't sure how much to believe since it all sounded crazy o.0

Also, I can see at least two problems with the way this loan is set up:
1: the way you wrote it up the interest is paid in USD, whereas if you take a loan in BTC it's generally expected that you'll pay it back in BTC (as with any other currency).

2: The general interest rates (from what I've seen so far) are ~10% per month. 20% for a year is about 1/15th the amount you can make from compounding general interest on BTC =\. Also, USD interest (esp with inflation) is probably much lower than 20%/y anyway, so you'd be better of finding a way to borrow dollars like everyone else in the world does, if that's possible anyway.

Matthew has answered this atleast 9001 times in this thread so I'm going to answer it for him this time.

He plans to get the BTC, convert to USD and use. Then every month (lets pretend hes repaying $500 a month) he'll take his repayment of $500, convert that to bitcoin at the price at that time, and pay.



So he might get a loan (for example) of 500BTC. He converts that to usd and gets $2500.

Next month, the price of BTC sky rockets to $10,000/btc. If he had a fixed BTC amount to repay, he'd now be fucked and have to repay $5,000,000 worth of BTC back, but because he's repaying at USD prices, he now only has to pay 0.25BTC back in total for the 500BTC loan.



So if bitcoin goes up or down, neither lendee or lender is affected, and lender can lend in BTC and lendee can repay in BTC. the loan is "hedged" on usd.


You cant blame him for trying, he has the interest he is willing to pay outlined somewhere in the thread. If I win the lottery I'll lend him the $20,000. Don't forget if I was to put my money in a savings account I'd get like 2% per year so from that POV this is a hell of a deal. Also loans in South Korea may have high interest rates, and may not be lending at this time.

I do understand how that works, but consider that if the value of BTC went to $10kUSD, then I as a lender would have been better off simply holding my BTC and doing nothing. Technically I (probably) wouldn't lose purchasing power, but the opportunity cost would be a killer. I also dislike USD in general :P.


I'm not blaming anyone for anything, that's just something I heard and was curious about. I also hear it's legal for them to send loansharks to your house to beat you up if you don't pay. I don't know that it's true but crazier things have happened.

Also, 2% per year is doing "well" for USD, but 2% per week is around the average I've seen for BTC, although it varies. If you're lucky enough to have an account at FirstPirate, you can get 4-7% per week, depending on how much coin you drop. At 2%/wk, that's 180%/y, and at 7% it's 3,270%/y, if you compound. Either number is pretty freakin insane, even at 33% BTC inflation for 2012.

That aside, dollar interest rates are pushed artificially low by the fed. Although I personally don't know much about getting international USD loans, if he could figure it out they should be around 5%, which would be doing way better than the 20% he was offering. I'm fairly certain he could beat 20% at any rate, which certainly isn't bad, and he'd have inflation on his side.

Most BTC loans are also short term, since it's better as a saving platform than as a debt platform. The USD is centrally planned (read: print) to favor debtors and allow for cheap long term mortgages and other artificial borrowing conditions, but saving in USD is a futile affair. USD favors instant gratification and bank ownership, while BTC favors delayed purchase and outright ownership. Ideally, you could borrow USD for the deposit, then stash the rent savings in a BTC bank :P. Eventually the interest from the BTC account would more than pay for rent.

Well, what if it went down to $0.0000001/BTC? Obviously if you know 100% that the value of anything is going to go up, then you buy/hold it and don't trade it, unless you really have to. A loan is (almost) guaranteed profit for the lender, so long as you trust the lendee.



Lol. That was a figure of speech, not to be taken literally. I wasn't accusing you of blaming anyone.


Most countries have those, they're also known as "debt collection agencies" :)


I have a 3.25% savings account (taking into account taxes and not taking into account inflation). That 2% per week is money your lending to an unregulated bank of which you really have no idea what your money is actually being used for and what the risk really is, or is for a small short term loan to a person, which isn't going to accrue near as much interest and is something you can do with USD (see http://wonga.com - APR 4214%). The risk with this type of loan is extremely low because if Matthew can't afford to pay he can always move apartment and collect his deposit.


Thats assuming the USD banks are lending money, and also that your BTC bank isn't going to lose your money. What do you do when your BTC bank steals/loses your money? I'd like to see what a judge would say in court.

Also I'd love to see pirate's reaction if I brang 4000BTC to him. I don't think he or any other BTC bank has the capacity to take that on right now.

Other than the interesting use of the character sting "brang", there are a few people that would take 4000 coins from you and pay interest.

This.

Uhh, no. The problem in Korea is not what's "legal" or "illegal", it's what's "enforced" and what's not "enforced". There are preferential treatment, corruption and lax laws here due to the fact that we are in a constant state of war with the North.


Exactly. Why is this so hard to understand for people? I do admit though, $5k is not $20k. If I am loaned $20k and I defaulted for example, the most I am 'guaranteed' to get is $5k from the last apartment.

This is Korea. We don't borrow USD, we borrow KRW, and it is way harder to borrow in Korea than in the states. Also, they're racist. We've covered this.

I wouldn't take the questions personally. It's a lot of money, and you should expect to answer a lot more questions than the average loan to get it. Are you willing to disclose your personal finances (income, savings, etc.) to a prospective lender (in private, if you don't want to do it in public)?

I don't. ^_^


Of course.

Well, normally that wouldn't be a big issue, but it's the USD I don't trust :P. One of these days all the inflation the US has been exporting is going to come back and bite it where it hurts. I wouldn't want to have any investments in USD when that time comes.

:P


Yeah but usually they're not allowed to beat you up and steal your stuff after a week of a 70% interest loan. Usually it requires some sort of legal action.


Well, actually I've been digging through the lending forum to see what info I could dig up. I found out a lot about the lending criteria people are using, their accounting practices (or lack thereof), and the relative risk of default that they face. In general they see about 1 in 10 loans default, and usually for very small amounts so that it doesn't cause too much problem. I can already see a number of simple mistakes people are making that could be avoided as well. Basically, the problems faced with BTC banking are no different from any other free-market bank, and the same universal principles of banking apply. Either when doing lending yourself or when choosing a bank, the same criterion for what "good" is apply.

Also, I haven't seen anyone throwing a fit about pirate, and he's been running insane interest rates and been going at it for a while now. There's also several other individual bankers, and I haven't seen very many complaints at all about not getting interest payments, or for any other reason. Business seems to be good enough.

I'd never heard of Wonga or anything like that. That's pretty insane. However, personally I'd rather deal with the challenges of the unsupported free market and come up with solutions myself than to rely on government control to make my business work. The world will never evolve if nobody steps up to come up with new solutions.


His risk level isn't really a factor. See above.


Maybe, you won't know till you look. As for bank capacity, you may be right. Current BTC banks are very primitive, and generally don't have the automation capacities to handle a lot of depositors or borrowers. If you know how to screen borrowers, you could lend yourself and probably manage it. However, I think the case for BTC banks stealing your coin or blowing up is overblown. Apparently, at one time when everyone was inexperienced and BTC was new, things were much less reliable, but I don't see that much today. The worst I've seen is the WBX collapse, which failed only on the AUD side, and is being liquidated much more responsibly than, say, MF Global or Lehman.


That makes better sense. Not terribly uncommon around the world, either.

Oh, and for the record, I was only curious x.x. I'm not Mr. D. Pockets, nor am I trying to argue with anyone lol.