I have come up with a solution to the lending problem, I know it needs work put the core concept would work just fine. Here is a quote to my thread on the subject.
My Proposal:
Looking for partners to develop a new crypto-coin system, this system is intended to work with Bitcoin and not to be an alternative to Bitcoin. The projects name is Lend-n-Vest and involves the creation of new crypto-coins dubbed LoanCoin, LendCoin and HedgeCoin. The Lend-n-Vest system of crypto-coins will be designed to solve two of the oldest financial problems in existence, 'how to loan money without the risk of a loss in your investment' AND 'how to borrow money without the risk of defaulting on the loan.' The concept is fairly simple, but the implementation will be complex. In essence the concept goes like this:
1. An investor has X amount of funds that they wish to make a profit on by loaning the funds to a trustworthy entity.
2. A trustworthy entity needs funding for a startup project, business, home purchase, to fund their education, etc...
The scenario;
After doing much research the investor has found several possible candidates that seem like good investments but is a little disappointed about the cost of fee's involved in traditional investment packages and the possibility of potentially loosing 100% of the investment in a direct loan if the debtor is unsuccessful or fraudulent. The investor finds the proposal of the pre-mentioned entity very attractive because the person/project/business has great potential and is inline with the investors personal interests. Additionally the investor is atracked to the investment because it has a wonderful altruistic social component.
The problem for the investor is that despite the fact that the investor would love to give the person/project/business a chance to succeed the investor cannot be sure of the trustworthiness of the entity nor the financial viability of the person/project/business. Traditionally the investor would most likely avoid investing in the candidates because of the risks and except the lower returns of traditional investments for the sake of financial security.
This is a shame because many wonderful ideas, innovations and a great deal of progress has never been realized due to the human tendency to avoid risk. This is where the Lend-n-Vest system can make a revolutionary change in society.
This is the option the investor would have with the Lend-n-Vest system:
Finding a worthy person/project/business the investor purchases X number of LoanCoins. Each LoanCoin is packaged with one LendCoin and one HedgeCoin. LoanCoins have a maturity date and mature at a value that is equal to the original purchase plus interest. The value of a LoanCoin on its maturity date is guaranteed. LendCoins are worth a small fraction of its associated LoanCoin. HedgeCoins have an initial value of 'zero' on the day of it's creation. This initial value of a LendCoin changes inversely against the value of some base crypto-coin (likely Bitcoin) The value of a LoanCoin is Locked buy its cousin the HedgeCoin and its maturity date is not set until its associated LendCoin is liquidated by converting it into another crypto-coin (cashing it). A LendCoin is destroyed when it is converted. HedgeCoins are processed immediately and function like options. HedgeCoins can function independently of LoanCoins and therefore can always be used to persevere the value an investment giving the HedgeCoin extra value. HedgeCoins will have a guaranteed value based on its inverse function and can be traded for a [HedgeCoin(+)premium] market value. Furthermore LoanCoins, for the sake of liquidity, can be traded before their maturity date, this gives the investor the option to make a short term or longterm investment or adjust their investment plan when needed. After maturity a LoanCoin can be converted for its value in the original crypto-coin it was based on. Like its counterpart the LendCoin, the mature LoanCoin is destroyed when converted.
The Lend-n-Vest system is also intended to allow miners to profitably use their existing hardware. With the advent of ASICs many miners are finding that their expensive hardware is losing its usefulness for mining. The new hardware is pushing many miners out of the game and is threatening to create the all to familiar 'the rich get richer and the poor get poorer' situation. I think that this is something that most in the Bitcoin community wish to avoid. By arranging the mining procedure in such a way that restricts the three Lend-n-Vest coins so that miners with the most powerful hardware have to rely on those miners with older slower hardware will equalize the situation. There are many ways to do this and since value is a product of work done for coin generation it can be fair and equitable.
One such solution would be that ASIC miners generate the LoanCoins, FPGA miners generate LendCoins and ASIC/FPGA miners pay GPU miners to generate the HedgeCoin (the third and essential part of the Lend-n-Vest system.) By changing difficulty levels, including an automatic donation to lower level miners and a dynamic reward distribution based on hashing power distribution, miners with newer hardware will be encouraged to fund hardware upgrades for those with older hardware. This process can continue even if ASIC technology is replaced by something more advanced. For example; if the conformation speed of blocks found is dependent on support miners with GPUs then ASIC miners will want to increase their donation percentage so that GPU miners can upgrade to FPGAs.
By wisely adjusting difficulty levels over time, the general strength and hardware advancement will increase for all and leaving no one out if they wish to join in. Lets say that at some point in the future there is no one left on the generation network using GPUs. Then, someone somewhere gets onto the network and begins to mine with a GPU. This causes everyone's numbers drop enough that they want to fix the problem, donations go up, then the new miner upgrades (because the miner will have a much greater profit if they upgrade) and everything returns to normal.
Now, the LoanCoin and LendCoin work together in this manner, an investor purchases/mines LoanCoins, with the purchase of the LoanCoins are included an equal number of LendCoins and HedgeCoins. The investor finds a worthy cause and gives the LendCoins to the individuals. Yes that's right, gives away the LendCoins free of charge. You see, the profit is built into the Lend-n-Vest system. The investor is guaranteed to make their profit when their LoanCoins meet maturely!
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The LendCoins are worth much less than their associated LoanCoin, in fact they are to be worth around 10-20% of the Lend-n-Vest coin package. Of the 10-20% only 5% or so percent of the original LoanCoin value will be available to the receiver but that 5% or so percent is generated value and does not deduct from the Lend-n-Vest systemcoin purchase amount! In addition most of the fees involved are paid by generated value.
At this point in development it is assumed that very little or none of the original investment is lost or spent. This is the security of the investment! Most of the extra value is accomplished through a clever arrangement of merged mining. The purpose of the HedgeCoin is to preserve the investors capital against the fluctuation of crypto-currency markets as well as to provide general stability in the markets and provide an additional profit opportunity.
What this all boils down to is that the investment funds are being lent to the Lend-n-Vest system and the investor is paid an interest for their investment. The added bonus is that the investor is able to finance and provide support for causes that the investor cares about. It will be Philanthropy realized!
![Smiley](https://bitcointalk.org/Smileys/default/smiley.gif)
I really want to see this happen so lets get it done!
Thanks for your consideration!