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October 25, 2015, 02:53:55 AM |
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Altcoins are by far the best collateral, especially the ones that are established, stable and have a decent trading volume.
If you have intimate knowledge about the markets of other digital items, including what it would take to sell various digital items and how much they would sell for if the seller was motivated to sell, then you may wish to accept other digital items provided it is difficult to reverse such digital items. There are a number of people who are very well versed in the bitcointalk account market and this is why so many people accept these as collateral for loans, however I would suggest that you do not do this until you are yourself well versed in the bitcointalk account market. The same is true for domains, as if you know a domain can quickly sell for well above the amount of the loan in the event of a default then you may wish to accept it as collateral, however if you are unsure then you should not.
In regards to wanting to avoid people running off with the bitcoin that you lend them, your best bet is to be sure that your collateral is sufficiently valued above the amount of the loan + interest, with a greater margin of additional value as the market for the collateral is smaller and the liquidity is less. If you make a loan for $100 and take collateral that can easily and quickly be sold for $200 then the borrower will most likely not default on such loan, on the other hand if you make a loan for $100 that is secured by $110 of collateral that is difficult to sell then the borrower is not going to have as large of an incentive to repay the loan because he stands to lose much less by defaulting on the loan.
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