[ANN BTCJam] - Loans denominated in other currencies (USD/EUR/RU)

[Tulkas]

Hello,

Now you can denominate your loans in other currencies. At every payout the total value in bitcoin will be calculated using the current MtGox exchange rate.

Motivation: protect from fluctuations in bitcoin price.

Example:

You borrow 30.0 BTC today, to pay next month, suppose BTC is at USD$30.00.

Next month you will make the payment, BTC price is now USD$ 60, instead of paying 30 BTC back, you will pay 15 BTC, the amount in MtGox USD remains constant.

You can hedge your loans with:

• Bitcoin - same as before
• MtGoxUSD
• MtGoxEUR
• MtGoxRU

[1714662431]

1714662431

[1714662431]

1714662431

[ThaddeusB]

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

[Tulkas]

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

[ThaddeusB]

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it.  The value of BTC never enters into it; is just payable in BTC.  This is not a hedge.  A hedge is a position that protects against the risk in another position.  A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X.  Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment."  There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important.  However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

[Tulkas]

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it.  The value of BTC never enters into it; is just payable in BTC.  This is not a hedge.  A hedge is a position that protects against the risk in another position.  A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X.  Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment."  There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important.  However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment. 

[miTgiB]

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it.  The value of BTC never enters into it; is just payable in BTC.  This is not a hedge.  A hedge is a position that protects against the risk in another position.  A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X.  Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment."  There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important.  However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment. 

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

[boonies4u]

Right, which means the loan is actually a USD (or Euro or whatever) loan however you want to spin it.  The value of BTC never enters into it; is just payable in BTC.  This is not a hedge.  A hedge is a position that protects against the risk in another position.  A true hedge would be to lend 10 BTC and then go sell short 10 BTC at $X, or more likely to buy an option to sell 10 BTC at $X.  Posting a link to the Wikipedia article on hedge doesn't make what you are offering a hedge. (Incidentally, from the very first line of said article: "A hedge is an investment position intended to offset potential losses/gains that may be incurred by a companion investment."  There is no companion investment in what you are doing.)

But whether you are offering is properly called a hedge or not is not really important.  However, you failed to answer actual question in my post, so I went to the site and did it myself: it appears that the buyer decides payback calculation when they create a loan.

Since there's no USD/Euro/etc involved the loan is in Bitcoin. Perhaps hedge is not the exact word for it, I failed to find a better one, perhaps you can suggest an alternative.

The payback calculation is done by the system based on the exchange rate for the reference currency at the payment moment. 

Is there anything that can be done for a loan that was already created? (with lenders approval ofcourse) While the recent rise in trading value of bitcoin does mean that I owe more (in terms of USD) I am still able to pay it off, but the price may jump to a point that I am unable to.

[Tulkas]

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

[miTgiB]

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But what value does it add?  I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

[ThaddeusB]

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But why value does it add?  I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

From the OP:

You borrow 30.0 BTC today, to pay next month, suppose BTC is at USD$30.00.

Next month you will make the payment, BTC price is now USD$ 60, instead of paying 30 BTC back, you will pay 15 BTC, the amount in MtGox USD remains constant.

Simply put, you are getting a loan based on the value of USD (or whatever currency) but paying in BTC.  If you borrow $300 of BTC at 10% you pay back in $330 of BTC.  Instead of the number of BTC at payback being determined, the value of the BTC is.  If BTC rises significantly durign the loan period, you may end up owing less BTC than you borrowed.  OTOH, if it falls a lot you may owe 2x or 3x as much BTC.  

Whatever one wants to call it, such a loan is exactly equivalent to a USD loan, but with the funds delivered and returned in BTC.

[boonies4u]

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

But why value does it add?  I agree you used the wrong word calling it a hedge, but other than informational value, I am missing what it provides.

The ability to lend and receive loans valued in USD and not bitcoins.

[Smoovious]

At this point, I sure wish I was able to index my loan in USD instead of BTC... since BTC has more than doubled in price since I took it out.

-- Smoov

[boonies4u]

At this point, I sure wish I was able to index my loan in USD instead of BTC... since BTC has more than doubled in price since I took it out.

-- Smoov

Agreed. Though having it pegged at USD at this point wouldn't be very attractive either...

[Smoovious]

At this point, I sure wish I was able to index my loan in USD instead of BTC... since BTC has more than doubled in price since I took it out.

-- Smoov

Agreed. Though having it pegged at USD at this point wouldn't be very attractive either...

Guess it all depends on which side of the loan page you're sitting on XD

-- Smoov

[wholesaler]

Sounds like nothing more than a calculation provided for the borrowers convince, but actually serves no real purpose.  You might look at actually providing a hedge to protect from a rising bitcoin value against fiat for an added fee by buying calls.

Please, read the OP again.

If you borrow 10 bitcoins today, to pay next month, you will theoretically pay aprox. USD $300.

Now suppose that in 10 days the bitcoin price jumps to USD$ 1000.00 per bitcoin, you still need to pay 10 bitcoins back, but now you will need USD$ 10,000.00 to buy 10 bitcoins!

yah i really do give a fuck im sorry but if i gave you 10,000$ and next month 1& was worth 10,000 i'd still want the 10k because most loans arent used right away they sit till they are at the last second also this would allow people to say get a 1000btc loan for 1 year and just have it sit then when they have to pay up they simply send it one BTC

profit 99BTC(if the exchange rate is exploded) so it only benifeits people who need loans not the lenders which are the most important.

also im done with your site because iv'e loaned out to people who have 5 postive loans repaid and then they just leave with out paying back shit and all their doxs are verifed.


take this listing for example https://btcjam.com/listings/1783 this is a fucking kid who has almost every dox verified and i might never get my coins back and this motherfucker has verified i know hes a kid becuase the number he gave me after wanting more money went to his dads cellphone his fucking dads phone and his dad tells me he is a "con artist".

so if i get my money back im never coming back to this site while nice it still to easy to scam people  even if you verify your dox.......................

[Monster Tent]

Loaning someone 10btc and then getting back only 5btc because the USD sucks ass isnt a good investment plan.

[boonies4u]

Loaning someone 10btc and then getting back only 5btc because the USD sucks ass isnt a good investment plan.

Loaning someone 10btc and then getting back only 10 btc despite the trading price plummeted isn't a good investment plan eitherr.

[Deprived]

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

The loan is NOT denominated in Bitcoin.  It's denominated in USD but transacted in BTC.

You should be able to work this out for yourself by considering the question "how much will the repayment be?".  When you realise that you can ONLY give an answer to that in USD yoi've just worked out what the loan is denominated in.

Additionally, all such loans should have the amount of the loan AND the size of payments displayed in USD:

1.  So lenders have it made very clear to them that what they get back will be valued in USD.
2.  Because if the borrower wants to borrow USD then the amount they want to borrow is likely set in USD not BTC (i.e. they want to borrow BTC sufficient to buy something work X USD).

At present people are going to lend to these sort of loans without noticing that if they mouse over the USD/GOX symbol it tells them that what they get back depends on an exchange-rate.  There should be no possibility for such misunderstandings.

[Monster Tent]

I don't think this is actually hedging at all, but rather allowing loans denominated in other currencies but settled in BTC...

Who decides on the "hedge"? The borrower when creating the listing or the lender when funding?

The loan is still denominated in Bitcoin.

When the listing is activated the aquivalent amount of the loan is calculated using the other currency.

When the payments are made, the amount to be paid in bitcoin is calculated using the current exchange rate (accordingly to MtGox) with the target currency.

http://en.wikipedia.org/wiki/Hedge_(finance)#Categories_of_hedgeable_risk
http://en.wikipedia.org/wiki/Currency_risk

The loan is NOT denominated in Bitcoin.  It's denominated in USD but transacted in BTC.

You should be able to work this out for yourself by considering the question "how much will the repayment be?".  When you realise that you can ONLY give an answer to that in USD yoi've just worked out what the loan is denominated in.

Additionally, all such loans should have the amount of the loan AND the size of payments displayed in USD:

1.  So lenders have it made very clear to them that what they get back will be valued in USD.
2.  Because if the borrower wants to borrow USD then the amount they want to borrow is likely set in USD not BTC (i.e. they want to borrow BTC sufficient to buy something work X USD).

At present people are going to lend to these sort of loans without noticing that if they mouse over the USD/GOX symbol it tells them that what they get back depends on an exchange-rate.  There should be no possibility for such misunderstandings.

Its highly misleading to say that BTC has anything at all to do with these loans. http://www.prosper.com/ one may as well use this and avoid the bitcoin scammers.

[miTgiB]

Yeah, now that this is becoming clearer ,I will avoid these loans. If I want to lend dollars, I'll use my lending club account long before btcjam where borrowers are actually verified and go through proper underwriting.