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[znort987]

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[oleganza]

Who will lend BTC when it grows 100% per month? In fiat world people are motivated to invest money because the risks of investment are lower than depreciation of cash. The less money depreciates, the less risky investments will be made. If the money is appreciating, then any investment opportunity must be that much less risky or more promising. With appreciating currency regular folks will not put their money in anywhere, so only very limited amount of resources from professionals will be moved into doing new stuff. That means less misallocation of resources and the products that are really in demand. Since the most growing and promising area is Bitcoin itself and many already have invested a lot in it, the most resources will be thrown in: 1) Bitcoin management services, 2) lobbying Bitcoin-friendly laws, 3) workarounds for Bitcoin-unfriendly laws, 4) wider and better accessibility of Bitcoin.

[BTC Books]

Who will lend BTC when it grows 100% per month? In fiat world people are motivated to invest money because the risks of investment are lower than depreciation of cash. The less money depreciates, the less risky investments will be made. If the money is appreciating, then any investment opportunity must be that much less risky or more promising. With appreciating currency regular folks will not put their money in anywhere, so only very limited amount of resources from professionals will be moved into doing new stuff. That means less misallocation of resources and the products that are really in demand. Since the most growing and promising area is Bitcoin itself and many already have invested a lot in it, the most resources will be thrown in: 1) Bitcoin management services, 2) lobbying Bitcoin-friendly laws, 3) workarounds for Bitcoin-unfriendly laws, 4) wider and better accessibility of Bitcoin.

The OP said:

...and would easily allow one to borrow fiat backed by one's coin stash value.

I think the point is that to collateralize a fiat loan with bitcoin, if the loan goes into default then the value of bitcoin at the time of default is used to repay it.  So if you hook one bitcoin for a $90 loan today at 10% interest, and then default in a year when bitcoin exchanges at $180, you'd pay the lender 0.5 bitcoin plus 10%.

[CIYAM]

The zero-knowledge proof of ownership would add the property that the fiat lender never gets
to know *which* coins you own, just that you own a given amount.

I think that unless the BTC was held in escrow it would be very hard to trust this concept (i.e. just because someone *has* a bunch of BTC doesn't mean they won't run off with the fiat).

[w1R903]

I think that unless the BTC was held in escrow it would be very hard to trust this concept (i.e. just because someone *has* a bunch of BTC doesn't mean they won't run off with the fiat).

Agreed.  I think you'd have to give up access to your private keys for a knowledgeable lender to lend fiat against btc collateral.

But I like the OPs creative approach to traditional financial transactions.  Keep 'em coming.

[Mike Hearn]

When the ZeroCoin paper comes out, you should read it, as a zero knowledge proof of ownership is exactly what they do. However, you can't do a ZKP with standard/raw outputs. They first have to convert them into "zerocoins".

In this particular case, I'm not sure I see the point. If the lender calls in the loan and claims the collateral then you'd end up signing over specific outputs anyway. It seems like a lot of complexity for not much benefit. I suppose if it could be done simply, it'd be useful.

You might be able to do it with a multi-party computation. The private inputs would be the index into the UTXO set of your owned coins.

[Zotia]

This would not work.

1) This is not proof that the borrower will actually pay.

2) This is not proof that the borrower will not use the bitoins for some other purpose after doing the proof.

3) This not even proof that the borrower actually has access to the bitcoins.  For example, an online service could be made to do the zero knowledge proof for you. (You would then just act as a willing man-in-the-middle).

[CIYAM]

This would not work.

1) This is not proof that the borrower will actually pay.

I don't see how this argument carries any weight.

When you borrow fiat from a banker, they look at your
assets and repayment history. None of these things are
proof that you are going to repay.

A bank will seize your house or car if you don't repay but they would not be able to size your BTC (so it's a *useless* asset if it is not held in escrow).

[CIYAM]

So... how about someone set up an escrow business?

That was really my point (that you would *need* to use escrow) but apparently the OP doesn't want to involve an escrow at all.

[auzaar]

So... how about someone set up an escrow business?

That was really my point (that you would *need* to use escrow) but apparently the OP doesn't want to involve an escrow at all.

In the moneypunk days of the late 1990s and early 2000s, we saw several attempts at 'ecurrency' banking, derivatives, and the like, and it all ended in tears.  A lot of it was naive exuberance and way too much of it was pure scammery.

Earning trust, especially when it comes to money, is the hardest part.

In one way, it is a shame that Bitcoin has taken off so quickly.  We have not had time for low-risk experiments that push the envelope.  When Bitcoin sold for USD 0.01, losing a few in some harebrained scheme to mimic insurance or something else clever would not have been a big deal.  As it is, paranoia is setting in, and the talk is about paper wallets and brain wallets.

How does price matter, you can still experiment with mbtc