Taking interest. Hoarding BTC.

[spiralarchitect]

I am fairly new to Bitcoin and Blockchain world, even though I keep reading forums here once in a while.

I want to understand few things w.r.t bitcoin code:

 1) Hoarding coins: How can hoarding excessive bitcoins be avoided? Lets say the total economy of BTC is 10 billion which converts to certain $ value at this moment. What if any govt or a conglomerate buys all of them or major share of coins, lets say 7 billion BTC. Won't they hijack the system? Won't they get powerful? Is it avoided in current system?
Also, is it possible to penalise hoarding in blockchain by code change?

2) Interest on lending coins: I see in this forum that people lend BTC for an interest with some collateral. Does that work purely on trust? Is there a legal angle to it?
And does the lender has ability to take collateral in case of non-payment?
    Is it possible by changes in code or otherwise to avoid people lending on interest? Like, 2 people can exchange BTC with or without interest. No body can stop that AFAIK. Is there a way to to convert interest lending into risk sharing model?

[Merovius]

Frankly this thread has too many questions in it for a single poster to be able to answer it all fully in a reasonable amount of time...the stuff about lending bitcoin at interest, trust issues, etc. should probably be split off into a separate thread in the Services section.

As far as possible hoarding of bitcoin goes, if a single entity were able to buy up a large amount of BTC this would simply benefit the rest of us BTC holders because it would significantly limit the supply of BTC in circulation, thereby theoretically leading to a further increase in the value of each BTC. Taken to the extreme it would be like the Uncle Scrooge comic book story I read back in 1979 where the Scrooge McDuck cartoon character tried to buy up all of the 1916 quarters in circulation at the time by offering everyone 50 cents per quarter. He was apparently successful at limiting the supply this way and driving the price all the way up to "ten skyrillion dollars" (I am not sure exactly how much a "skyrillion" is but I imagine it is roughly equivalent to the national debt of the USA). The problem with our Uncle Scrooge was that no one could actually afford to pay 10 skyrillion dollars, so in the end he was stuck with a big pile of quarters that he could not sell because his penchant for hoarding had driven the prices too far out of whack.

In the case of our bitcoin economy it is unlikely that things would ever reach this point because there are enough hardcore "hodlers" out there who will not let go of their BTC even as the price rises, such that no one would ever be able to buy up all of the BTC in circulation. If the available supply did become sufficiently limited through hoarding and/or increased demand, then smaller units like satoshi could become valuable enough to necessitate a few more decimal places being added to the displayed balances of bitcoin wallets and transactions. I am not sure how easy or difficult it would be to add more decimal places than the current eight to the underlying code, however; for the answer to this, and the questions about BTC lending issues, we will see if other posters have something more to add.

[lucifochrome]

I do not know if there is such a penalty for hoarding bitcoin but as far as i know there is none. And i think it is a risk that the hoarder is taking. Say for example this hoarder decided to buy a huge amount of bitcoin like billions then suddenly price dropped insanely. For an investor this is going to be a bad investment. So i dont think that there will be someone who will hoard for a long time maybe a few months or just a year.
As for the lending; i think this just matter solely in trust. Unless you know who that person is or you have something like an agreement but without that i will not take the risk in lending bitcoin.

[hatshepsut93]

Bitcoin incentivizes holding so it may be extremely hard to buy any big portion of total amount of bitcoins. Right now you can go to exchanges and buy some thousands of coins from their order books, but it will drive the price higher and higher and people may decide to hold instead of selling, since price rises might only reassure investors that Bitcoin is going to be worth hundreds of thousands of USD in the future. So, if Bitcoin's marketcap is 95 billions it doesn't mean that you can buy all bitcoins with that sum. Next point is, on a technical level it doesn't matter how much coins do you own - 1 BTC, 0.0001 BTC or 16 million BTC - the network is governed by code so everyone play by the same rules. Money, be it BTC or fiat can allow you to influence the price and by it you could influence mining, but you can never get any direct control over the network - it was designed to withstand such attacks.

[Almat]

I am fairly new to Bitcoin and Blockchain world, even though I keep reading forums here once in a while.

I want to understand few things w.r.t bitcoin code:

 1) Hoarding coins: How can hoarding excessive bitcoins be avoided? Lets say the total economy of BTC is 10 billion which converts to certain $ value at this moment. What if any govt or a conglomerate buys all of them or major share of coins, lets say 7 billion BTC. Won't they hijack the system? Won't they get powerful? Is it avoided in current system?
Also, is it possible to penalise hoarding in blockchain by code change?

2) Interest on lending coins: I see in this forum that people lend BTC for an interest with some collateral. Does that work purely on trust? Is there a legal angle to it?
And does the lender has ability to take collateral in case of non-payment?
    Is it possible by changes in code or otherwise to avoid people lending on interest? Like, 2 people can exchange BTC with or without interest. No body can stop that AFAIK. Is there a way to to convert interest lending into risk sharing model?

The more BTC is hoarded, the higher the price will be. Hoarded BTC are effectively out of circulation. BTC has an upper limit of 21 million BTC. It would be theoretically possible to buy up massive amounts, but they would need massive amounts of money. They also can't predict how the market will react so it would be a huge risk.

[christam02]

I do not know if there is such a penalty for hoarding bitcoin but as far as i know there is none. And i think it is a risk that the hoarder is taking. Say for example this hoarder decided to buy a huge amount of bitcoin like billions then suddenly price dropped insanely. For an investor this is going to be a bad investment. So i dont think that there will be someone who will hoard for a long time maybe a few months or just a year.
As for the lending; i think this just matter solely in trust. Unless you know who that person is or you have something like an agreement but without that i will not take the risk in lending bitcoin.

Me too!

[RayvenPierre]

First of all it is hard to see and really way too impossible for the government or even someone to buy 70% of the bitcoin out there in the market. And second there are people lending bitcoins here and they use the accounts as collaterals. They can either sell the account or use it for sig campaigns if the lendee was not able to pay.

[w5pn73]

First of all it is hard to see and really way too impossible for the government or even someone to buy 70% of the bitcoin out there in the market. And second there are people lending bitcoins here and they use the accounts as collaterals. They can either sell the account or use it for sig campaigns if the lendee was not able to pay.

Governments can just print money, theoretically they could just create money out of thin air, use government bonds to buy all the bitcoin they want, At the end of their buying spree their fiat currency would be useless though.  

[Opquar]

2) Interest on lending coins: I see in this forum that people lend BTC for an interest with some collateral. Does that work purely on trust? Is there a legal angle to it?
And does the lender has ability to take collateral in case of non-payment?
    Is it possible by changes in code or otherwise to avoid people lending on interest? Like, 2 people can exchange BTC with or without interest. No body can stop that AFAIK. Is there a way to to convert interest lending into risk sharing model?

No legal angle whatsoever. There is often collateral involved in the form of altcoins, but they could be just about anything. Lending without collateral is enormously risky as there is nothing you can do about them running away with your coins.