Zero interest Bitcoin mortgages

[nonameo]

Here's what I don't understand - where is the value in that?


1. I don't need rights to mine. I can mine all day long in a pool or solo - how is this different?

2. supposing this somehow makes mining easier(the alternative) then it must make mining harder for everyone else. The # of bitcoins is limited to 21 million, so making 1 million free for one person means there's only 20 million left for everyone else to mine.

[BeeCee1]

what do you mean not be able to profit from it?  Did you miss point 3 in my original post?  Currently mining yeilds what, 5 Bitcoins?  This is worth roughly $70.  So for an investment of $100 you would get a return of $70 per month.  Is that not a good enough profit for you? 

Did the money go to the previous home owner to buy their home or to mining hardware? The same money can't go to both at the same time unless you are counterfeiting.

What are you talking about?  it's quite simple:  Person A lends coins to person B ($100 worth).  Person B makes monthly repayments back to person A (principal only, no interest)  As a reward for lending the coins, person A gets the right to process (mine) the transaction, which of course results in new coins being created.  There is no counterfieting here.

Coins get created with new blocks, not new transactions.  They can even be created with no transactions (except the coin generating one) in it.  The only thing miners get that is associated with a transaction is the fee and that fee comes from the person sending the bitcoins (the borrower in this case).  Sorry, no free lunch.

[trentzb]

They are mined.  Just like regular bitcoins, except in this case only one person is allowed to mine them (but he can sell that right)

This is where the breakdown is. Who determines who is allowed to mine and how do you propose on enforcing that?

[Agozyen]

I think the confusion comes from the title 'Zero interest Bitcoin Mortgages'.

Also, if I invest $100 and get $170 in Bitcoins back, where do they come from?  In other words, who generates them?  

They are mined.  Just like regular bitcoins, except in this case only one person is allowed to mine them (but he can sell that right)

 You still aren't answering my question.  WHO physically mines the Bitcoins?  Where are they mined?  Is it a server farm?  Is the guy that took out the loan responsible for mining them with his own equipment?  How do you determine the queue for mining coins?

If I take a $100,000 mortgage out, by your model, I would have to repay $170 back to 1000 people.  My hash rate is at 350 Mhash/sec.  At that rate, and at the current difficulty, I generate .26 BTC per day.  If I have to pay back $170,000 worth of BTC, I will be mining for 91 years.  And that's only if the difficulty stays the same.  If I am one of the guys that loans out $100, how long before I get my money back?

All you have is a concept, can you give an actual example with math to back it up based on current difficulty and say $20 per BTC?  

[SupremeBit]

Terrible idea. Not only it's not viable but it'd encourage bad investments.

[raresaturn]

Terrible idea. Not only it's not viable but it'd encourage bad investments.

how so?

[raresaturn]

 You still aren't answering my question.  WHO physically mines the Bitcoins?  Where are they mined?  Is it a server farm?  Is the guy that took out the loan responsible for mining them with his own equipment?  How do you determine the queue for mining coins?

The lender gets to mine them.  If he can't or doesn;t want to then he sells his right to a server farm or whatever.

If I take a $100,000 mortgage out, by your model, I would have to repay $170 back to 1000 people.  My hash rate is at 350 Mhash/sec.  At that rate, and at the current difficulty, I generate .26 BTC per day.  If I have to pay back $170,000 worth of BTC, I will be mining for 91 years.  And that's only if the difficulty stays the same.  If I am one of the guys that loans out $100, how long before I get my money back?

your hash rate is irrelevent, as the borrower you are not the one mining.

All you have is a concept, can you give an actual example with math to back it up based on current difficulty and say $20 per BTC?  

exactly, it's a great concept.  look at my post number, i'm new to all this.

[nonameo]

raresaturn,  do you mind explaining your understanding of how bitcoin works to us?

I do not mean to pick on you, but the best way to help someone understand something is to have them explain to you how it works.

[raresaturn]

Here's what I don't understand - where is the value in that?


1. I don't need rights to mine. I can mine all day long in a pool or solo - how is this different?

Yes but as I understand it it's pretty hit and miss, and anyone can mine the coins out from under you.  Under this concept only you can mine those coins.

2. supposing this somehow makes mining easier(the alternative) then it must make mining harder for everyone else. The # of bitcoins is limited to 21 million, so making 1 million free for one person means there's only 20 million left for everyone else to mine.

why is it limited to 21 million coins? Is that an arbitary number?

[raresaturn]

raresaturn,  do you mind explaining your understanding of how bitcoin works to us?

I do not mean to pick on you, but the best way to help someone understand something is to have them explain to you how it works.

Sure, as I understand it each transaction has to be processed by a miner, for which they are rewarded with coins.  But I am not totally sure how the transactions are allocated, is it random? Or to multiple persons work on the same transaction and the first one to finish gets the coins?  Let me know if I'm misunderstanding it, I only learnt about it last week.

[raresaturn]

Yes but as I understand it it's pretty hit and miss, and anyone can mine the coins out from under you.  Under this concept only you can mine those coins.

Each miner gets an amount of BTC that is proportional to his MegaHash/second (MHPS) rate. There is no practical way that you can change that.

can you expand on that?  how exactly are these allocated?

[Agozyen]

 You still aren't answering my question.  WHO physically mines the Bitcoins?  Where are they mined?  Is it a server farm?  Is the guy that took out the loan responsible for mining them with his own equipment?  How do you determine the queue for mining coins?

The lender gets to mine them.  If he can't or doesn;t want to then he sells his right to a server farm or whatever.

If I take a $100,000 mortgage out, by your model, I would have to repay $170 back to 1000 people.  My hash rate is at 350 Mhash/sec.  At that rate, and at the current difficulty, I generate .26 BTC per day.  If I have to pay back $170,000 worth of BTC, I will be mining for 91 years.  And that's only if the difficulty stays the same.  If I am one of the guys that loans out $100, how long before I get my money back?

your hash rate is irrelevent, as the borrower you are not the one mining.

All you have is a concept, can you give an actual example with math to back it up based on current difficulty and say $20 per BTC?  

exactly, it's a great concept.  look at my post number, i'm new to all this.

 Look at my post number.  I'm new too.  

 But once again, you aren't answering the whole question.  Where. Are. The. Coins. Mined???  Who's. Hardware?  Who's. Electricity???

 If the individual lenders are mining the coins, why even lend $100 in the first place?  I can mine bitcoins now without having to lend $100.  

 As a lender my hashrate is vitally important.  At 350Mhash/sec will take me about 35 days to generate $170 in Bitcoins (assuming $20/BTC).  

 Concept is dead if lenders use their own hardware and electricity.

[raresaturn]

 But once again, you aren't answering the whole question.  Where. Are. The. Coins. Mined???  Who's. Hardware?  Who's. Electricity???

I. Don't. Care!

 If the individual lenders are mining the coins, why even lend $100 in the first place?  I can mine bitcoins now without having to lend $100.  

 As a lender my hashrate is vitally important.  At 350Mhash/sec will take me about 35 days to generate $170 in Bitcoins (assuming $20/BTC).  

 Concept is dead if lenders use their own hardware and electricity.

But isn't mining competitive? (correct me if I'm wrong).  The difference here is it becomes exclusive

[luxgladius]

As others have mentioned, the idea as it stands is unworkable because you don't understand how Bitcoin works. Miners don't need your transaction to mine Bitcoins. The only incentive that a miner has to process a particular transaction is the fee associated with it. Blocks can be created with no transactions other than the one that creates 50 BTC. You're not offering any incentive to a miner that he doesn't already have.

Now if you offered a fee to a miner and an exclusive right to mine that transaction rather than broadcasting it to a network, that would be something at least. As others have mentioned though, not many players have sufficient power to solo mine any more, so it would take them a highly variable random amount of time to actually generate the block with your transaction. And then you're not having zero-interest, you're just having a fee in place of the interest.

[Agozyen]

 But once again, you aren't answering the whole question.  Where. Are. The. Coins. Mined???  Who's. Hardware?  Who's. Electricity???

I. Don't. Care!

 If the individual lenders are mining the coins, why even lend $100 in the first place?  I can mine bitcoins now without having to lend $100.  

 As a lender my hashrate is vitally important.  At 350Mhash/sec will take me about 35 days to generate $170 in Bitcoins (assuming $20/BTC).  

 Concept is dead if lenders use their own hardware and electricity.

But isn't mining competitive? (correct me if I'm wrong).  The difference here is it becomes exclusive

 Dude, you're not grasping the concept of Bitcoin at all.  We all have mining hardware.  We all have the ability to mine bitcoins ALREADY.

 Why would I lend someone $100 when I can just mine them for myself?

 If I loan you $100, and then mine $170 worth of BTC on my own hardware, how does that benefit me?  I can do these things already WITHOUT having to lend you any money.  You get $100 FREE without having to pay me back.  At all.  Basically,  your concept is for people to lend money, and then use Bitcoin mining to pay themselves back with the borrower contributing absolutely nothing.  Or am I wrong?

 Why would I lend you money and then use my own hardware and electricity to pay myself back?  How do you, as the guy that just got the loan, pay me back the original $100?

  EDIT - To put it in other terms, it's like me lending you $100 to help you out, but instead of YOU getting a second job to pay ME back, I have to get the second job to get back my money while YOU contribute nothing. 

[raresaturn]

Now if you offered a fee to a miner and an exclusive right to mine that transaction rather than broadcasting it to a network, that would be something at least.

That's exactly what I'm proposing.  Was I not clear on that..?

[luxgladius]

Now if you offered a fee to a miner and an exclusive right to mine that transaction rather than broadcasting it to a network, that would be something at least.

That's exactly what I'm proposing.  Was I not clear on that..?

You have to change the bitcoin protocol and build your own bitcoin network to do that. Then you have to create demand for your currency by offering value in exchange.

If he was just adding a transaction fee, he wouldn't have to change anything. He would just have to send it just to this one miner, whoever that was, rather than broadcast it to the network. As soon as that miner solved a block with that fee in it, he would claim the fee.

All the same, this wouldn't count as zero-interest. Instead of paying interest to the lender, which makes sense, you'd be paying it to the miner instead for some strange reason, but you'd still be paying it... It seems he doesn't really understand how Bitcoin works.

[Agozyen]

Now if you offered a fee to a miner and an exclusive right to mine that transaction rather than broadcasting it to a network, that would be something at least.

That's exactly what I'm proposing.  Was I not clear on that..?

 Help me understand what you are proposing.  

 Here are 3 scenarios.  Let's assume that for each scenario, my Hashrate is 350 Mhash, the price of Bitcoins is $20, difficulty stays where it's at, free electricity and I have $100 in the bank.

 Given the above, it would take me 33 days to mine $170 worth of Bitcoin.  $170 is what you originally proposed as payback ($100 + $70).

 Scenario One - I lend you $100.  33 days later, I have $170.  

 Scenario Two - I don't lend you $100.  33 days later, I have $170 + $100.

 Scenario Three - I buy another 5770 for $100, increase my hashrate to 550 Mhash, and 33 days later I have $267.

 What I *think* you don't understand is that those of us that are already mining don't get anything from your proposal.  Since I am already mining, what do I get for lending you $100?  All I get is $100 less in the bank.  This is because I am already mining.  Lending the $100 does not add to my hashrate.  The borrower doesn't even have to pay anything back.  

  A few posts ago I asked you to go through and provide an example backed up by numbers and math, you didn't.  I also asked who pays for the electricity and who's hardware does the mining.  You said you didn't care.  Well, those of us that have to pay for our own electricity do care.  Those of us that don't have mining farms do care.  I am already maxxed out on my hashrate and will always be.  

 So I'll ask this a different way.  Let's pretend I don't own a computer.  Let's say I lend you $100.  How do I get repaid?

[raresaturn]

All the same, this wouldn't count as zero-interest. Instead of paying interest to the lender, which makes sense, you'd be paying it to the miner instead for some strange reason, but you'd still be paying it... It seems he doesn't really understand how Bitcoin works.

The lender is the miner

[raresaturn]

 What I *think* you don't understand is that those of us that are already mining don't get anything from your proposal.  Since I am already mining, what do I get for lending you $100?  All I get is $100 less in the bank.  This is because I am already mining.  Lending the $100 does not add to my hashrate.  The borrower doesn't even have to pay anything back.  

The borrower still has to repay the loan. .the mining is just a bit of incentive on top of that.

Let me try to put it another way... when you are mining, what guarentees that you'll earn some coin?  Is it just dumb luck?  or is it something else?  Are others trying to earn those same coins, and can they undercut you?  That is what I am trying to take out of the equation.  You get to procees a block that nobody else can.

If you are already mining to your maximum capacity then you can sell your rights to THIS BLOCK to someone who is able to use it.