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eldentyrell_old
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September 18, 2011, 09:04:11 AM
 #81

bitcoin banks will have to work more like sharia banks not like banks in the west

I’m not sure I understand.. I looked up sharia banking but it all seems like a shell game to comply with the Islamic law against charging interest while still charging interest.

My (totally crude and uninformed) understanding of Islamic banking is basically that there is no uncollateralized credit, only equity.  Fully collateralized debt it still possible by treating it as equity in the collateral itself.

The "no uncollateralized credit" part is what's similar to bitcoin.  There are no instances of a court issuing a judgment in which bitcoins are considered to be a legitimate asset, and I doubt that is going to happen anytime soon.  So people structure their bitcoin transactions so that they don't have to rely on courts when things go wrong (often this structuring is expensive/difficult/risky, but that's the tradeoff).
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Tim the Magician
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September 18, 2011, 09:38:49 AM
 #82

bitcoin banks will have to work more like sharia banks not like banks in the west
I’m not sure I understand.. I looked up sharia banking but it all seems like a shell game to comply with the Islamic law against charging interest while still charging interest.
My (totally crude and uninformed) understanding of Islamic banking is basically that there is no uncollateralized credit, only equity.  Fully collateralized debt it still possible by treating it as equity in the collateral itself.
Right.. and the whole point is to exploit a loophole in a religious rule.. Although, I don’t know how well that would really work.. if you really believe in God and you believe He forbids something.. would you expect to be able to ignore His rules by playing word / accounting games?

The "no uncollateralized credit" part is what's similar to bitcoin.  There are no instances of a court issuing a judgment in which bitcoins are considered to be a legitimate asset, and I doubt that is going to happen anytime soon.  So people structure their bitcoin transactions so that they don't have to rely on courts when things go wrong (often this structuring is expensive/difficult/risky, but that's the tradeoff).
Have there been instances where courts dismissed Bitcoins as having no value?  If someone cheated you out of some Bitcoins you would have just as much right in court as if you had been trading anything else of value.. The exchange medium does not matter as long as both parties had a contract (verbal or otherwise) to make the exchange. The bigger issue is that many Bitcoin transactions are anonymous deals between strangers over the internet where there is no recourse if things were to go wrong.

I think the biggest reason why there isn’t any Bitcoin enumerated credit is because of the exchange volatility.  The availability of credit would only serve to increase volatility (by enabling short selling) so it is not in anyone’s best interest.  I think when the market is (much) bigger and stable we may begin to see credit emerge.
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September 18, 2011, 12:11:48 PM
 #83

Its worth noting that Islamic banking rules arent too different from how the Catholic church used to view usury, and how Jewish bankers still operate (although as I understand,  jewish bankers are allowed to demand interest from non Jews). The principles behind it arent so much religious as moral, and to be perfectly honest, I think even practical. The more I read about Islamic banking, the more I think its simply a good idea regardless of religion.

Anyway, Im not sure if Islamic banking is the example, or even word to use for BitCoin. It would simply be full reserve banking instead of fractional reserve banking.

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September 18, 2011, 05:21:03 PM
 #84

Its worth noting that Islamic banking rules arent too different from how the Catholic church used to view usury, and how Jewish bankers still operate (although as I understand,  jewish bankers are allowed to demand interest from non Jews). The principles behind it arent so much religious as moral, and to be perfectly honest, I think even practical. The more I read about Islamic banking, the more I think its simply a good idea regardless of religion.

I don’t have any problems with Islamic banking.. in fact it seems like a nicer / friendlier sort of banking than we have here with ideas like profit sharing while we have predatory lending.

My only issue is when people commit to living their lives by a code but then seek to subvert the code by playing word games to allow themselves to do whatever they want.

Over simplified examples with made up numbers:

Story A: Person borrows $100,000. Bank has lien on the asset and person pays $500 / month for 30 years to cover principal + interest.

Story B: Person wants asset worth $100,000.  Bank buys asset and charges person $500 / month for 30 years in a rent to own arrangement.

The exact same economic activity is occurring with the exact same intent in both stories but somehow God hates Story A enough to explicitly ban it but is supposed to be just fine with Story B.
 
Anyway, Im not sure if Islamic banking is the example, or even word to use for BitCoin. It would simply be full reserve banking instead of fractional reserve banking.

The problem with the full reserve banking is that there is nothing in it for the bank.  They would need to charge a fee for deposits.. so what is there in it for you to pay someone else to hold your Bitcoins?

The only Bitcoin banking scenario which makes sense is facilitation of instant payments between account holders without waiting for block confirmations.
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September 18, 2011, 08:21:25 PM
 #85


Story A: Person borrows $100,000. Bank has lien on the asset and person pays $500 / month for 30 years to cover principal + interest.

Story B: Person wants asset worth $100,000.  Bank buys asset and charges person $500 / month for 30 years in a rent to own arrangement.


You should read the wikipedia page more carefully and you will see some serious differences. Like what happens in a foreclosure, risk and reward are shared by bank and "person".  Its also not like here, where the first 5 years or so you only pay back interest and no principal. And if after 5 years you stop paying the bank, you dont own anything, but you owe the bank the full amount + interest. With islamic banking, in the same scenario you could actually make a profit if the house sells for more, and if it sells for less, the bank will have to absorb a large part of that. It really is different.

BTW, this isnt about God. Its about morality. And maybe not even that, it seems to me this sort of banking is just plain smart. I bet you would see a whole lot less foreclosures to keep within your example.

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The problem with the full reserve banking is that there is nothing in it for the bank.  They would need to charge a fee for deposits.. so what is there in it for you to pay someone else to hold your Bitcoins?

A bank could act as intermediary between depositors and creditors and collect a fee on that. The only thing different is that a bank wouldnt be able to lend out more than it has in deposits. Loans would therefore be more expensive yes, otherwise depositors wouldnt deposit, but since its a deflationary currency thats probably okay. You cant have cheap loans anyway, or you would make a profit just by taking a credit. That this vastly reduces the need and scope of banks is fine by me. The financial sector is currently something like 15% of the US GDP? How insane is that.

Cosbycoin
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September 19, 2011, 12:02:57 AM
 #86

Lovely how threads like these go waaay off topic.
Tim the Magician
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September 19, 2011, 12:45:44 AM
 #87

A bank could act as intermediary between depositors and creditors and collect a fee on that. The only thing different is that a bank wouldnt be able to lend out more than it has in deposits. Loans would therefore be more expensive yes, otherwise depositors wouldnt deposit, but since its a deflationary currency thats probably okay. You cant have cheap loans anyway, or you would make a profit just by taking a credit. That this vastly reduces the need and scope of banks is fine by me. The financial sector is currently something like 15% of the US GDP? How insane is that.

I agree.  Because local currency loans are cheaper it does not make financial sense to have Bitcoin enumerated loans.   Some financial services such as payment processing, escrow services and exchanges are needed but most other banking services don’t make much sense in the Bitcoin realm. At this point, with the markets so volatile, Bitcoin enumerated loans would only serve to enable short selling which would further destabilize prices. 
Troll Toll
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September 19, 2011, 08:24:53 PM
 #88

break even price for me is $1.84/btc. this is before I calculate the reduced electricity use because I write off my electricity  (good thing my entire house runs on electricity) Grin Grin

plus with winter coming, I now have 4 space heaters.

fpga mining will never be economical for me

You gotta pay
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