How would loans work in a Bitcoin economy

[mtdr]

We would need smart contracts to handle the escrow of value. Or a third independent party of sorts.

In the smart contract you as a lender would agree on an interest, payback interval and duration of the loan with the borrower, who would legally pawn something of agreed similar value or other relation in case of payback issues, which would also be agreed on the smart contract.

Volatility could be solved/reduced with implementation of future contracts into the deal.

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[iMark]

I wouldn't take loan in crypto. Except if the price was tied to USD, not BTC.

I also prefer to take a loan at a price tied to USD. It's good because we don't know who will profit and lose between the lender and the borrower when the price of Bitcoin will not necessarily be stable at that price If the loan was tied to BTC.

If you loan funds from tied crypto it would be far more risky, especially in the long run because the price always goes up. you can return the funds many times more. If you loan funds is more recommended with tied usd because it is more stable, there is no difference too large between what you borrow and the funds you have to pay.

[merchantofzeny]

Well you may have to take the loan off from an individual rather than from an institution so the more need for collateral since it would be easy for you to run away with their money. I personally never took any BTC loan so am also unfamiliar with how it goes.

If I'm a lender though I'd probably never lend to someone outside my own country and I might even risk revealing myself just to meet up with the borrower personally and exchange documents for the collateral.

I don't think no-collateral loans would ever work in a decentralized system, there are so many ways to exit scam, and unless KYC or something similar to credit scores are enforced, no lender would ever risk such a thing.

And if we did implement KYC, it'll be pointless and ruin the point of BTC, so tough situation.

Yes that is a concern for lenders. Even if the transactions are done in person and the lender took all the borrower's personal info, how to tell if he's a good payer? I don't think we can even piggyback on the banking industry's credit score system, I doubt we can get such info unless we have insider friends in multiple banks.

[bustedsynx]

I don't think Bitcoin loans would work for now. No one will borrow 1 BTC ($10,000) and then repay 1.10 BTC ($22,000) if Bitcoin moons. The same goes for a crashing Bitcoin price, no one will lend out. Maybe in the future if the price becomes less volatile or you don't have to exchange it to fiat.

[jostorres]

If you mean an economy where everything that would be used is just cryptocurrency without regulation and people being anonymous, then, sorry no one is going to give you any loan, except for the way that it is being down currently – how it is being done now is that you submit your cryptocurrencies as collateral and you then get loans in dollars.

Nobody is going to give you loans as cryptocurrency direct, you only get dollars after you give them your crypto assets. When you return the money you have borrowed with the interest, then you get back your cryptocurrencies. But, if people are to start giving loans as Bitcoin, then Bitcoin would need regulation and there will have to be ways for them to be able to trace you down to your house and collateral will also be a must, in case you decide to run off with their money.

Lastly, a lot of people here don’t even want cryptocurrency to be regulated , so how is that going to work? Things are just going to remain the way it is and Crypto will remain as an asset and nothing more, even if they start being regulated, won’t change anything.

[Naida_BR]

I don't think Bitcoin loans would work for now. No one will borrow 1 BTC ($10,000) and then repay 1.10 BTC ($22,000) if Bitcoin moons. The same goes for a crashing Bitcoin price, no one will lend out. Maybe in the future if the price becomes less volatile or you don't have to exchange it to fiat.

That's not the case. In our ecosystem you can borrow a smaller portion of bitcoin and repay after.
It is not mandatory to get a loan of 1BTC. As the market is volatile there is the possibility of losses but for profits as well.

[sana54210]

You guys are giving people more credit than they deserve. Humanity has always been an idiot race and we have always failed to see what wrongs are going on in front of our eyes, even today there are people who VOTE for a dictator and they like him, all over the world by the way not just in one country. They like being openly racist as well and they think it makes them different from others.

There is no way we can actually make people realize how much banks are screwing us when they are literally not caring about deaths all over the world because of their political opinions, the party you voted might be killing or jailing people and they don't care. So telling them that crypto is far superior in every sense then fiat makes no logic since as long as one of their peers could say its a sin and they would stay away from it forever.

[mtdr]

You guys are giving people more credit than they deserve. Humanity has always been an idiot race and we have always failed to see what wrongs are going on in front of our eyes, even today there are people who VOTE for a dictator and they like him, all over the world by the way not just in one country. They like being openly racist as well and they think it makes them different from others.

There is no way we can actually make people realize how much banks are screwing us when they are literally not caring about deaths all over the world because of their political opinions, the party you voted might be killing or jailing people and they don't care. So telling them that crypto is far superior in every sense then fiat makes no logic since as long as one of their peers could say its a sin and they would stay away from it forever.

nice moon setup

[muhhentuhhen]

I don't think Bitcoin loans would work for now. No one will borrow 1 BTC ($10,000) and then repay 1.10 BTC ($22,000) if Bitcoin moons. The same goes for a crashing Bitcoin price, no one will lend out. Maybe in the future if the price becomes less volatile or you don't have to exchange it to fiat.

Bitcoin and other crypto loans services have been successfully working even now. However, it is a great risk for both sides. We all know about the highest volatility of the cryptocurrency, and each participant of the deal should understand that his chances to lose/win are 50/50.
For me, it is even like gambling, which finally, lead to the greatest losses those, who are too active.

[bitgolden]

You guys are giving people more credit than they deserve. Humanity has always been an idiot race and we have always failed to see what wrongs are going on in front of our eyes, even today there are people who VOTE for a dictator and they like him, all over the world by the way not just in one country. They like being openly racist as well and they think it makes them different from others.

There is no way we can actually make people realize how much banks are screwing us when they are literally not caring about deaths all over the world because of their political opinions, the party you voted might be killing or jailing people and they don't care. So telling them that crypto is far superior in every sense then fiat makes no logic since as long as one of their peers could say its a sin and they would stay away from it forever.

This time around, the cry of the common man that they have been suppressing has been heard because nobody needs to tell them the effect of cryptocurrency on their superiority before they start seeing it themselves.

The fiat is what is basically giving them such power, and you know that the number of rich people in every country is far greater than the number of the common men, so if this system is for the common man, it means that the table will turn and they will be the one to be swept under the carpet when the adoption of cryptocurrency becomes very high even without their support.

We actually don’t need any of their support because cryptocurrency was built to be independence, it is because we just feel that some sort of regulation will help us speed the process up that you see a lot of people clamoring for it.

[shield132]

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?

With bitcoin, how is everyone their own bank? Seems you didn't understand correctly what people mean. They mean that with bitcoin, you own funds online which are independent from banks while you have to keep usd with banks, that's difference, it gives freedom in virtual world.
On another hand every process will be almost same with bitcoins too but problem is that bitcoin's price is valued in usd and when you give loan of 1 btc for example and price is 1000$ (loan is 120%), then if you return 1.2 bitcoin and price will be 600$, bank is in loss. But if they set 120% of usd, then you may have to return less bitcoin or much more.

[setialovers]

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?

With a very limited supply of bitcoin, in my opinion bitcoin cannot be treated like money in a bank. In addition, in my opinion it would be better if bitcoin is used as a store of value. But our monetary system may change and bitcoin is used as a reserve

[yohananaomi]

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?

So far I do not know that there is a loan as you asked. because bitcoin changes at any time so if there is a borrowing of bitcoin, when the return is clear the price of bitcoin can be below or above the price when borrowing, other than maybe priced at US first. it also won't solve the problem if bitcoin prices are higher.

[South Park]

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?

You are half right, banks receive your money and give loans using that money, but banks can use fractional reserve banking which basically allows them to create money, so there are two possibilities, the first is that some people will use banks to store their bitcoin and banks will use fractional reserve banking to print some form of paper bitcoin, this will artificially increase the supply and decrease the value of bitcoin, the second option is that we are going to have something similar to what happens in the forum in which people ask for a loan and expose why they want the loan and the collateral they can give and those holding bitcoin in excess can choose to fulfil the loan or not.

[Semosuchi Tesongrato]

Certainly the loan market will pose several new problems, above all with regards to the guarantees, the competences and the reimbursement systems. But in the end it's always about money, and it won't take long to find a practical solution to the new problems.

[Bitcoin Seller]

Certainly the loan market will pose several new problems, above all with regards to the guarantees, the competences and the reimbursement systems. But in the end it's always about money, and it won't take long to find a practical solution to the new problems.

This market will work always. Very often, the interest rate on loans in cryptocurrency reaches even 20 or 25%  in a year. That is why such loans are beneficial to take for the short term only. Additionally, despite such a high rate, many users, having been refused by the bank, agree to such conditions, as this is the only way and the only opportunity to get a loan for purchases, business or other purposes.

[Ozero]

Hello everyone,,
To my understanding people deposit money into banks and the banks use that money to give out loans. But with Bitcoin everyone is essentially their own bank, meaning there wouldn’t be anyone to give out traditional loans. My question is where would people go to get loans in a Bitcoin economy and how might those loans work?

Banks will always exist and lend to both the state’s economy and the structure of business and individual citizens. It is unlikely that loans in bitcoin or other decentralized cryptocurrency will ever be widely distributed. Due to the fact that Bitcoin has a very high price volatility, it is almost impossible to calculate the return of loans. In view of this, obtaining loans in cryptocurrency will not be attractive for business structures.

[andriarto]

Certainly the loan market will pose several new problems, above all with regards to the guarantees, the competences and the reimbursement systems. But in the end it's always about money, and it won't take long to find a practical solution to the new problems.

This market will work always. Very often, the interest rate on loans in cryptocurrency reaches even 20 or 25%  in a year. That is why such loans are beneficial to take for the short term only. Additionally, despite such a high rate, many users, having been refused by the bank, agree to such conditions, as this is the only way and the only opportunity to get a loan for purchases, business or other purposes.

when compared to bank interest rates for fiat currencies, the difference is very far. bank interest rates for fiat currency loans around 12% per annum, and using collateral. Does the loan in cryptocurrency use collateral as well? reasonable if the selection is very strict if not using collateral

[tonyvo2017]

It also works the same way we borrow from a bank now, but now all transactions will be done on the app or website. For example, if you want to borrow 1 bitcoin, you must provide evidence of how much money each month you earn and how much balance you have in your account. After completing the procedure, you will receive the money. that's it.

[shoreno]

ive seen a thread before about bitcoin banks . its a kind of bank that accept bitcoin .

 when people deposit on it , the these bitcoin banks might also offer bitcoin loans to others .  that should how bitcoin loaning works  .

  other one that i can think off , is those lenders only uses thier own money converted to btc so that they can run a bitcoin lending business   . there are also what you called a bitcoin investing platform , where people put thier btc on it  . we never know if these platforms use the btc deposited on them and use on other business like lending  .