A Bitcoin Credit Union?

[CajunTechie]

Has anyone considered the possibility of establishing a Bitcoin Credit Union? It would operate much like a traditional bank might except the account holders would have dividends paid to them quarterly. It would be a way for everyone to make a few extra Bitcoins and also contribute to the welfare of the community in that there would be a loan aspect to it.

What do you think? Could it work? Would you join?

[casascius]

Has anyone considered the possibility of establishing a Bitcoin Credit Union? It would operate much like a traditional bank might except the account holders would have dividends paid to them quarterly. It would be a way for everyone to make a few extra Bitcoins and also contribute to the welfare of the community in that there would be a loan aspect to it.

What do you think? Could it work? Would you join?

 The only question I would have is, what is there for sale that someone would want to borrow money in order to buy?

[CajunTechie]

Has anyone considered the possibility of establishing a Bitcoin Credit Union? It would operate much like a traditional bank might except the account holders would have dividends paid to them quarterly. It would be a way for everyone to make a few extra Bitcoins and also contribute to the welfare of the community in that there would be a loan aspect to it.

What do you think? Could it work? Would you join?

 The only question I would have is, what is there for sale that someone would want to borrow money in order to buy?

Well, I would imagine they might borrow money for all of the things they currently borrow money for. They would use the credit union instead of a traditional bank because 1) the credit union might offer a lower interest rate and 2) it might offer higher dividends to members than their local CU does.

Other than that, it might operate very similar to a traditional fiat based CU.

[grondilu]

The only question I would have is, what is there for sale that someone would want to borrow money in order to buy?

Pretty much anything, after currency exchange.

Basically if bitcoin rates are low, this offer would allow bitcoin carry trade.

[epii]

I don't really have a "chief" thread to link to - perhaps this one would do - but there have been several discussions about the inherent challenges of loaning Bitcoins, most of which boil down to "how can you have a system of trust when transactions are anonymous?"  Have you chosen a strategy to deal with this?  Or would it be less of an issue with credit unions for some reason?  (To be honest, my understanding of CUs vs. banks is a rusty.)

[CajunTechie]

I don't really have a "chief" thread to link to - perhaps this one would do - but there have been several discussions about the inherent challenges of loaning Bitcoins, most of which boil down to "how can you have a system of trust when transactions are anonymous?"  Have you chosen a strategy to deal with this?  Or would it be less of an issue with credit unions for some reason?  (To be honest, my understanding of CUs vs. banks is a rusty.)

The issue of maintaining anonymity while still being somewhat fraud and theft resistant is one I've wrestled with and I'm not really sure there's a way around it. If you're anonymous, there's no way to verify your identity or to find you if you skip off with the Bitcoins. Even charging a membership fee like most CU's do doesn't assure anything except you'll have the membership fee if they skip off. Not really valuable if they take 50,000btc or something.

It's going to take some thinking but there has to be a way around it.

Anthony

[deadlizard]

Credit Unions are a response to modern banking.
Since we don't have modern banking in the bitcoin community why not go back to the Building society or Friendly society models 

[grondilu]

I don't really have a "chief" thread to link to - perhaps this one would do - but there have been several discussions about the inherent challenges of loaning Bitcoins, most of which boil down to "how can you have a system of trust when transactions are anonymous?" 

I don't see any issue.  Just GPG sign a loan contract and publish it.

[CajunTechie]

I don't see any issue.  Just GPG sign a loan contract and publish it.

That still doesn't solve the question of identity. For example, I could generate a GPG key for 'Johnny Daniels' and sign a loan. Without some sort of way to validate some traceable information about this person, having a signed document doesn't really mean anything. Or am I missing something?

[fetokun]

For now I don't see a Bitcoin Credit Union as a possible thing even if it's totally non-anonymous.

If you lend me say 1k BTC and you live in US while I live in Romania...You can have my e-mail, my skype, my real address, my cc number but nothing would make me pay if I don't want to.

I've seen "reputable" people doing all sort of things to skip a simple restaurant bill, imagine what would be the choice of one of these guys if he had to choose between buying something real for his familly or paying a guy 2 continents alway who can be totally ignored with a few clicks of a mouse.

[grondilu]

That still doesn't solve the question of identity. For example, I could generate a GPG key for 'Johnny Daniels' and sign a loan. Without some sort of way to validate some traceable information about this person, having a signed document doesn't really mean anything. Or am I missing something?

Reputation would not be on you, as a physical human being.  It would be on the GPG public key.

Basically people will think "I know that the guy, whoever he is, who uses this GPG key has always paid his debts.  So I guess I can trust him to pay this one."

If you lose your private key, then you'll lose the associated reputation and you'll have to start again with a new, zero reputation key.

[CajunTechie]

Credit Unions are a response to modern banking.
Since we don't have modern banking in the bitcoin community why not go back to the Building society or Friendly society models 

Interesting and I can see the point. But how does implementing one of those models relieve fraud? It addresses voluntary mutually benificial associations but still doesn't really provide a way to stop someone from walking away with the bitcoin and never repaying. Sure, they could do that with non-digital money too but it's a bit harder since we have to provide identity information for a traditional loan.

Thoughts?

[CajunTechie]

Reputation would not be on you, as a physical human being.  It would be on the GPG public key.

Right, I get that. So would the reputation of your GPG key be akin to a credit rating of sorts? Would the CU use the key's reputation as  a means of determining the eligibility for a loan?  In that case, every new customer would essentially start with zero reputation since there would be no 'credit history' for the key.

Anthony

[CajunTechie]

For now I don't see a Bitcoin Credit Union as a possible thing even if it's totally non-anonymous.

If you lend me say 1k BTC and you live in US while I live in Romania...You can have my e-mail, my skype, my real address, my cc number but nothing would make me pay if I don't want to.

I've seen "reputable" people doing all sort of things to skip a simple restaurant bill, imagine what would be the choice of one of these guys if he had to choose between buying something real for his familly or paying a guy 2 continents alway who can be totally ignored with a few clicks of a mouse.

That's probably the main issue a BTC CU would face. But what about if we had more of an 'association' of credit unions. Maybe one in the EU, one in North America, one in South America, etc. Would that provide a legal way to mitigate the risks? If it were anonymous, I would think not unless there was some way to maintain anonymity while still providing SOME traceability, that could work, couldn't it?

Anthony

[grondilu]

Reputation would not be on you, as a physical human being.  It would be on the GPG public key.

Right, I get that. So would the reputation of your GPG key be akin to a credit rating of sorts? Would the CU use the key's reputation as  a means of determining the eligibility for a loan?  In that case, every new customer would essentially start with zero reputation since there would be no 'credit history' for the key.

Reputation would not be anything formal.  For each public keys, there would be some data about successful or failed loans.   It's up to you to use this data and give a credit rating.

And yes, every one would start from a "zero reputation".

By the way, such a system has already started on #bitcoin-otc.

[CajunTechie]

Reputation would not be anything formal.  For each public keys, there would be some data about successful or failed loans. 

 It's up to you to use this data and give a credit rating.

And yes, every one would start from a "zero reputation".

By the way, such a system has already started on #bitcoin-otc.

Interesting. So then, in that case, perhaps such a CU doesn't deal with totally new keys with no reputation just like a bank or traditional CU wouldn't be quick to deal with a new loan applicant with no credit. Perhaps some sort of algorithm that figures in the age of a key and the plus/negative for repaying other loans could be used to develop a risk model. Definitely interesting. I'm going to read up a bit on trust systems tomorrow and see how this might be doable in an anonymous way.

Thanks for the great comments...

Anthony

[casascius]

The reason why I ask what there is to buy is because normally you take out a loan for a house or car. These are collateral in case you don't pay the loan back. What is someone going to borrow BTC for, drugs?  It is not as though I need alpaca socks today, but want to pay tomorrow. I imagine someone who wants to borrow money for drugs would be the sort of person who would be the least reliable in paying it back. Such a credit union would accumulate liabilities and losses, not profit and dividends. There may be a time and a place for that but it's not now.

[deadlizard]

The reason why I ask what there is to buy is because normally you take out a loan for a house or car. These are collateral in case you don't pay the loan back. What is someone going to borrow BTC for, drugs?  It is not as though I need alpaca socks today, but want to pay tomorrow. I imagine someone who wants to borrow money for drugs would be the sort of person who would be the least reliable in paying it back. Such a credit union would accumulate liabilities and losses, not profit and dividends. There may be a time and a place for that but it's not now.

You can always cash out and buy things in the fiat markets
For example - mining gear. 

[grondilu]

I'm going to read up a bit on trust systems tomorrow and see how this might be doable in an anonymous way.

"Anonymous" would not be the correct term.  You'd rather talk about "pseudonymous" credit system.

Your pseudonym would be your GnuPG ID.

In an anonymous network, all nodes are equivalent and you can't tell them apart.  In a pseudonymous network, they are not, but you just don't know anything about them except their ID, which can be as meaningless as a random number.

[­­­Atlas_]

I'm going to read up a bit on trust systems tomorrow and see how this might be doable in an anonymous way.

"Anonymous" would not be the correct term.  You'd rather talk about "pseudonymous" credit system.

Your pseudonym would be your GnuPG ID.

In an anonymous network, all nodes are equivalent and you can't tell them apart.  In a pseudonymous network, they are not, but you just don't know anything about them except their ID, which can be as meaningless as a random number.

Meh, sounds like a load of pedantry to me. Heh heh. I guess it's good to know specific labels every now and then but in the end it's best to just take the message for what is if you understand it.