[SERVICE][PILOT] Bitcoin Collectibles Backed BTC Loans

[raghavsood]

I am offering Bitcoin loans collateralized against Bitcoin collectibles solely to members of this forum. The terms of the loans are in the second post.

Motivation

This is NOT structured to be a highly profitable service. Under the terms of the Pilot program, the maximum I will earn is ~0.03 BTC on a 1 BTC principal, and that's before accounting for any operating costs and other service fees.

The primary motivation for this is to provide some liquidity to members of the forum when they need it most, without forcing them to part with hard earned collections. I've recently helped a few members in tough spots, and I can't keep hoarding things forever.

This is primarily intended as a helpful service. Think friendly neighbourhood credit union, not evil financier conglomerate global bank.

This is also why loans are issued in BTC against BTC collateral - you cannot get margin called if you make good choices. It also explains why any excess value left over after liquidation is returned to the borrower with a minimal fee to cover operating overheads of having to do the liquidation, and why there are no early repayment penalties (beyond an increase in interest rate if you drop to a different loan term bracket).

The interest rates have been fixed to be high enough to motivate repayment, but also low enough to be approachable, especially on smaller items. The minimum interest charged is just 5000 satoshis a day (approx 3 USD), which would apply on principals up to 0.1825BTC (against an item with a loaded value of ~0.21BTC on a 4-week). That's an amazing deal, and far better than most lines of credit out there. Heck, I'm not even using compound interest.

For security and peace of mind, all items used as collateral are held in escrow by minerjones - the most trusted and well known escrow service around these parts of the forum.

The terms are straightforward and easily readable. I have intentionally opted to not pursue a legalese heavy contract flow given the collateralized nature of the loans during the pilot program.

The pilot will run until 31st December, 2024.

Loans will be issued until 2nd December, 2024.

To start with, I will be offering loans up to a maximum of 1BTC across all active loans.

This may be increased if there is sufficient demand.


This topic was originally posted to the Collectibles board - loans to members who are not active in the collectibles community may not be as easily granted.

[raghavsood]

Pilot Loan Terms
Last Updated: 1 September, 2024

Issuance

1. The loan is issued against a loaded Bitcoin collectible. During the pilot, other assets such as BCH, ETH, LTC, XMR are not eligible
2. A loan of up to 90% of the item's loaded value may be taken. i.e. a 1 BTC item is eligible for a 0.9 BTC loan. A loan may only be taken against the loaded BTC value of the item, without regard for premiums or any forks for that item.
3. The loan is subject to approval from raghavsood and receipt of the item by minerjones in good standing.
4. The hologram/private key must not be tampered with, peeled, revealed, or otherwise in any condition that may raise question as to the items' security.
5. The loan is only issued upon receipt of the item by minerjones.
6. A loan is issued for a specific, pre-defined duration. During the pilot, open term loans are not offered. Only durations listed in "Available Loan Terms" are available.
7. minerjones retains the right to refuse escrow for any item or user at his sole discretion
8. raghavsood retains the right to refuse issuance against any item or user at his sole discretion
9. Only one loan may be taken against a single item at any given moment.


Escrow Terms

1. The borrower is responsible for covering the cost of shipping the item to and from minerjones.
2. The item will only be shipped back to the borrower upon full repayment of the loan and any associated interest and fees.
3. In the event that a loan is refused due to the item not being secure, as described, or otherwise not in goodstanding at the sole discretion of minerjones and raghavsood, the borrower is responsible for all shipping costs to and from minerjones.
4. minerjones and raghavsood are not responsible for any items lost in transit to or from minerjones.
5. No additional escrow fees are payable by the borrower.

Loan Terms

1. An interest rate applies based on the term of the loan.
2. Interest is accrued daily at 0000 UTC.
3. A minimum interest of 1 day is accrued upon origination of the loan.
4. If the daily interest accrued is less than 5000 satoshis, a minimum daily interest of 5000 satoshis (0.00005 BTC) applies.
5. An interest payment is due on the last day of each 14-day period the loan is active. The day of origination is the first day.
6. During the pilot period, the loan principal and interest DO NOT compound. We only charge simple interest.
7. At the end of the loan term, the full principal amount and remaining interest accrued are due in full. Full repayment must be made by 2359 UTC on the day of the loan maturing
8. A single 48 hour grace period is available for the lifetime of the loan for a late interest or maturity payment. i.e. the borrower may only make a late payment once during the lifetime of the loan before it defaults on subsequent late payments. A late payment charge of 10% on the amount due applies.
9. A loan term may be extended at the sole discretion of the lender.
   a. An extension fee of 2% of the loan value applies.
   b. The extension fee must be paid within 24 hours of the extension being approved.
   c. Extensions must be applied for a minimum of 48 hours prior to the maturitation of the loan. Extentions requested after that time may not be evaluated prior to the expiry of the loan.

Liquidation Terms

1. A loan is considered in default if:
   a. More than one scheduled payment is missed.
   b. The borrower ceases to make interest payments.
2. A liquidation fee of 2.5% applies on the proceeds of the liquidation
3. In the event of a default, minerjones will auction the escrowed item. Bidding will start at the item's face value (+ an additional basic premium to account for metals/fork value at the time of auction at our discretion)
4. If the item is not sold at auction, it will be peeled. The peeled item will then be offered at auction. Bidding will start at a fair value at our discretion.
5. The proceeds of the liquidation will be paid out as follows against the total amount raised through liquidation:
   a. 5% to minerjones for operating the liquidation process.
   b. 2.5% as a liquidation fee paid to the loan service.
   c. 92.5% or less to the loan principal and any outstanding interest and late charges.
   d. Any remaining value is returned to the borrower, less transaction fees.

Payment Terms

1. All dates are effected based on the UTC date of the Bitcoin block in which the transaction is confirmed.
2. All transactions must have a minimum of 1 confirmation prior to the deadline for such transaction.
3. 0-confirmation transactions are NOT considered valid with respect to interest, maturity, and fee payments.
4. All payments for a loan MUST be made to the address provided at the time of loan origination.
5. All payments are due by 2359 UTC on the date of the payment. i.e. the payment transaction MUST be confirmed in a Bitcoin block with a timestamp before or equal to 2359 UTC on the payment date.
6. In the event of an excess payment, the principal amount of the loan is reduced by the overpaid amount, effective from the next UTC day.

Early repayment

1. A loan may be terminated at any time by making a payment of the principal + any unpaid accrued interest.
2. If the early repayment of the loan results in the total active duration of the loan falling into a shorter Loan Term as described in "Available Loan Terms", an additional payment is due to increase the interest paid to match the effective interest for the shorter term.

Operational Terms

1. A loan can be requested by sending a private message to raghavsood (https://bitcointalk.org/index.php?action=profile;u=1042589)
2. Once approved, a 3-way message will be created between the borrower, minerjones, and raghavsood
3. The principal will be transferred to an address provided by the borrower upon safe receipt of the item by minerjones in good standing (see: Issuance) within 24 hours of the receipt of the item.
4. Once a loan is originated, a reply will be posted to the Master Loan service thread containing the loan duration, the loan terms, borrowed amount, and repayment address, and repayment schedule. The identity of the borrower and the nature of the collateral is not disclosed and will be kept private.
5. All loan originations will be signed by 1LoANvmubuNtq4PR4ZFDDEPtLsZdK8Xnqg


Available Loan Terms

28 days @ 10% per annum
56 days @ 9.5% per annum
84 days @ 8% per annum
112 days @ 7.5% per annum

Terms and Definitions

"Per annum" is defined as a period of 365 days.
"Daily interest" is defined as (interest rate for that loan term/365) * the principal amount


Changelog

The contents of the gist are signed by 1LoANvmubuNtq4PR4ZFDDEPtLsZdK8Xnqg using electrum.

v1 - 1 September 2024 - ICjA0gqiDwAF1+H91sxuS6PDdR+RWBnqO0+BAOxXyNr4FuZLjmwL+M/6UF6Wubt2Es4KVYfawR10KGF9hqkht5s=
v1.1 - 1 September 2024 - H2xCz3bKesq8CbPBwwPgBLnFCcFzN5BjqNANgzPXfJhXUicQCPmkwYe2G2YPPXkkuAs24pf88MT60RS hr0IeNjo=

[gpfrag]

Awesome service and will be following closely.  I’ve always wondered if I could take a loan out against my collectibles but was looking at foreign banks with a healthier appetite for risk. 

[raghavsood]

Awesome service and will be following closely.  I’ve always wondered if I could take a loan out against my collectibles but was looking at foreign banks with a healthier appetite for risk. 

I have tried this in the past with Singapore and Hong Kong banks - most of them don't even know what I'm asking for. I got one to price it out, but the rates were abhorrent on a negligible LTV.

I don't think most banks are able to price crypto collateral at this stage.

Heck, even getting insurance is a bit of a black magic ritual - you have to somehow utter the right combination for words to even get a reply, and usually it still leads nowhere.

[TaxAttorneyCPA]

Extremely reasonable terms and a great service!

One thing to consider - if you loan out 90% and only recover 92.5% at liquidation, you might not be getting all your interest payments recovered.

[raghavsood]

Extremely reasonable terms and a great service!

One thing to consider - if you loan out 90% and only recover 92.5% at liquidation, you might not be getting all your interest payments recovered.

Yes, that's correct - in the event that something ends up getting peeled, the peeled item sells for next to nothing, and the unpaid interest is high enough, it's possible that I lose the interest.

I'm willing to write that off though. Under the current structure, the principal is always recoverable even after accounting for the cost of operation, and this isn't intended to be a super profitable enterprise. I'm happy to write off the interest if it results in better terms for the folks here.

It's a small way for me to give back to this community. I've only been collecting since 2017, and was able to get pretty far due to the supportive culture we have here. I'm not going to sweat it if I lose out on some interest.

[polymerbit]

A clear example of the way this forum is composed of people who go above and beyond to help this community.

I applaud this, although I must admit I'm a bit concerned that you may be taken advantage of.

Clear verification of the collectible in question is a must.

[Kazkaz27]

Hello, Raghavsood.

I would like to take a moment to applaud you for your efforts creating an innovative service for our community!

This is something I’ve been thinking about for a few years now. It’s great to see that this idea is coming to life.

Bitcoin loans collateralized against Bitcoin collectibles. This initiative is a fantastic way to provide liquidity for forum members without requiring them to sell their cherished collectibles.

The structure of the pilot program is commendable. By offering loans with minimal interest rates and no early repayment penalties, it prioritizes the needs of borrowers over profit. The focus on responsible lending practices, such as issuing loans in BTC against BTC collateral, ensures that borrowers cannot be margin called, promoting financial security.

Moreover, the use of a trusted escrow service like minerjones adds an extra layer of security and peace of mind for participants. The straightforward terms and conditions reflect a transparent approach that is often lacking in traditional financial institutions.

This service is an excellent example of community support and cooperation, fostering a sense of trust and camaraderie among members. It's refreshing to see a service designed not just for profit but to genuinely assist others during challenging times. Kudos to raghavsood for spearheading this initiative!

[minerjones]

A clear example of the way this forum is composed of people who go above and beyond to help this community.

I applaud this, although I must admit I'm a bit concerned that you may be taken advantage of.

Clear verification of the collectible in question is a must.

Hold my beer..... I got this

[Eclipse33]

I want to breifly say that is could quite possibly be the very best service arising out of the collectables section in years.

If done correctly this could be huge, and could provide unprecidented liquitity as a revolving door service.

Make sure to properly appraise the value of each collectable selected for consigment.

Make sure the consigner is vetted and trusted and will not abuse the system as I would hate to see this idea get exploited and ruined.

If this could get up and running, and prolonged it would be something very unique.

[raritycheck]

Great initiative.

[DaveF]

Sad question, but has to be asked. What happens in the event of a rugpull by the coin maker?

Using myself as an example, if I needed (I don't but if I did) the money from a funded coin that I had up.
Nobody bought it so we came to an agreement and I shipped it out MJ got it and you sent me BTC0.09

Then the next day / week / month / whatever the maker did a rug pull. Who holds the bag?

Not a pleasant thought and obviously a very very fringe case but it's worth thinking about.

Or as we have seen what happens if everyone legitimately agrees to peel and redeem and there is an issue?
Either unreadable or wrong key who covers the funds then?

As I said, fringe cases but worth thinking about.

-Dave

[raghavsood]

Sad question, but has to be asked. What happens in the event of a rugpull by the coin maker?

Using myself as an example, if I needed (I don't but if I did) the money from a funded coin that I had up.
Nobody bought it so we came to an agreement and I shipped it out MJ got it and you sent me BTC0.09

Then the next day / week / month / whatever the maker did a rug pull. Who holds the bag?

Not a pleasant thought and obviously a very very fringe case but it's worth thinking about.

Or as we have seen what happens if everyone legitimately agrees to peel and redeem and there is an issue?
Either unreadable or wrong key who covers the funds then?

As I said, fringe cases but worth thinking about.

-Dave

A borrower's obligations are to the loan - if the collateral turns out to be a rug, the loan is still technically active. I will make a good faith effort to recover it, but naturally with compromised collateral it may not be a given.

In more practical terms, they may result in a loss for myself - at least during the pilot stage, I do not intend to issue loans against brand new makers or arbitrary items like UCS, or known compromised collections like Coldkey.

In the long run, if this is an in-demand and well-used service, there are ways to manage risks such as rugs across a loan portfolio. Some options could include increasing rates and/or lowering the LTV for non-established collections, requiring additional collateral in the form of other crypto assets or items, or requiring a guarantor.

Of course, it also falls on my to not overindex any particular, and especially new, creators - it would be pretty stupid of me to go and issue all 1BTC to a newbie account using their own recently launched collection as collateral.

[rsincognito]

I absolutely love everything about this post! If the markets get rough, you’ll be hearing from me for sure lol
Bravo, my friend 🙏🏼

[Eclipse33]

This thread got moved, but still an actionable idea.

I wonder if it could operate in the collectables section and not the loans section.

[raghavsood]

This thread got moved, but still an actionable idea.

I wonder if it could operate in the collectables section and not the loans section.

I believe the moderators feel that it is a better fit for the lending section, which I am not opposed to (they have kindly left a redirection thread in the collectibles board).

I have updated the OP to reflect that this service is largely geared towards the collectibles forum, and members not active there may not receive the same level of trust and grants.

Unfortunately, this does mean we will be relying more on folks pointing those who need the liquidity here from the collectibles board, as they might not discover it organically.