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Author Topic: BTC P2P lending sites?  (Read 2310 times)
P4man
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December 28, 2011, 10:28:49 PM
 #21

I did say liquid assets. Diamonds or art are not. Let me rephrase my analogy; why would you give 100 euro in collateral for a 100 dollar loan? Are you then loaning or speculating on currency exchange rates?

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Stephen Gornick
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December 28, 2011, 10:50:44 PM
 #22

I did say liquid assets. Diamonds or art are not. Let me rephrase my analogy; why would you give 100 euro in collateral for a 100 dollar loan? Are you then loaning or speculating on currency exchange rates?

I suppose it is a little of both.  For the borrower that takes out the loan with the intention of repaying it in full regardless of the value of the collateral,then this is simply a loan using other property as collateral -- nothing more nothing less.  This could be used for speculation, though I suspect the interest rate would not be minimal for this lending service and as a result, there would hopefully be cheaper methods specific for exchange rate speculation.

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December 29, 2011, 12:02:24 AM
 #23

One difference here is that transaction costs for selling art or diamonds or even shares of stock would be much higher than for selling bitcoin...  but I guess you are asking if it makes sense to establish a marketplace for collateralized bitcoin loans, business loans, etc.??

It seems like the hedging function is a separate matter - the value of any currency or collateral might vary over time, and there are established means of hedging against volatility using derivatives. 

Has anyone created a market for bitcoin derivatives yet? 

But back to my original question  Grin  Perhaps here is a clearer way to ask it, given the discussion:

What would stop someone from making agreements to loan each other fungible items (real or virtual items) and earn more of the same in interest?   

BTC is such a fungible item - but it hasn't been declared a currency; it's not regulated.  Correct?

Also, there are ways of assessing risk between counterparties that do not rely on traditional mechanisms of updating credit reports, etc.  There's social networks, transaction history, etc...  and per the recent comments, one might also require collateral so the market would support secured as well as unsecured loans.

The distributed nature of P2P lending seems to be a better match for the way BTC works than to require some kind of centralized bank - distribute the risk and let individuals choose their own risk/reward blend.

So why couldn't someone adapt existing P2P lending technology to create a P2P lending system based on bitcoin?   You want to loan out your bitcoin and have it gain interest - the system helps you pick the best borrowers; riskier borrowers pay higher rates and will typically default more.
Perhaps you prohibit riskier borrowers based on their credit ratings.

Such a service might be mostly virtual, if it didn't have to deal with onerous regulations - the big issue I see is how would you do Collections to police deadbeats... maybe some kind of alternate consequence could be set up.


I guess it surprises me that although bitcoin is still a tiny market, there hasn't been discussion of this kind of thing because of the large amounts of money involved if an alternate unregulated international credit system could be created with impunity...








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December 29, 2011, 02:35:40 AM
 #24

But back to my original question  Grin 

Sorry for hijacking your thread with that. Grin

I guess it surprises me that although bitcoin is still a tiny market, there hasn't been discussion of this kind of thing

Lending BTCs exposes the lender to huge exchange rate risk.  Imaging you borrowed BTCs about six weeks ago when BTC/USD was $2.25 or thereabouts.  Today at $2 higher, repayment is much higher.  Add in the ability to ditch a sullied social network username and start over and you'll likely find borrowers who maintain a good credit history when BTC/USD is going up but a rapidly increasing number whose credit turns south when the BTC/USd exchange rate drops as well.

I'm being reminded by the borrowings by stevenbucks (problem gambler, allegedly) https://bitcointalk.org/index.php?topic=3355.0 and bond auctions by Atlas and others:

- https://bitcointalk.org/index.php?topic=4863.0
- https://bitcointalk.org/index.php?topic=5214.0

Additionally, with P2P there is the risk of the lender running away with the collateral.  Unfortunately, an automated escrow solution for handling that is not available (at least not since ClearCoin closed) http://wiki.bitcoin-otc.com/wiki/Secured_loan
- http://wiki.bitcoin-otc.com/wiki/Secured_loan

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December 29, 2011, 03:14:06 AM
 #25

Well as to the volatility problem, my conjecture is that funds would be exchanged for local currency pretty quickly as desired at least for the initial sum.

I think you do have a point when it comes to calculating interest payments though - the contract would need to be written to index the bitcoin payment amounts to a currency, I guess.

We're just talking conceptually here- an automated escrow system, maybe like what silkroad uses, and whatever else is needed, could be built.     Yet I'm still not convinced that escrowed bitcoin would be the way to go, lendingclub.com is all unsecured loans based on credit risk.    For larger loans maybe the lender would take title to the property, just like what happens now for car loans, mortgages, etc. 

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