Loans in BTC

[wasserman99]

With fiat, bank loans create money out of thin air increasing the money supply thus promoting inflation. Nowadays the banks can free wheel as there is little to no requirement to hold reserves. BTC is different because lending BTC is real. None created from the loan.

Just like with gold in the 19th century, BTC banks would "create" BTC bank notes (receipts) with all ensuing consequences like bank runs and bank defaults.

If a person has 1 BTC in their Coinbase account and Coinbase lends 0.9 of it, then there is effectively 1.9 BTC. Money has been created. That's classic fractional reserve banking. No banknotes are needed.

Actually only .9 would have been created. Coinbase would still be at risk as if too many people wanted to withdraw their money but didn't have enough reserves to cover the withdrawal requests.

[botany]

The FDCPA is the Fair Debt Collection Practices Act. Generally speaking fiat based loans will have more options to guarantee payment. Even signature loans for example will require a borrower to have an active checking account that money can be automatically withdrawn.

Fiat based loans also generally will require more documentation regarding a borrower's ability to repay their loans. Yes this is not something that BTC based lenders cannot do but the economy is generally not setup to do this.

Once licences come into play, I can see documentation for bitcoin users getting more cumbersome than fiat documentation. 

I don't think licenses will so much have to do with the expenses of lending in BTC. I think it is mostly the fact that once you give someone BTC it is very difficult to force them to give it back (repay their loan).

Licences increase cost. Compliance officials are one of the most expensive hires in the market.

[Plank]

I got amazed at first when i saw the Btc loans section in here don't know how its works but I am sure it's not a newbie thing

[itsAj]

The FDCPA is the Fair Debt Collection Practices Act. Generally speaking fiat based loans will have more options to guarantee payment. Even signature loans for example will require a borrower to have an active checking account that money can be automatically withdrawn.

Fiat based loans also generally will require more documentation regarding a borrower's ability to repay their loans. Yes this is not something that BTC based lenders cannot do but the economy is generally not setup to do this.

Once licences come into play, I can see documentation for bitcoin users getting more cumbersome than fiat documentation. 

I don't think licenses will so much have to do with the expenses of lending in BTC. I think it is mostly the fact that once you give someone BTC it is very difficult to force them to give it back (repay their loan).

Licences increase cost. Compliance officials are one of the most expensive hires in the market.

This is true, however lenders would likely not need additional licenses above what traditional fiat banks have.

[botany]

The FDCPA is the Fair Debt Collection Practices Act. Generally speaking fiat based loans will have more options to guarantee payment. Even signature loans for example will require a borrower to have an active checking account that money can be automatically withdrawn.

Fiat based loans also generally will require more documentation regarding a borrower's ability to repay their loans. Yes this is not something that BTC based lenders cannot do but the economy is generally not setup to do this.

Once licences come into play, I can see documentation for bitcoin users getting more cumbersome than fiat documentation. 

I don't think licenses will so much have to do with the expenses of lending in BTC. I think it is mostly the fact that once you give someone BTC it is very difficult to force them to give it back (repay their loan).

Licences increase cost. Compliance officials are one of the most expensive hires in the market.

This is true, however lenders would likely not need additional licenses above what traditional fiat banks have.

It would have been nice to see how the markets evolved if there were no licences/regulation. Governments are trying to currently force fit regulations applicable to a fiat economy on to crypto as well.

[itsAj]

The FDCPA is the Fair Debt Collection Practices Act. Generally speaking fiat based loans will have more options to guarantee payment. Even signature loans for example will require a borrower to have an active checking account that money can be automatically withdrawn.

Fiat based loans also generally will require more documentation regarding a borrower's ability to repay their loans. Yes this is not something that BTC based lenders cannot do but the economy is generally not setup to do this.

Once licences come into play, I can see documentation for bitcoin users getting more cumbersome than fiat documentation. 

I don't think licenses will so much have to do with the expenses of lending in BTC. I think it is mostly the fact that once you give someone BTC it is very difficult to force them to give it back (repay their loan).

Licences increase cost. Compliance officials are one of the most expensive hires in the market.

This is true, however lenders would likely not need additional licenses above what traditional fiat banks have.

It would have been nice to see how the markets evolved if there were no licences/regulation. Governments are trying to currently force fit regulations applicable to a fiat economy on to crypto as well.

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

[Justine]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

[tee-rex]

With fiat, bank loans create money out of thin air increasing the money supply thus promoting inflation. Nowadays the banks can free wheel as there is little to no requirement to hold reserves. BTC is different because lending BTC is real. None created from the loan.

Just like with gold in the 19th century, BTC banks would "create" BTC bank notes (receipts) with all ensuing consequences like bank runs and bank defaults.

If a person has 1 BTC in their Coinbase account and Coinbase lends 0.9 of it, then there is effectively 1.9 BTC. Money has been created. That's classic fractional reserve banking. No banknotes are needed.

If I'm not mistaken, the proper name for this process is "money multiplication". FRB refers more to a reservation of some part of the deposit in the process to avoid bank (wallet, lol) runs, and, strictly speaking, is not required for the creation of money thereby (especially for a system with a Central Bank).

[wasserman99]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

I don't think the courts are so much necessary to catch scammers (although they are to some extent) but rather the government to set limits as to what lenders can charge and to set certain disclosure guidelines. If all of the relevant facts are properly disclosed then it is much more difficult for one party to get a much worse deal then the other party to a transaction.

[Datcracktho]

Given the non refounable nature of btc, isnt it kinda tricky'?

[botany]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

Smart contracts will show the way going forward.
No room for subjective interpretation. No room for protracted litigation.

[SwingBTC]

So how is it suspossed to work? how would one get a btc loan and regulate the whole thing?

[wasserman99]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

Smart contracts will show the way going forward.
No room for subjective interpretation. No room for protracted litigation.

There are very few real world applications that smart contracts can be implemented in. If a computer/blockchain can "read" a term of a contract then it can be just as easily read by the court system so there would be little to no room for dispute. The issue with most contracts is that the terms and/or subsequent performance by one or more parties to a contract is less then clear. 

[itsAj]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

Smart contracts will show the way going forward.
No room for subjective interpretation. No room for protracted litigation.

Most contracts have something that is open to interpretation. Also the US constitution guarantees due process so a "smart" contract would likely be ruled invalid by the courts unless it can be looked at by the courts.

[depkotien]

it's a reckless idea but in my opinion, a loan by BTC will be very difficult to make and it also bring many troubles later. 

[botany]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

Smart contracts will show the way going forward.
No room for subjective interpretation. No room for protracted litigation.

Most contracts have something that is open to interpretation. Also the US constitution guarantees due process so a "smart" contract would likely be ruled invalid by the courts unless it can be looked at by the courts.

Well, if it is automatic (say calculated and executed on ethereum), how would the courts intervene?
Let us say, I execute a smart contract with another person, so that bitcoins from an escrowed account go into 1 of 2 addresses depending on the outcome of an event. This is executed using ethereum (when it does come up). My opponent doesn't know my identity. I would love to see the courts try and invalidate this contract.

[itsAj]

A small amount of regulation is generally healthy as there are many people that are very gullible, as well as the fact that it if often difficult to do due diligence if there is zero accountability on the other person's end for manipulating facts. What the kind of regulations we are seeing in some states that cap the interest rates that borrowers can be charged is causing is the least credit worthy borrowers be shunned from the credit market because it is illegal to charge them an interest rate that is appropriate for their credit/risk profile.

Right. Even will full due diligence, there is still possible for scammer to scam, the reason government and court need to exist in the first place to enforce the contract and agreement between two parties.

Smart contracts will show the way going forward.
No room for subjective interpretation. No room for protracted litigation.

Most contracts have something that is open to interpretation. Also the US constitution guarantees due process so a "smart" contract would likely be ruled invalid by the courts unless it can be looked at by the courts.

Well, if it is automatic (say calculated and executed on ethereum), how would the courts intervene?
Let us say, I execute a smart contract with another person, so that bitcoins from an escrowed account go into 1 of 2 addresses depending on the outcome of an event. This is executed using ethereum (when it does come up). My opponent doesn't know my identity. I would love to see the courts try and invalidate this contract.

You could sue the ethereum to prevent the money from being disbursed prior to having the dispute settled. You could file a lawsuit against a "john doe" who is the counter party to your contract and if they do not respond to your lawsuit then you would win by default. This is simply how the court system works, it is designed to settle disputes in contracts.