Bitcoin Forum
November 23, 2019, 02:04:30 AM *
News: The forum is 10 years old today!
 
   Home   Help Search Login Register More  
Pages: [1]
  Print  
Author Topic: Lower-risk loans with repos  (Read 904 times)
copumpkin
Donator
Sr. Member
*
Offline Offline

Activity: 266
Merit: 252


I'm actually a pineapple


View Profile
April 09, 2012, 07:19:23 PM
 #1

Hi all,

I guess it's the time of the week for me to go on my customary long rant (that nobody reads) about how to change the bitcoin credit market.

This time I think it's a pretty simple and helpful idea, though. Real markets have these things called repos (repurchase agreements) which are basically a loan using another asset as collateral. As more and more people start using GLBSE (and eventually MPEX, I hope) for their bitcoin investments, it becomes very easy to transfer securities between users. These transfers are the simplest form of collateral ever: if borrower B asks for a loan, he can transfer an equivalent number of shares to lender L and get the coins, with an agreement that B will buy the shares back from L at a later date for a pre-determined higher amount. If B runs off with the coins, L is left with a bunch of shares. If L loses the shares, B still has coins.

It does expose L to risk from fluctuations in the price of the asset being repurchased, but that's typically better than just losing the entire principal from a dishonest B. By removing most of the counterparty risk from the equation, it could lead to loans with lower risk (good for the L) and lower interest (good for B). Obviously L would have to believe that B's shares are worth something to begin with for this to work, but there are several assets on GLBSE right now that are moderately liquid (bitbond, puremining, SS, gigamining soon, probably BFLS soon)

Anyway, I'd be interested to see what people think. I'd really like to find ways to lower credit risk without compromising the decentralized/pseudonymous nature of this community.

You can read more about the idea at http://en.wikipedia.org/wiki/Repurchase_agreement

tl;dr: use shares/bonds as collateral for loans
1574474670
Hero Member
*
Offline Offline

Posts: 1574474670

View Profile Personal Message (Offline)

Ignore
1574474670
Reply with quote  #2

1574474670
Report to moderator
1574474670
Hero Member
*
Offline Offline

Posts: 1574474670

View Profile Personal Message (Offline)

Ignore
1574474670
Reply with quote  #2

1574474670
Report to moderator
1574474670
Hero Member
*
Offline Offline

Posts: 1574474670

View Profile Personal Message (Offline)

Ignore
1574474670
Reply with quote  #2

1574474670
Report to moderator
The Bitcoin Forum is turning 10 years old! Join the community in sharing and exploring the notable posts made over the years.
1574474670
Hero Member
*
Offline Offline

Posts: 1574474670

View Profile Personal Message (Offline)

Ignore
1574474670
Reply with quote  #2

1574474670
Report to moderator
notme
Legendary
*
Offline Offline

Activity: 1904
Merit: 1001


View Profile
April 09, 2012, 07:24:01 PM
 #2

Hi all,

I guess it's the time of the week for me to go on my customary long rant (that nobody reads) about how to change the bitcoin credit market.

This time I think it's a pretty simple and helpful idea, though. Real markets have these things called repos (repurchase agreements) which are basically a loan using another asset as collateral. As more and more people start using GLBSE (and eventually MPEX, I hope) for their bitcoin investments, it becomes very easy to transfer securities between users. These transfers are the simplest form of collateral ever: if borrower B asks for a loan, he can transfer an equivalent number of shares to lender L and get the coins, with an agreement that B will buy the shares back from L at a later date for a pre-determined higher amount. If B runs off with the coins, L is left with a bunch of shares. If L loses the shares, B still has coins.

It does expose L to risk from fluctuations in the price of the asset being repurchased, but that's typically better than just losing the entire principal from a dishonest B. By removing most of the counterparty risk from the equation, it could lead to loans with lower risk (good for the L) and lower interest (good for B). Obviously L would have to believe that B's shares are worth something to begin with for this to work, but there are several assets on GLBSE right now that are moderately liquid (bitbond, puremining, SS, gigamining soon, probably BFLS soon)

Anyway, I'd be interested to see what people think. I'd really like to find ways to lower credit risk without compromising the decentralized/pseudonymous nature of this community.

tl;dr: use shares/bonds as collateral for loans

Not a bad idea... unless B also runs the PonziShares he offers as collateral Wink.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
12jh3odyAAaR2XedPKZNCR4X4sebuotQzN
miscreanity
Legendary
*
Offline Offline

Activity: 1316
Merit: 1005


View Profile
April 09, 2012, 07:42:15 PM
 #3

Funny - I was recently reading about Islamic banking and found one of the major tenets to essentially be buy-back loans - repos. This appeals to me as a more stable lending mechanism than the dominant form of unsecured, rating-based credit.

Utilizing GLBSE shares as collateral is a positive move in my book.
Pages: [1]
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!