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Author Topic: [IDEA] - Ripple-like system for Bitcoin investment / p2p insurance / p2p lending  (Read 4298 times)
ripper234
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Ron Gross


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June 02, 2012, 09:09:08 AM
 #21

I did sign up for ripple a while back when someone mentioned it, but its mainly sat idle.  I was curious as to how you were thinking a person or persons would set it up as an insurance.  Could you give some more details?

I know hardly anything about Ripple itself, I don't know whether it can be used directly, but I believe I have described the essence of my suggestion above ... see below for additional details.

Perhaps the implementation could be achieved, in a distributed fashion, via Open Transactions ... it sounds like a perfect fit. Still, the "p2p" I put in the subject doesn't reference the system architecture, but rather the fact one user is lending to another user, even if the records were kept on a centralized server.

ripper: "p2p insurance", I like the idea, still a bit cloudy, though...

regarding above emphasis: shouldn't that be: "As long as each link of the chain trusts the next link, the entire chain is safe trusted."?

Sure.

What exactly happens in a case of default? Do the re-lenders in the chain provide the insurance and suffer loss of fund or do they pass the default on and "only" suffer loss of trust?

Each the choice of each insurer how to behave in case of a default. The system does not enforce payment, each link can choose between covering the default, like he contracted to do, and retain his credibility, or default and lose credibility ... just like the real world.

I'm not so sure what exactly should be stored with the link. You said merely a scalar trust value is not enough, it should include affirmations of trust in the context of an interest rate and amount. Maybe something more even, maturity? What are the dimensions here? And: is this info supposed to be based on past experience or subjective impression?

Various properties should be representable within the system. Each user of the system would choose some parameters he cares about. Let's start by keeping it simple ... as a user, you would choose N other users, and assign to each a premium (calculated on a yearly basis), and a maximal loan cap from that user you're willing to cover (amount and loan period). You can also offer deposits within the system yourself.

So:

1. Adam offers an investment oppurtunity of 2000 BTC, 10% yearly interest, for 3 months.
2. Bob trusts Adam, and offers to insure any deposit from Adam for up to 500 BTC and one year, for the yearly premium of 2%.
3. Carol invests 1000BTC with Adam and buys insurance on 500BTC of this investment from Bob, all automatically through the system. In addition to his 1000 BTC, he pays 0.0049% (2% yearly over 3 months) * 500 BTC ~ 5 BTC to Bob.
4-A. After 3 months, Adam might return the investment + interst = 1024 BTC (10% yearly interest over 3 months).
4-B. After 3 months, Adam might default. In this case, Bob has an obligation to pay Carol 500 BTC. He can pay, or default and ruin his own reputation.


I think maybe the re-lenders should in fact provide insurance and maybe even proof of ownership of necessary funds to cover?

Do you want to include "contracting" somehow within the system? Then maybe we could automatically mix, shuffle and re-package the debt and sell it as "highly secure AAA+ non-inflatable bitcoin debt" Wink. Hmm, actually, scratch "automatically", this'd probably be exactly a job for someone within the chain, a debt-repackaging insurer or something.

Well, now I'm just rambling on... better cut here.

I don't want the system to enforce anything. It should be like GLBSE, just a place to manage, buy and sell insurance/investment contracts. In fact, it might make perfect sense to implement this system inside GLBSE. As an extension, you could also buy/sell/short specific insurance contracts ... if after issuing an insurance, my assesment of the insurance risk has changed, I might want to double-insure myself ... I would in fact be buying extra insurance from a 4th party against the default of Adam. I'm still liable if Adam defaults, but this 4th party (let's call him Dave) is responsible to me, so my risk of actually having to pay the default out of my own pocket is greatly diminished.

This might all sound overly-complicated, but this is how the real world insurance market works, but even without these complications, an insurance market for Bitcoin is essential for its growth as a real currency.

Please do not pm me, use ron@bitcoin.org.il instead
Mastercoin Executive Director
Co-founder of the Israeli Bitcoin Association
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June 02, 2012, 09:19:09 AM
 #22

thanks for clearing things up, ripper234.

Regarding implementation: I'd rather like to see it implemented on OT than glbse. With OT, presumably, you can proove existance of contract without having to rely on central authority. I watched the first of the OT (smart contracts) intro videos and I'll look into it more. Very interesting indeed.

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June 02, 2012, 09:47:30 AM
 #23

thanks for clearing things up, ripper234.

Regarding implementation: I'd rather like to see it implemented on OT than glbse. With OT, presumably, you can proove existance of contract without having to rely on central authority. I watched the first of the OT (smart contracts) intro videos and I'll look into it more. Very interesting indeed.

GLBSE itself should be retro-fitted to work on OT, it's just good for everyone ... and if they don't do it, a competitor will.

BTW, two more links where such insurance was discussed:

https://bitcointalk.org/index.php?topic=74586.20

https://bitcointalk.org/index.php?topic=74552.0

We need to get these transactions off the threads and into a good, organized system.

Please do not pm me, use ron@bitcoin.org.il instead
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ripper234
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June 05, 2012, 11:56:31 AM
 #24

It appears there is a category of "P2P Lending". I wonder if any of them are working on Bitcoin.

Asked on Quora.

Please do not pm me, use ron@bitcoin.org.il instead
Mastercoin Executive Director
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