Decentralized Lending Protocol / Network

[jdbtracker]

You've laid out most of the structure so now, we have to develop a work flow

The Interface for Lenders and Borrowers
Investment directory
Secure Blockchain to send Bitcoins for Consolidation and Distribution
Investment Contracts
System Statistics
Ratings Service
API for DAC support(for monitoring operations by investors and secure Transfer of funds)

[1714857120]

1714857120

[1714857120]

1714857120

[theblacksquid]

You've laid out most of the structure so now, we have to develop a work flow

The Interface for Lenders and Borrowers
Investment directory
Secure Blockchain to send Bitcoins for Consolidation and Distribution
Investment Contracts
System Statistics
Ratings Service
API for DAC support(for monitoring operations by investors and secure Transfer of funds)

A destination can only get clearer when you have a map.

*someone from the background shouts* THANK YOU SO MUCH, CAPT. OBVIOUS!

Oh, and the Github repo, I'll get one up. Links to come.

[jyakulis]

Well, in an ideal world usury would not exist.

Given increased usage from increased population growth leading to increases in velocity of coins and increases in productivity from the private sector in a closed box system the currency should gradually increase in value based on those factors. This is based in a system of scarcity. Why the scarcity? I don't know, people are greedy. It shouldn't be this way but, it is unfortunately.

Would not the idea of lending be moreso, I have more money than I need right now let me essentially help some other people out. I guess in the long run I would like to see what your proposal is with no usury? What about an interest free loan? Is not usury a symptom of an inflationary system? What would happen with your system?

I guess what I'm saying is what about in an ideal world where usury doesn't exist (I'm thinking very long term here). Doesn't that throw the dividend and risk mitigation out the window? What if someone wanted an interest free loan? How does the math work there in your example? I'm not saying right off the bat. This is a great stab at a modern way to lend money using bitcoin architecture. I'm just saying if it ever got to a point of an interest free loan. What would happen? Right now I see that people would need incentive but, maybe down the road the incentive is my bitcoins will buy more 5 years from now tied up with someone else paying me them back than it would in my pocket right now collecting dust due to productivity gains in producing consumer goods. Or maybe the person is simply generous as you see with a lot of the tipping that goes on in the community.

I like it though. You could call it crowdlending. I also like that the terms of the loan are up to the loanee instead of the loaner.




"Give to the one who asks you, and do not turn away from the one who wants to borrow from you."

[GingerAle]

Well, in an ideal world usury would not exist.

Given increased usage from increased population growth leading to increases in velocity of coins and increases in productivity from the private sector in a closed box system the currency should gradually increase in value based on those factors. This is based in a system of scarcity. Why the scarcity? I don't know, people are greedy. It shouldn't be this way but, it is unfortunately.

Would not the idea of lending be moreso, I have more money than I need right now let me essentially help some other people out. I guess in the long run I would like to see what your proposal is with no usury? What about an interest free loan? Is not usury a symptom of an inflationary system? What would happen with your system?

I guess what I'm saying is what about in an ideal world where usury doesn't exist (I'm thinking very long term here). Doesn't that throw the dividend and risk mitigation out the window? What if someone wanted an interest free loan? How does the math work there in your example? I'm not saying right off the bat. This is a great stab at a modern way to lend money using bitcoin architecture. I'm just saying if it ever got to a point of an interest free loan. What would happen? Thanks.

I like it though. You could call it crowdlending.

Indeed - how would the system work with an interest free loan? The short of it is that, similar to the standard BTC network, some fee would be added to cover the efforts of the miners. Or, no fee - and the loan has the same problem as an fee-free transaction in the future BTC network when there are no new coins to mine.

An interest free loan could come about in two manners - 1) the borrower requests an interest free loan, or 2) the lender decides to fund a loan interest free.

In option 1, the workflow is no different than described in the OP - the loan (and all of its associated transactions) would suffer the same consequences as a BTC that doesn't have a fee. Maybe additionally there is a stipulation that interest free loans aren't insured by the DAR (because they are not contributing)

In option 2, Bill see's Jane's loan and goes "damn I want this to happen" and clicks a button to fund the loan entirely without interest. To keep things simple, this action supersedes any previous by ins to the loan. If the loan was 50% funded and Bill decided to stretch his philanthropy muscle, all the people in the 50% get washed out.


Okay, jdbtracker - thanks for entertaining this idea with some structure. Okay, so now we're at the point where the hardest part is figuring out if everyone's on the same page talking about the same thing....

You've laid out most of the structure so now, we have to develop a work flow

The Interface for Lenders and Borrowers

Okay, the interface I can draw out or mock up with some crude powerpoints or one of those online animation doohickies or just pen and paper this thing and snap a pic. Any preference?

Investment directory

I don't understand what this refers to. I imagine this directory will ultimately manifest in the lendwallet as the searchable list of loans available for investment.

Secure Blockchain to send Bitcoins for Consolidation and Distribution

Okay, so in my imagining of this, the loanchain is essentially building a transaction (lets call it the Singularity, because it is one thing (the loan application) that is drawing all other things towards it (people lending into that loan) that is in suspended animation until the 100% mark is met. Once this occurs, the singularity is then activated on the BTC blockchain. So the loanchain itself does not send Bitcoins... but of course this is obvious and I might just be explaining things to here myself talk (or type). I apologize! But the building of that transaction needed a name, so we now have it.

Investment Contracts

Okay, this is more or less the loan application, correct?

System Statistics

So this would be just a way for any end user to see how many loans are in existence, how much is in the DAR, etc.

Ratings Service

This would more or less be an equivalent of being able to search a blockchain. I say for now, we keep it simple. Longest chain of on time payments, number of loans repaid, total amount ever borrowed, total amount currently borrowed.

API for DAC support(for monitoring operations by investors and secure Transfer of funds)

^^^ honestly, I think all of these things would be in the lendwallet, right? But yeah, an API indeed.


Back to the usury comment real quick - I dunno if it was because I didn't explicitly state it, but in this system, the borrower sets the interest rate. Granted, a borrower is more likely to get a loan if they offer 30%, but there's nothing stopping them from asking for a 2% loan.


All right... I will work on what I can ( some mock up of the interface, I guess... or a more detailed workflow).

In the meantime, I'll put up the original PDF. This filetea service is volatile, so this link will only be active as long as my browser window posting it is open.
 
https://filetea.me/t1sWbpemht3RCCB9ylFYPqRxw

checksum: C537CA3491E3E69036A4CA7E2ABFC25442B5CE48

[GingerAle]

Hmmm now this is interesting. But how do you make it easy for people in the lendchain to know what Jane's idea is with using with the money. Is it like a web based thing where you would write a business plan etc. and then apply for the loan and people would sort of shop around at different peoples ideas and say maybe I want to loan 0.2 bitcoins for a water reclamation project. That's certainly an interesting idea.

Yes, this is exactly the idea. People will know what Jane's idea is because it will be displayed in the Lend tab of the lendwallet. Because the lendwallet uses the same blockchain idea, all loans that exist on the loanchain can be displayed in the lend tab - obviously, the lendwallet will only display those loans that are still accepting funds.

Hrm, yes, it could be a web based thing - but I imagined it as an application similar to having a bitcoin wallet running on your computer - but indeed, a web interface would be a logical phase 2 after the core is built.

But yeah, like anything decentralized, it will need people participating in full node support (blockchain storage and hashing) in order to maintain the network, and this would be rewarded with some amount of BTC, as described.

[cyberpinoy]

The largest and most common misconception of the bitcoin community as well as newbies and others looking into bitcoins is that Bitcoins is an actual currency with the expectation to replace cash as we know it. This is not what this currency was for. Bitcoin is a digital currency meant to provide a better way to transact cash itself. Not to replace it. But intelligent people know if you really understand currency trading and banking operations in addition with money transfer companies and policies, Bitcoins has the ability to make the Big Banks ( not the currencies themselves) but the BIG Banks to go bankrupt.

All Banks do not create money, Money is created by one central bank only and is based on something. Gold, imaginary gold, how many fish are in the sea, whatever they base it on. It also only has a certain  amount that can be created. the more they create the less value their currency is worth.  The need a high value currency to trade it with other countries to buy and sell goods and services.

Why can bitcoin bankrupt Big Banks, 3 reasons: Bitcoin has the ability to destroy the Foreign Exchange market where the banks make 4 Trillion dollars daily trading currencies for a profit, as well as destroying the need for those hugely profitable contract options they sell, and lastly Bitcoin has the ability to destroy the need for ATM and Debit cards with a visa , mastercard logo on them. Loosing Debit cards is a HUGE hit to banks, Most banks make millions of dollars a month from the ATM fees when you use an ATM that is not your own banks ATM, not to mention the fees they charge the account holders, insufficient funds fees, low balance fees, overdraft fees. Why deal with these fees when bitcoins can accomplish the same goal and incurs tiny amounts of fees, 2 to 5 cents usually.

So Bitcoin was not created to replace cash, and never will, but it has the ability to destroy big banks who make their profit from the foreign exchange market and account holder debit card fees. It will not destroy all banks you local no name bank who is not a market mover will survive, but Bank of America, JP MOrgan, Barclays and other market moving banks like these will be bankrupt within a year of true adoption of bitcoins and their value of sending money anywhere in the world virtually for free.

[GingerAle]

I love the detail, wow and I guarantee you someone is already building it, somewhere out there thinking of setting it up for revenue and others completely decentralized systems with share distribution.

Indeed, the "revenue" version is:
http://maclanewilkison.com/decentralized-crowdlending-2/

I haven't seen a share distribution yet

You know you can mitigate risk if you link some businesses together in a completely open manner using a DAC.

Here I'm confused with what you mean by "link some businesses together in a completely open manner". I understand DACs - the DALP is sort of a DAC, but there's no revenue associated with it - it just exists alongside the BCT network to provide lending service to the BTC network.

So, I assume you mean mitigate risk as in mitigate the risk associated with being a lender. So perhaps by businesses, you mean the people on the borrowing side of the equation? So, borrowers could pool together somehow to present to the DALP a loan application that involves multiple parties? Yes! This is fantastic!

If the DAC is completely open it can simply route the money through the Corporation Digitally, marking costs and revenues in Real-Time.

I'm lost.

Setting up a good flow for the Coins is essential to fund all facets of a DAC along with labels and metrics for work being done. If this flow is visible to everyone it can be Crowd Sourced, providing revenue for 1000's of investors in Real-Time using your idea. It is quite powerful, when you completely automate it with a Transparent Structure.

Okay, I think your thought chain may have forked from my original thought chain, or I'm losing something somewhere... but it could be me. I'm running on fumes here. I should really sleep. But sleep when you're dead, right?

I hope everyone understand that a Business is nothing more than a Dispersal of Money to Job Assignments, It is a channel by which money travels through from Customer to Businesses and Investors. To create a Business is to merely understand it's requirements, setup people or machines to carry out work, pay or maintain them to continue that work, observe it being done and provide a Product or Service that channels those Coins effectively through the Corporation; The fact we can automate it is quite impressive, but creating a Market is far more Interesting. A well organized structure can be a platform to bring people and machines together to offer services, forming spontaneous Conglomerations; bringing Consumer and provider into a integrated Directory of Purchasing, Investing and Production.

Okay, here I think your presenting your conceptualization to the full.. and I get it... yeah! Use the DALP as a means for a business to essentially run its finances. In this case, the borrowers are branches of the company (the ones doing the jobs), and they submit (what I've been calling) a loan request  to the network. The Top of the company are here the lenders, and they can allocate the funds to the branches appropriately. And then the branches can report their success simply by "paying off the loan".

I think we may soon see Drop in corporations appearing on the web, selectable and openly available for anyone to deploy as a service; The structure is already designed for you, you just have to fill in the positions and advertise it, instant business deployment in any part of the world with a Distributed Investor Structure.

Hrm, might need to elaborate more.


Whether or not we ended up talking about the same thing, some great things happened just there.

[GingerAle]

The largest and most common misconception of the bitcoin community as well as newbies and others looking into bitcoins is that Bitcoins is an actual currency with the expectation to replace cash as we know it. This is not what this currency was for. Bitcoin is a digital currency meant to provide a better way to transact cash itself. Not to replace it. But intelligent people know if you really understand currency trading and banking operations in addition with money transfer companies and policies, Bitcoins has the ability to make the Big Banks ( not the currencies themselves) but the BIG Banks to go bankrupt.

All Banks do not create money, Money is created by one central bank only and is based on something. Gold, imaginary gold, how many fish are in the sea, whatever they base it on. It also only has a certain  amount that can be created. the more they create the less value their currency is worth.  The need a high value currency to trade it with other countries to buy and sell goods and services.

And is this .... good?

Why can bitcoin bankrupt Big Banks, 3 reasons: Bitcoin has the ability to destroy the Foreign Exchange market where the banks make 4 Trillion dollars daily trading currencies for a profit, as well as destroying the need for those hugely profitable contract options they sell, and lastly Bitcoin has the ability to destroy the need for ATM and Debit cards with a visa , mastercard logo on them. Loosing Debit cards is a HUGE hit to banks, Most banks make millions of dollars a month from the ATM fees when you use an ATM that is not your own banks ATM, not to mention the fees they charge the account holders, insufficient funds fees, low balance fees, overdraft fees. Why deal with these fees when bitcoins can accomplish the same goal and incurs tiny amounts of fees, 2 to 5 cents usually.

So Bitcoin was not created to replace cash, and never will, but it has the ability to destroy big banks who make their profit from the foreign exchange market and account holder debit card fees. It will not destroy all banks you local no name bank who is not a market mover will survive, but Bank of America, JP MOrgan, Barclays and other market moving banks like these will be bankrupt within a year of true adoption of bitcoins and their value of sending money anywhere in the world virtually for free.

Perhaps. And perhaps that was the same thing said about paper money at first.

http://en.wikipedia.org/wiki/History_of_the_United_States_dollar#mediaviewer/File:Continental_$50_note_1778.jpg

I understand your point but I disagree, and thats fine. I see a different future for bitcoin and cryptocurrencies, regardless of whether satoshi envisioned BTC to replace fiat or not. I doubt the folks that came up with IOU's for gold back in............ whenever.... never thought "Hey, in 500  + years, this piece of paper will have value simply because we all agree it should."

from the mighty wikipedia: "Present-day Federal Reserve Notes are not backed by convertibility to any specific commodity, but only by the legal requirement that they are issued against collateral."

[theblacksquid]

Do we have a "name" or something that identifies this specific flavor of decentralized P2P lending? I'm making a Github Organization and repo.

[jonald_fyookball]

yes, fractional reserve banking is possible with BTC, but I don't see how provable reserves (100%+) wouldn't become the standard that consumers demand in a free market.

In other words, say you want to put some of your bitcoins in a bank instead of self storage.  Do you choose the bank that isn't provably solvent, the bank that proves their reserves but only has a fraction of their actual holdings, or the bank that has 100%+ and can prove it?  I know which one I would choose.

[Vessko]

Sigh... The OP not only doesn't have a clue how banking works, he doesn't understand "money". There are several different things commonly lumped under the label "money". How to explain this in simple words....

OK, OP's original premise is that since you can't increase the supply of Bitcoin (once all coins have been mined), fractional reserve banking won't be able to "work" because lending by commercial banks increases the money supply (the latter is true) - banks use every $10 of deposited money to make $100 loans.

The conclusion is false. Note that commercial banks are not allowed to increase the supply of physical currency (e.g., dollar banknotes). This is called "monetary base" - the currency in circulation. Only the central bank is allowed to do that. That doesn't prevent commercial banks from increasing the broad money supply by creating fudicary equivalents of money. Basically, they create an accounting entry, creating virtual money out of nothing.

Yes, this is basically a fraud. Banks create "double ownership" on the same amount of money (multiplied 10 times), because both the depositor and the entities that have taken loans from the bank have valid, contractual claims on the same money. Yes, if the depositors all demand their money at the same time, the bank will become insolvent, because it doesn't have them.

There is absolutely no problem perpetrating the exact same kind of scam with Bitcoin. Banks won't be able to create new Bitcoins - but they will be able to create multiple claims on the same bitcoins.

Yes, if you make a 100% reserves requirement that will no longer work. But the whole point of fractional reserve banking is that it operates with fractional reserves - 10% instead of 100%.

[GingerAle]

Do we have a "name" or something that identifies this specific flavor of decentralized P2P lending? I'm making a Github Organization and repo.

I've been calling it the DALP (decentralized autonomous lending protocol). Though if I understand jdp correctly, the underlying core of the protocol (building transactions in suspended animation and then triggering them at some point), there are many applications beyond lending and granting.

Hrm, Decetralized Autonomous Financial Network? (DAFNE)

though some would say this is what bitcoin is, but bitcoin doesn't explicitly really allow you to network currency.




and back to this:

Sigh... The OP not only doesn't have a clue how banking works, he doesn't understand "money". There are several different things commonly lumped under the label "money". How to explain this in simple words....

OK, OP's original premise is that since you can't increase the supply of Bitcoin (once all coins have been mined), fractional reserve banking won't be able to "work" because lending by commercial banks increases the money supply (the latter is true) - banks use every $10 of deposited money to make $100 loans.

The conclusion is false. Note that commercial banks are not allowed to increase the supply of physical currency (e.g., dollar banknotes). This is called "monetary base" - the currency in circulation. Only the central bank is allowed to do that. That doesn't prevent commercial banks from increasing the broad money supply by creating fudicary equivalents of money. Basically, they create an accounting entry, creating virtual money out of nothing.

Yes, this is basically a fraud. Banks create "double ownership" on the same amount of money (multiplied 10 times), because both the depositor and the entities that have taken loans from the bank have valid, contractual claims on the same money. Yes, if the depositors all demand their money at the same time, the bank will become insolvent, because it doesn't have them.

There is absolutely no problem perpetrating the exact same kind of scam with Bitcoin. Banks won't be able to create new Bitcoins - but they will be able to create multiple claims on the same bitcoins.

Yes, if you make a 100% reserves requirement that will no longer work. But the whole point of fractional reserve banking is that it operates with fractional reserves - 10% instead of 100%.

I get your point, and I understand the argument, but I don't agree that its right or good.

"they will be able to create multiple claims on the same bitcoins."... and issue these claims with, what? as stated earlier in this thread, if we imagine some future bank of be a holder of bitcoins, we assume that your "account" in this bank is the equivalent of the bank having a wallet file for you that they store in some fantastic unbreachable system. The only way they will be able to simultaneously claim that you have 10 BTC in your account and that they can claim 9 BTC for lending is if they use some type of reserve note created that is backed by BTC and issued by that bank.

Otherwise, your BTC really isn't there. And yes, maybe this is how it worked back in the day of gold banking - I don't know. Maybe this is why, for the better part of, I dunno, history... people don't trust banks.

Ultimately, my point is: banking has its pros and cons. The pro is that it moves money around and can make things happen - lending is essentially our ability to say "yes, I believe in the future". The cons are that the manifest game of smoke and mirrors can obviously go very very very wrong (see 2008 crash).

Ultimately we may not need to do this anymore.

[GingerAle]

Maybe though we should keep it simple at first and just focus on the lending component. Either DALP or DAFNE will work. Or The Singularity Protocol.

[GingerAle]

https://news.yahoo.com/rage-ago-bitcoin-sputters-adoption-stalls-203435730--sector.html

"Analysts also provided Reuters with data that shows liquidity in the cryptocurrency remains limited."

"John Ratcliff, a software engineer at Nvidia who has done extensive analysis on bitcoin transactions, estimated that monthly liquidity is about 10-20 percent of the entire 13.6 million bitcoin in circulation. The rest are either being hoarded or don't trade because they're fractional in size."

DAFNE / DALP can provide a way for bitcoins to start moving around. I'm guessing right now that there has evolved a bitcoin upper class that is sitting on their coins mainly because there's nothing one can do with them besides hope they go up in value.

Loan app for 100 BTC. Loan app gets filled by thousands of BTC holders. Loaner probably converts BTC to fiat. Does stuff with fiat. Uses fiat to buy BTC to payback the loan. Bitcoins move. Around the world. Grains at a time.

We could probably also use the DAR to secure against deflationary lending problem to some percentage. Loaner gets 100 BTC to pay back at 5%, equals 35000 USD. Converts to fiat. BTC goes up to 400. Loaner essentially owes 42000 USD now. Something to consider.

Also should probably include an option in loan application where the borrower can ask for deflation insurance, like they'll only pay back up to 20% deflation. Again, this makes the loan less attractive to lenders, but its something that can be done. 

The DAFNE / DALP also promotes BTC stability (if adoption is widespread), because everyone involved in the lending network has a vested interest in a stable currency value.

[GingerAle]

I need to look into this more, but some of this code may exist in Ripple.... but their focus is exchange.

https://github.com/ripple/rippled

[theblacksquid]

That's true, they focus more on exchanging tokens that are IOU's of the currencies that are "deposited" to gateways.

BTW, I like how DAFNE sounds like. I'll use that for the Organization name and the Repository. But, Alas, I may have to hold off until monday. Is there anyone else who could do it?

[GingerAle]

I did something, dunno if its what I was supposed to do.

It can be found in github under Gingeropolous / DAFNE

[theblacksquid]

Awesome. Can you put a link to the op to the Github Page?

[jonald_fyookball]

Sigh... The OP not only doesn't have a clue how banking works, he doesn't understand "money". There are several different things commonly lumped under the label "money". How to explain this in simple words....

OK, OP's original premise is that since you can't increase the supply of Bitcoin (once all coins have been mined), fractional reserve banking won't be able to "work" because lending by commercial banks increases the money supply (the latter is true) - banks use every $10 of deposited money to make $100 loans.

The conclusion is false. Note that commercial banks are not allowed to increase the supply of physical currency (e.g., dollar banknotes). This is called "monetary base" - the currency in circulation. Only the central bank is allowed to do that. That doesn't prevent commercial banks from increasing the broad money supply by creating fudicary equivalents of money. Basically, they create an accounting entry, creating virtual money out of nothing.

Yes, this is basically a fraud. Banks create "double ownership" on the same amount of money (multiplied 10 times), because both the depositor and the entities that have taken loans from the bank have valid, contractual claims on the same money. Yes, if the depositors all demand their money at the same time, the bank will become insolvent, because it doesn't have them.

There is absolutely no problem perpetrating the exact same kind of scam with Bitcoin. Banks won't be able to create new Bitcoins - but they will be able to create multiple claims on the same bitcoins.

Yes, if you make a 100% reserves requirement that will no longer work. But the whole point of fractional reserve banking is that it operates with fractional reserves - 10% instead of 100%.

Yes, but before Bitcoin, provable reserves weren't even remotely possible.   Currently, its not only possible with Bitcoin, its already been implemented in at least one company.
So, the only way fractional reserve banking can happen with Bitcoin is if consumers allow it to happen.

[picolo]

https://www.lendingclub.com/ is pretty nice too.