[POLL] What is the best loan collateral ?

[AnswerQuestion]

Where the hell is CLAM!?

An altcoin. It has recently become somewhat popular and has increased in price because just dice started accepting it (exclusively) on it's site

[1715273904]

1715273904

[Kluge]

Counterparty or similar token backed by stable, redeemable commodity. I made a goofy comment elsewhere about this, but a Tidecoin (literally backed by jugs of Tide laundry detergent) would probably be as close to ideal as you could get. Worst case scenario, you have to actually use the overpriced shit -- but its use as a laundry detergent does give it some... "near-objective" value.

That said, "non-productive" collateral is still a bad kludge to a practically unsolved problem which needs to be fixed properly. Cars make sense for collateral because people need them, and they usually need the exact car they bought on loan, and, for that reason, a loan officer probably isn't going to issue another car loan to the same person while he still has an outstanding car loan. Same with houses and home improvement/repair loans. -But a lendee doesn't really "need" litecoin or XRP or whatever, and there's a good chance the collateral will be worth significantly less than when collateral was negotiated. Normally, in a repo event, the collateral would be sold around FMV with the proceeds used to REDUCE the loan amount - but because collections are almost impossible with crypto-loans between people separated by hundreds or thousands of miles, the lender being made whole is still extremely unlikely. On the flip-side, a malicious lender may hold collateral hostage, demanding FMV be paid for the collateral to be returned, and it's unlikely the lendee would have viable recourse.

[UberNifty]

how about asking for different % of collateral depending on the assets in the poll?
how would you rate them?

Good point, considering that an asset could be used as either a promissory note of types (i.e. crowdfund profit-share) or a token representing a specific value (i.e. digital goods, physical goods, services, etc.)

[AnswerQuestion]

Counterparty or similar token backed by stable, redeemable commodity. I made a goofy comment elsewhere about this, but a Tidecoin (literally backed by jugs of Tide laundry detergent) would probably be as close to ideal as you could get. Worst case scenario, you have to actually use the overpriced shit -- but its use as a laundry detergent does give it some... "near-objective" value.

That said, "non-productive" collateral is still a bad kludge to a practically unsolved problem which needs to be fixed properly. Cars make sense for collateral because people need them, and they usually need the exact car they bought on loan, and, for that reason, a loan officer probably isn't going to issue another car loan to the same person while he still has an outstanding car loan. Same with houses and home improvement/repair loans. -But a lendee doesn't really "need" litecoin or XRP or whatever, and there's a good chance the collateral will be worth significantly less than when collateral was negotiated. Normally, in a repo event, the collateral would be sold around FMV with the proceeds used to REDUCE the loan amount - but because collections are almost impossible with crypto-loans between people separated by hundreds or thousands of miles, the lender being made whole is still extremely unlikely. On the flip-side, a malicious lender may hold collateral hostage, demanding FMV be paid for the collateral to be returned, and it's unlikely the lendee would have viable recourse.

This is why escrow should be used when using collateral for a loan. The escrow can be trusted enough to not pull off some kind of scam to demand more then what is owed.

While the incentive to repay should be there for borrowers the lender should secure collateral they can easily resell at slightly below FMV (to ensure a quick transaction) to cover the repayment amount of the loan.

Altcoins have little actual use to most borrowers however they are liquid so a lender can easily sell them in the event that their value approaches the repayment amount of the loan so the lender would be protected.

[abstream]

There is always a risk involved when you take a loan:

1)risk for borrower to lose the collateral - there might be a rule to lose the whole collateral if there is no repayment for "N" days after the due date.
2)lender is taking the risk of not receiving the full repayment, then the lender has to request the collateral from the escroll and try to sell it. Or maybe the escrow shall try to
sell the collateral to BTC or whatever the loan currency is. The escrow then would probably compensate the lender and keep any proceeds if any.

If there is a free market, the lenders could bid on collaterals and % of collaterals to be pledged, in order to mitigate the risk involved with different digital assets.

Counterparty or similar token backed by stable, redeemable commodity. I made a goofy comment elsewhere about this, but a Tidecoin (literally backed by jugs of Tide laundry detergent) would probably be as close to ideal as you could get. Worst case scenario, you have to actually use the overpriced shit -- but its use as a laundry detergent does give it some... "near-objective" value.

That said, "non-productive" collateral is still a bad kludge to a practically unsolved problem which needs to be fixed properly. Cars make sense for collateral because people need them, and they usually need the exact car they bought on loan, and, for that reason, a loan officer probably isn't going to issue another car loan to the same person while he still has an outstanding car loan. Same with houses and home improvement/repair loans. -But a lendee doesn't really "need" litecoin or XRP or whatever, and there's a good chance the collateral will be worth significantly less than when collateral was negotiated. Normally, in a repo event, the collateral would be sold around FMV with the proceeds used to REDUCE the loan amount - but because collections are almost impossible with crypto-loans between people separated by hundreds or thousands of miles, the lender being made whole is still extremely unlikely. On the flip-side, a malicious lender may hold collateral hostage, demanding FMV be paid for the collateral to be returned, and it's unlikely the lendee would have viable recourse.

[UberNifty]

Counterparty or similar token backed by stable, redeemable commodity. I made a goofy comment elsewhere about this, but a Tidecoin (literally backed by jugs of Tide laundry detergent) would probably be as close to ideal as you could get. Worst case scenario, you have to actually use the overpriced shit -- but its use as a laundry detergent does give it some... "near-objective" value.

That said, "non-productive" collateral is still a bad kludge to a practically unsolved problem which needs to be fixed properly. Cars make sense for collateral because people need them, and they usually need the exact car they bought on loan, and, for that reason, a loan officer probably isn't going to issue another car loan to the same person while he still has an outstanding car loan. Same with houses and home improvement/repair loans. -But a lendee doesn't really "need" litecoin or XRP or whatever, and there's a good chance the collateral will be worth significantly less than when collateral was negotiated. Normally, in a repo event, the collateral would be sold around FMV with the proceeds used to REDUCE the loan amount - but because collections are almost impossible with crypto-loans between people separated by hundreds or thousands of miles, the lender being made whole is still extremely unlikely. On the flip-side, a malicious lender may hold collateral hostage, demanding FMV be paid for the collateral to be returned, and it's unlikely the lendee would have viable recourse.

Agreed, overall. However, Smart Contracts would at least bind the loan / collateral to the blockchaian it was issued to; whereby making it a legally-enforceable contract between the buyer and the seller (or two traders, in the case of a barter arrangement).

NXT does start to address this issue with the ability to issue a NXT-backed MS altcoin held in escrow via Smart Contract; based on the defined properties and terms (i.e. block height expiry, etc.) The SAE currently has a relatively primitive Smart Contract available, albeit the true power of Smart Contracts is rumoured to be released around v1.7 or 1.8 of the NXT wallet client.

[AnswerQuestion]

Agreed, overall. However, Smart Contracts would at least bind the loan / collateral to the blockchaian it was issued to; [n]whereby making it a legally-enforceable contract between the buyer and the seller[/b] (or two traders, in the case of a barter arrangement).

NXT does start to address this issue with the ability to issue a NXT-backed MS altcoin held in escrow via Smart Contract; based on the defined properties and terms (i.e. block height expiry, etc.) The SAE currently has a relatively primitive Smart Contract available, albeit the true power of Smart Contracts is rumoured to be released around v1.7 or 1.8 of the NXT wallet client.

No it does not. All a "smart" contract does is ensure that certain cryptographically verifiable conditions are met. If there are no such conditions then parties are not protected

[abstream]

tokens are fine but offering profit-share is illegal, it's like promising dividends of stocks and that shall be regulated, even with digital currency it is illegal up to my knowledge.

how about asking for different % of collateral depending on the assets in the poll?
how would you rate them?

Good point, considering that an asset could be used as either a promissory note of types (i.e. crowdfund profit-share) or a token representing a specific value (i.e. digital goods, physical goods, services, etc.)

[abstream]

Agreed, in addition, one would need cross-blockchain smart contract in order to handle collateral loan, isn't it?

Agreed, overall. However, Smart Contracts would at least bind the loan / collateral to the blockchaian it was issued to; [n]whereby making it a legally-enforceable contract between the buyer and the seller[/b] (or two traders, in the case of a barter arrangement).

NXT does start to address this issue with the ability to issue a NXT-backed MS altcoin held in escrow via Smart Contract; based on the defined properties and terms (i.e. block height expiry, etc.) The SAE currently has a relatively primitive Smart Contract available, albeit the true power of Smart Contracts is rumoured to be released around v1.7 or 1.8 of the NXT wallet client.

No it does not. All a "smart" contract does is ensure that certain cryptographically verifiable conditions are met. If there are no such conditions then parties are not protected

[UberNifty]

Agreed, in addition, one would need cross-blockchain smart contract in order to handle collateral loan, isn't it?

I strongly suspect that will be one of many fine SuperNET attributes, given the altcoins / blockchain technologies (i.e. MaidSafe) that it has partially / fully integrated (or is in process of).