ribs
Probably not James Marshall
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Post by ribs on Aug 22, 2014 8:46:45 GMT
For the non-geeks amongst us who may not know what bitcoin is, watch this video: www.weusecoins.com/en/So, I came accross this today: btcjam.com/Obviously kinda weird compared to what we're used to, maybe a little bit more risky than Ratesetter and the like. But that's how P2P money was seen when it first started out. Just wondered if anyone had any thoughts on this? |
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hendragon
Member of DD Central
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Post by hendragon on Aug 22, 2014 9:27:25 GMT
3 points come into mind
1 a double risk of the volatility of bitcoins as well as potential defaults.
2 This appears to be based in the US. Anyone got any knowledge of US debt/insolvency laws?
3 tax implications. Taxed in the US, UK, or both.
The site does look interesting though, even if I haven't got a clue what some of the loans are asking for.At first sight it seems to be some form of hybrid between cloud funding and P2B
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Post by wiseclerk on Aug 22, 2014 9:31:41 GMT
The underlying problem with p2p lending based on Bitcoins is, assuming the borrower does anything with the money (e.g. spend it or purchase an asset) , there are 3 scenarios i.m.o.:
1. If the value of Bitcoins goes up (say 100%):
The borrower will have a high probability of being unable or unwilling to repay. Assume he borrowed Bitcoins in the equivalent of 10,000 US$. Now he has to repay in the equivalent of 20,000 US$ (plus interest). This is not feasable. Defaults will likely cause losses for lenders in this scenario
2. If the value of Bitcoins goes down (say 50%)
In this scenario the borrower will likely be able to repay. He borrowed in the equivalent 10,000 US$ and now repays the equivalent of 5,000 US$ (plus interest).
The lender position in this loan is bad. He lost the ability to sell his bitcoins during the downward trend of the exchange rate
3. Assuming the Bitcoin exchange rate is stable then it might work somewhat similar to other high risk p2p lending marketplaces.
What are the arguments that the lenders should use a p2p lending marketplace based on bitcoins, when scenarios 1 and 2 are much more likely than scenario 3 (see the volatility of bitcoin value in past years)? I can't see the reasoning for the lender side.
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hendragon
Member of DD Central
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Post by hendragon on Aug 22, 2014 11:01:52 GMT
I rather think that say it a lot better than I did
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ribs
Probably not James Marshall
Posts: 148
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Post by ribs on Aug 23, 2014 20:22:40 GMT
Some very valid points.
Whilst bitcoin has stabilized recently, it's not been stable for long (and so isn't really stable at all), and whilst I love the technology and ideology behind it, I think it's a little too risky for my taste.
A competing technology, litecoin, has recently had a massive drop in value. So some people have lost thousands, ouch.
Thanks for the input, these are points I hadn't considered.
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Post by batchoy on Aug 25, 2014 6:22:07 GMT
Another risk is that bitcoin and bitcoin related trading becomes the subject of legislation and trading is declared illegal in either or both the lender's or the borrower's country.
Sent from my GT-N7105 using proboards
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Post by oldatheist on Aug 25, 2014 8:50:57 GMT
The underlying problem with p2p lending based on Bitcoins is, assuming the borrower does anything with the money (e.g. spend it or purchase an asset) , there are 3 scenarios i.m.o.: 1. If the value of Bitcoins goes up (say 100%): The borrower will have a high probability of being unable or unwilling to repay. Assume he borrowed Bitcoins in the equivalent of 10,000 US$. Now he has to repay in the equivalent of 20,000 US$ (plus interest). This is not feasable. Defaults will likely cause losses for lenders in this scenario 2. If the value of Bitcoins goes down (say 50%) In this scenario the borrower will likely be able to repay. He borrowed in the equivalent 10,000 US$ and now repays the equivalent of 5,000 US$ (plus interest). The lender position in this loan is bad. He lost the ability to sell his bitcoins during the downward trend of the exchange rate 3. Assuming the Bitcoin exchange rate is stable then it might work somewhat similar to other high risk p2p lending marketplaces. What are the arguments that the lenders should use a p2p lending marketplace based on bitcoins, when scenarios 1 and 2 are much more likely than scenario 3 (see the volatility of bitcoin value in past years)? I can't see the reasoning for the lender side. There appears to be 2 loan types, bitcoin and linked. With the former the loan and repayments are bitcoin based exposing both lender and borrower to the volatility of bitcoins. The later leaves the outstanding balance at the exchange rate the loan was taken out which is recommended for anyone who is not a hardcore bitcoin user.
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Post by Deleted on Aug 26, 2014 20:56:19 GMT
Bitcoin (or rather cryptocurrencies in general) is the ultimate fiat currency.
Taking Bitcoin as an example, the claim is that it's just like gold: the currency is backed by a scarce thing of value, namely the payment system itself. There is a finite number of coins that can be 'mined' into existence.
This is all true. However, people are making a big mistake by comparing that situation to the situation of the old national/local currencies backed by the Gold Standard. The pound was worth X number of ounces of gold and the dollar was worth Y ounces of gold. They could easily be converted one to another because both were backed by the Gold Standard.
Right, but that was ONE supply of gold.
When dealing with Bitcoin and Litecoin (and Dogecoin and all the others), each one has its own blockchain with its own finite number of possible units.
Do you see? They're not all backed by "a" scarce good: they're all backed by their own entire global supply of such a scarce good, created literally by fiat and without limit.
It gets worse: not only could we end up seeing trade measured as follows: 3BTC.2LC.1DG (think 3 gold coins, 2 silver and 1 copper coin)
But each currency could avail itself of additional blockchains by fiat!!!! It's open source software so there is literally nothing preventing someone from building a new 'coin' with three blockchains (or an infinitely expandible number) and promoting it hard until it becomes the dominant one: heck governments could even launch such a 'coin' in cahoots with their favourite crony corporations.
No, it's not sound money: it's not backed by a scarce good. If you're a speculator gambling on human behaviour then there is still money to be made, especially in Bitcoin, but as a philosophical advance, the technology may prove incredibly useful when applied to other things but as money in and of itself it's too arbitrary, too insubstantial and too plentiful. It's infinitely inflationary: it's not what ONE blockchain is like that counts: it's what the total ecology of all blockchains is like, and there it's infinitely inflationary.
Sorry, I know it's not what people want to hear.
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Post by GSV3MIaC on Aug 29, 2014 7:41:00 GMT
But some of those problems apply to money too _ any country can mint its own (think Guernsey!). And even 'gold standard' well a finite supply (on earth at least) but what about a parallel Uranium standard Or Water standard, or pick your own commodity standard?
Basically it comes down to what the mass of humanity are willing to believe is valuable.
Bitcoins are inflationary though, with more/faster computers able to churn then out ever quicker. I wouldn't be rushing to adopt them.
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bigfoot12
Member of DD Central
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Post by bigfoot12 on Aug 29, 2014 12:30:11 GMT
Bitcoins are inflationary though, with more/faster computers able to churn then out ever quicker. I wouldn't be rushing to adopt them. I won't be rushing to adopt it either, but I don't think it suffers from that problem. There is some feature which takes account of the total hashing power available at each block check so more/faster computers/etc should not be a problem. There are other problems.
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Post by batchoy on Aug 29, 2014 13:30:41 GMT
No, it's not sound money: it's not backed by a scarce good. Which goes for every national currency on earth since no country uses the gold standard any more.
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Post by phoenix on Aug 29, 2014 17:49:53 GMT
Bitcoins are inflationary though, with more/faster computers able to churn then out ever quicker. I wouldn't be rushing to adopt them. I won't be rushing to adopt it either, but I don't think it suffers from that problem. There is some feature which takes account of the total hashing power available at each block check so more/faster computers/etc should not be a problem. There are other problems. is right, Bitcoins are churned out not ever quicker but ever slower, due to the ever increasing difficulty of the algorithm. Nowadays only the most efficient computers can produce them at a worthwhile margin over the electricity cost.
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james
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Post by james on Aug 29, 2014 20:05:56 GMT
That's not a place I'd be keen to use because I think that the operators may end up going to prison, potentially some lenders also, though I think that's quite unlikely:
"Can I get a loan if I am in (INSERT MY COUNTRY HERE) ?
The
answer is a resounding YES! By using bitcoin, the community can fund
people from literally any country, including Antarctica!"
Since it's a crime to circumvent sanctions either they aren't telling the truth and I don't want to deal with them, are in a place without adequate laws and I don't want to deal with them or they will go to prison after having all site resources seized by the authorities and I don't want to deal with them.
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Post by davee39 on Aug 30, 2014 0:36:45 GMT
Why are sane people even discussing this? Why are governments wasting time discussing regulating this? Has no one heard (learned anything from) the bubbles of the past? The Bitcoin world exhibits criminality similar to that seen in historic manias as in South Sea bubble en.wikipedia.org/wiki/South_Sea_Company |
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Post by elljay on Aug 30, 2014 8:20:56 GMT
You are George Santayana and I claim my fiver 
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