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Bitcoin is often referred-to as pristine collateral. It's highly liquid, and its presence can be verified easily on the public blockchain without resorting to

Bitcoin is often referred-to as pristine collateral. It's highly liquid, and its presence can be verified easily on the public blockchain without resorting to experts, such as auditors. I don't think "depositing into a smart contract" is any more necessary than someone moving out of their house when that's used as collateral. Conceivably one could simply pledge a set of UTXOs as collateral, and the moment any of them move, which is easily monitored, THAT potentially triggers action on the loan.

ceejayoz 6y ago
> It's highly liquid, and its presence can be verified easily on the public blockchain without resorting to experts, such as auditors. This is a simplistic idea of what auditors do. Auditors do more than verify "they have $50M in their bank account". They're also there to verify more complicated things like "they haven't promised that $50M to someone else already". This was a major issue with Tether, for example. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... > In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’ > On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
thebean11 6y ago
> Conceivably one could simply pledge a set of UTXOs as collateral, and the moment any of them move, which is easily monitored, THAT potentially triggers action on the loan. That seems like a shoddier implementation of what the smart contract would do
homakov 6y ago
> set of UTXOs as collateral, and the moment any of them move, which is easily monitored not possible. Once collateral is moved, it's moved. You can't even call it collateral if the other person can easily take it away in front of your eyes. It's only collateral if it's locked up and has a dispute period (see: payment channels collateral)

ceejayoz 6y ago

> It's highly liquid, and its presence can be verified easily on the public blockchain without resorting to experts, such as auditors. This is a simplistic idea of what auditors do. Auditors do more than verify "they have $50M in their bank account". They're also there to verify more complicated things like "they haven't promised that $50M to someone else already". This was a major issue with Tether, for example. https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal https://ag.ny.gov/press-release/2021/attorney-general-james-... > In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’ > On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.

thebean11 6y ago

> Conceivably one could simply pledge a set of UTXOs as collateral, and the moment any of them move, which is easily monitored, THAT potentially triggers action on the loan. That seems like a shoddier implementation of what the smart contract would do

homakov 6y ago

> set of UTXOs as collateral, and the moment any of them move, which is easily monitored not possible. Once collateral is moved, it's moved. You can't even call it collateral if the other person can easily take it away in front of your eyes. It's only collateral if it's locked up and has a dispute period (see: payment channels collateral)