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A number years ago I was unemployed for an extended period of time while working on open source projects, and I ran out of money, so I took out a loan to cover

by Ruphin 4y ago

A number years ago I was unemployed for an extended period of time while working on open source projects, and I ran out of money, so I took out a loan to cover my expenses. I lived off this money for several months until I found a suitable job, and after some time I repaid this loan. This type of personal credit financing would cost a fortune in regular finance (try going to a bank and taking out a loan because you're broke and unemployed), but because I had digital assets to pawn I had access to a line of credit at a reasonable rate. Without this option, I would have to either finance myself at a criminal rate, or accept a job I wasn't ready for. I feel I'm much better off personally from having this option available. Outside the personal anecdote, I don't understand how it's difficult to see the utility in having digital goods of value. It allows all sorts of use cases, and using them as collateral for loans is just one. I have a harder time accepting that goods of value simply cannot be digital. If I look at the past 30 years of history, literally everything is turning digital; our consumption of entertainment, our work, our communication, social connections. What is the argument for having all things of value be either be a physical thing, or something controlled by some central authority? It seems like a "because that's how things have always been" sort of position.

wpietri 4y ago
Wait, are you comparing a personal loan backed by an asset versus an unsecured personal loan from a bank? That seems pretty apples and oranges to me. I think the right comparison would be a broker letting you borrow money against stock, something they do all the time.
- darkteflon 4y ago
  Cheaply, too - some brokers are offering in the mid 1% for USD. I don’t know what defi collateral requirements and rates are like at the moment, but I suspect much more onerous and higher.
throwaway82652 4y ago
I don't understand what you're trying to say or what any of that has to do with cryptocurrency. "Digital goods" is a very broad category beyond cryptocurrency. Also I agree with the other comment here, that's not an unsecured loan. You used collateral to get it.
Lazare 4y ago
That makes no sense. > try going to a bank and taking out a loan because you're broke and unemployed), but because I had digital assets to pawn "Broke" means you have no assets, thus you have nothing to pawn, therefore the loan would be unsecured. You COULD NOT have obtained such a loan via defi, and while you could have obtained one in the traditional finance system (which is strictly an advantage over defi...), it would be have been, yes, very expensive. But you weren't broke! You had assets! The traditional finance system loves to lend money secured by liquid assets, does so all the time, and at lower interest rates! > I don't understand how it's difficult to see the utility in having digital goods of value ...digital goods of value. Otherwise known as a number on a ledger somewhere, otherwise known as a bank account? Nothing in your story in any way depended on crypto/defi; every part of it is a normal, traditional part of the financial system. All crypto added here was higher costs and a worse UI.
- Ruphin 4y ago
  Obviously I was not "broke" in the sense that I had no possessions of any value. With that definition nobody is ever broke unless they are naked with nothing left to sell other than their labor. I had plenty of things of value, like a trading card collection, a personal computer, a phone. But no bank would ever accept any of these things as a collateral for a loan. I could have sold things I owned, but I didn't want to lose any of the things I had collected over the years. Having access to digital things of value made it possible to take out a loan without having to sell anything. You say crypto added higher costs and worse UI, but do you have any evidence for this? I was able to get a few months income on my bank account in less than an hour of work, at a rate that is more favorable than any mortgage rate currently offered by banks (with mortgage rates almost at an all-time low). Digital value does not have to be limited to bank accounts, just like physical value does not have to be limited to cash. If I have other physical things of value (like collectible trading cards) I can trade these with other people directly or use them as collateral for cash loans with any third party. Why are digital things of value limited to bank accounts? If other digital things of value exist, and we have standardised interfaces for digital valuables, that enables incredible amounts of flexibility in financial transactions, such as using things I have as collateral for loans, without requirements for appraisal, risk assessment, fraud protections, etc. If I had traditional financial assets I could have used those and use the traditional financial system to get credit, but I didn't have any of those. I had other things of value, and because they are digital, with standard interfaces, I was able to get credit, which I otherwise wouldn't be able to get. I'm only offering some kind of anecdotal evidence here that some people do in fact get some utility from these things. To me personally, it was very convenient to have this option at the time. If I get into a similar situation in the future, I would use it again.

by Ruphin 4y ago

wpietri 4y ago

Wait, are you comparing a personal loan backed by an asset versus an unsecured personal loan from a bank? That seems pretty apples and oranges to me. I think the right comparison would be a broker letting you borrow money against stock, something they do all the time.

darkteflon 4y ago
Cheaply, too - some brokers are offering in the mid 1% for USD. I don’t know what defi collateral requirements and rates are like at the moment, but I suspect much more onerous and higher.

throwaway82652 4y ago

I don't understand what you're trying to say or what any of that has to do with cryptocurrency. "Digital goods" is a very broad category beyond cryptocurrency. Also I agree with the other comment here, that's not an unsecured loan. You used collateral to get it.

Lazare 4y ago

That makes no sense. > try going to a bank and taking out a loan because you're broke and unemployed), but because I had digital assets to pawn "Broke" means you have no assets, thus you have nothing to pawn, therefore the loan would be unsecured. You COULD NOT have obtained such a loan via defi, and while you could have obtained one in the traditional finance system (which is strictly an advantage over defi...), it would be have been, yes, very expensive. But you weren't broke! You had assets! The traditional finance system loves to lend money secured by liquid assets, does so all the time, and at lower interest rates! > I don't understand how it's difficult to see the utility in having digital goods of value ...digital goods of value. Otherwise known as a number on a ledger somewhere, otherwise known as a bank account? Nothing in your story in any way depended on crypto/defi; every part of it is a normal, traditional part of the financial system. All crypto added here was higher costs and a worse UI.

Ruphin 4y ago
Obviously I was not "broke" in the sense that I had no possessions of any value. With that definition nobody is ever broke unless they are naked with nothing left to sell other than their labor. I had plenty of things of value, like a trading card collection, a personal computer, a phone. But no bank would ever accept any of these things as a collateral for a loan. I could have sold things I owned, but I didn't want to lose any of the things I had collected over the years. Having access to digital things of value made it possible to take out a loan without having to sell anything. You say crypto added higher costs and worse UI, but do you have any evidence for this? I was able to get a few months income on my bank account in less than an hour of work, at a rate that is more favorable than any mortgage rate currently offered by banks (with mortgage rates almost at an all-time low). Digital value does not have to be limited to bank accounts, just like physical value does not have to be limited to cash. If I have other physical things of value (like collectible trading cards) I can trade these with other people directly or use them as collateral for cash loans with any third party. Why are digital things of value limited to bank accounts? If other digital things of value exist, and we have standardised interfaces for digital valuables, that enables incredible amounts of flexibility in financial transactions, such as using things I have as collateral for loans, without requirements for appraisal, risk assessment, fraud protections, etc. If I had traditional financial assets I could have used those and use the traditional financial system to get credit, but I didn't have any of those. I had other things of value, and because they are digital, with standard interfaces, I was able to get credit, which I otherwise wouldn't be able to get. I'm only offering some kind of anecdotal evidence here that some people do in fact get some utility from these things. To me personally, it was very convenient to have this option at the time. If I get into a similar situation in the future, I would use it again.