5 ms·

No. Here is an example: I have 1 BTC, worth $27,000 today. I lend that 1 BTC. I'm getting 1% on it. This is better than the pet rock that it otherwise is. I

No. Here is an example: I have 1 BTC, worth $27,000 today. I lend that 1 BTC. I'm getting 1% on it. This is better than the pet rock that it otherwise is. I can then borrow safely 50% of the value of that BTC, so $13,500 worth of goods. Now, I've magically given myself an additional $13,500, that I didn't have before. The price of BTC would have to drop 50% before I'd be liquidated (some of my BTC would be automatically sold to cove the loan). Certainly, BTC can drop 50% in value... but if you are paying attention, you should have more than enough time to pay back that loan or add more BTC. In practice, BTC drops that much slowly over time (like a month or two), not in one go. It also works the other way, if BTC gains in value, you have less to worry about. Let's say I pick to borrow ETH ($1800). I can now borrow 7.5 ETH at 3%. I can then lend that 7.5 ETH at 5%. I can then take those 5% earnings and sell those or even restake them. Money legos. None of this requires permission or credit reports, just transactions on a blockchain. If you use a chain that has far lower fees (like Polygon, Arbitrium, Avalanche), then the fees are a rounding error in the cost of operations.

lottin 3y ago
I don't think this is correct. Let's say you have one bitcoin. Your funds available for spending are $27,000 (we're assuming bitcoin has perfect liquidity, for the sake of the argument). If you borrow $13,500 against your bitcoin, your funds available for spending are now $13,500. So, less than what you started with. This isn't a loan. A loan increases your funds available for spending, not decreases them.
- latchkey 3y ago
  If you have $13,500 that you didn't have before, isn't that an increase? I do see the distinction you're trying to make though. That's why I qualified it with the word "collaterlized". Let me also correct you: "Let's say you have one bitcoin. Your funds available for spending are $27,000". No, we're not talking about selling the bitcoin. There is no 'spending' here. What you're doing is borrowing against the value of the bitcoin that you're holding. You don't need to sell it, you're using it as collateral. The system can liquidate you.
  - lottin 3y ago
    You started with more than $13,500. You started with $27,000. Then you used those $27,000 as collateral to borrow $13,500. Once you pay back the $13,500, you get your $27,000 back. So, you never have more than $27,000 at your disposal, which is what you started with.
    - latchkey 3y ago
      No, I started with 1 BTC.
      - lottin 3y ago
        Are you sure? Did it fall from the sky? No, it didn't. You saved up $27,000 and then you bought the bitcoin. So first you had to have $27,000, otherwise none of the subsequent steps would have been possible.
        latchkey 3y ago
        I think I spent $200 in 2013 on it. Now that pet rock is worth more and I'd like to capitalize on it, without spending it. Just like people invest in a house and take equity out on it. Or they buy gold because they think it'll go up in value over time. Regardless, you're being pedantic at this point. Back to the original discussion, there is utility to crypto now, and I've proven a way.
        lottin 3y ago
        Yeah, I understand... these type of loans exist in finance, they serve a very specific purpose. The point is that, unlike consumer loans, such loans require that the borrower has savings before they can take the loan. For example, most people who take a mortgage do so because they don't want to save money for 30 years before they can buy a house. They want to buy a house now, and save later. A mortgage loan allows them to do precisely that. These other loans don't, and so they're less useful. They aren't completely useless. It's just that in most circumstances they aren't useful.

lottin 3y ago

I don't think this is correct. Let's say you have one bitcoin. Your funds available for spending are $27,000 (we're assuming bitcoin has perfect liquidity, for the sake of the argument). If you borrow $13,500 against your bitcoin, your funds available for spending are now $13,500. So, less than what you started with. This isn't a loan. A loan increases your funds available for spending, not decreases them.

latchkey 3y ago
If you have $13,500 that you didn't have before, isn't that an increase? I do see the distinction you're trying to make though. That's why I qualified it with the word "collaterlized". Let me also correct you: "Let's say you have one bitcoin. Your funds available for spending are $27,000". No, we're not talking about selling the bitcoin. There is no 'spending' here. What you're doing is borrowing against the value of the bitcoin that you're holding. You don't need to sell it, you're using it as collateral. The system can liquidate you.
- lottin 3y ago
  You started with more than $13,500. You started with $27,000. Then you used those $27,000 as collateral to borrow $13,500. Once you pay back the $13,500, you get your $27,000 back. So, you never have more than $27,000 at your disposal, which is what you started with.
  - latchkey 3y ago
    No, I started with 1 BTC.
    - lottin 3y ago
      Are you sure? Did it fall from the sky? No, it didn't. You saved up $27,000 and then you bought the bitcoin. So first you had to have $27,000, otherwise none of the subsequent steps would have been possible.
      - latchkey 3y ago
        I think I spent $200 in 2013 on it. Now that pet rock is worth more and I'd like to capitalize on it, without spending it. Just like people invest in a house and take equity out on it. Or they buy gold because they think it'll go up in value over time. Regardless, you're being pedantic at this point. Back to the original discussion, there is utility to crypto now, and I've proven a way.
        lottin 3y ago
        Yeah, I understand... these type of loans exist in finance, they serve a very specific purpose. The point is that, unlike consumer loans, such loans require that the borrower has savings before they can take the loan. For example, most people who take a mortgage do so because they don't want to save money for 30 years before they can buy a house. They want to buy a house now, and save later. A mortgage loan allows them to do precisely that. These other loans don't, and so they're less useful. They aren't completely useless. It's just that in most circumstances they aren't useful.