I have started to think about it. You just have to consider things like what happens when the lenders want their coins back and users have valid short orders ou

I have started to think about it. You just have to consider things like what happens when the lenders want their coins back and users have valid short orders out. Think about the incentive here. The lender is giving his coins to people who he knows are betting the price will drop. This means that when the price does start to drop the lender could want to sell the coins to prevent further loss. However, the other user (the one who got the lent coins) may not be ready to return then. There was a service that allowed shorting (Bitcoinica). But all that seemed to come to a very abrupt and painful end. While it was running it did serve a valuable purpose.