What's the point of borrowing money by using money as a collateral to spend money?
The point of borrowing is to access capital you do not have. A lender is someone's who believes in your capacity to use this new capital to create more value over time.
Fiat borrowing by using Bitcoin as collateral is... Fiat as fuck. It has a place right now not because it is a better way to lend and borrow but because we live in a fiat world.
100% it only makes sense to me because we live in a transitionary period. Otherwise a Bitcoin denominated loan would require some other asset that you already own but don't want to sell (like a house you live in or rent to others). You'd just be paying that back plus interest in Bitcoin. The beauty in that is that one would need to create more value than they take. The fiat system allows all these unnatural games to be played where people can get richer by doing nothing or even less than nothing in some cases.
At least that's how I'm seeing things. I'm nowhere close to an expert on debt instruments or the fiat system. I know enough to know it's evil and robs me of my life force.
Unfortunately fiat rails need fiat rails.
I asked Jack to implement a debit system instead but I'm assuming the credit card scheme is to liquidate people honestly since the APRs will probably be like 15% to 40% or something since this last dip almost caused a bank run on the exchanges.
Paying fiat to acquire free bitcoin is an obvious deal for Jack.
People of course will be satisfied with a credit card too since they're probably all fiat maxis anyways maxed out on credit cards, and want muh protections plus more liquidity against the one asset they own.
I have mixed feelings, makes buy, borrow, die easier for poor people since most institutions require $30,000 to $100,000+ in assets to live off your stocks or home equity, etc.
It's good when prices keep going up but will probably ugly quick if things crash.
Was he talking about credit cards? I just assumed it was the usual Bitcoin collaterized loan but maybe it's kinda the same thing.
To me it's just a way for people to go leverage long on Bitcoin without saying it out loud. It's sexier.
And, look, I believe in Bitcoin too and maybe going long is the right thing to do. But there's a *maybe*.
Maybe some people will get rekt too.
what are you talking about
I think you are confused sir
Not true. For example, i once took a 401k loan out to buy cattle which fell through so rather than paying it right back into my 401k to close the loan, i bought bitcoin.
I didnt have access to this money, but via the loan i was able to use it for something more productive without incuring penalties and the interest is paid to myself.
Yes, but in an healthy market your 401k would be bitcoin. It would be stupid to use your 1 Bitcoin as collateral so that you can get half a coin and buy cattle with it. Instead you would simply spend your money for the cattle.
Using money as collateral for more money is not something that happens in a healthy market. Spending without spending. It's basically an attempt at double spending by leveraging bad money in circulation.
Your number number might have gone up higher by taking a loan with money to buy money but this isn't what I call productivity.
You answered your own question.. because we still live in a fiat world
Yes but exactly. Jack is framing this as a better way to do lending and borrowing. It's not a better way. It's just a new way to short fiat.
This is no different than getting a line of credit against your home or business. If you don't repay you fork over the asset.
That being said if I was to take a loan against my bitcoin, the bank should be paying ME interest to get my bitcoin.
So unless these come at a negative rate (which it won't) they are a scam.
Except a home or a business is not money. It's not liquid.
There is no good reason to use money as collateral for money UNLESS what you're really trying to do is short fiat on leverage.
It's about the equivalent of taking your bitcoin to a pawn shop.
Usually you swap debt for an asset. A bank is always happy to swap an asset for debt.
Imagine getting your money to a pawn shop instead of simply spending it. I don't understand why someone would want to pawn their money.
UNLESS this person is looking for a way to leverage short fiat.
My interpretation of ‘better lending and borrowing’ is there isn’t such a social component which involves your personal data and who you are. With BTC backed, because what’s backing your loan is a scarce, digital asset that I can send to you. It speaks for itself. You send the BTC, we trust you, you get your credit. Where in the current system, you can’t send your house, so now we have to look at all this other personal data to determine if we trust you enough to give you your money
Why not simply spend the BTC?
Because why would I spend a scarce, appreciating asset like Bitcoin, when I can borrow against it for fake money, and let Bitcoins appreciation ‘pay’ down my loan over time
Same reason why someone wouldn’t sell their home if they need liquidity. Why would I sell my home that’s gaining value, if I can just borrow against it and get some liquidity to purchase what I need
I see where you’re coming from as a bitcoin-only business like yourself. However the world is still fiat. So until everyone accepts bitcoin, borrowing fiat against it for liquidity, is a much smarter move financially than to part ways with it
The difference is that the home is not liquid. It's not money. This is why you don't spend it and instead offer it as collateral. If I already have money in pocket, there is no reason to use it to get a loan of money.
But you say you don't want to spend it because it appreciate in value. And THIS is why this financial product actually exist for. It's a way to short fiat like I said before. The only reason to use good money to borrow bad money is to leverage the NGU of the good money.
Okay so you get it. Then what’s your issue with it?
It's marketed as a revolution in finance when it is actually just an other tool to go leverage. I don't believe it helps restoring good market signals because this tool is not Bitcoin but rather a symptom of fiat.
My OP was saying this: "This is not a revolution in finance it's just a way to short fiat".
What I mean is that it's not much different than trading. You take such loan because you bet on NGU of Bitcoin.
The reason someone takes a real loan is because he bet on himself.
I consider the first one to be a form of shitcoining.
My position on this have nothing to about me running a business. I don't believe the people loaning their Bitcoin have and ever will have a significant impact on me. It might actually end up do publicity for Bitcoin and be good for me in the end.
I think you answered your own question? of course in a hyperbitcoinized world there is less of a need
I think in an hyperbitcoinized world there would be *zero* need for it. The only use it has right now is to leverage long a Bitcoin trade. This is why people want this financial tool. It's to spend without feeling like they are missing out on NGU.
I disagree with the last part.
This isn't what credit "should" have been. What credit should have been is not something that is bound to disappear.
Maybe I'm missing something, but i don't see why someone, in an hyperbitcoinized world, would put 1 Bitcoin as collateral to receive 0.5 Bitcoin.
I think you’re viewing credit through a fiat lens and assuming it’s for people without money?
In a Bitcoin world, credit isn’t about accessing capital you don’t have. It’s about unlocking liquidity from capital you do have, without selling it. Why would someone borrow against their bitcoin? To access capital without giving up their bitcoin. Unless I’m misunderstanding your point?
But if Bitcoin is money, why would I not want to spend it? Bitcoin is the liquid capital. You don't think Bitcoin would be the most liquid asset in a Bitcoin world? I think you understand my point but I don't understand why you think someone would seek something more liquid than Bitcoin.
I think you are the one seeing viewing credit through a fiat lense. Credit IS meant to access capital you don't have and this will always imply risks and trust.
I don't see the point of this service in a world where Bitcoin is the most liquid asset on Earth and has absolutely no other utility than to be spent because it's money.
