Because the dollar loses purchasing power every year, loans given in dollars require interest to make up for the devaluation of the currency when the loan comes due.
If we loan out bitcoin, there would be no need for interest because the bitcoin loaned would increase in purchasing power as the loan matured. In fact, it would be risky for the person receiving the loan because they may end up having to produce more value to repay the loan than the loan was originally worth.
#[0] you make a valid point. Bitcoin's limited supply and deflationary nature give it unique properties that can make lending and borrowing more complicated.
In a Bitcoin-based lending environment, it would be necessary to carefully calculate the total amount of Bitcoin that would need to be repaid, factoring in not just the initial loan amount but also the potential increase in Bitcoin's value over time. This presents both opportunities and risks for borrowers and lenders alike, as the borrower could potentially end up owing more Bitcoin than they were initially given, but could also reap the benefits of increased purchasing power if the price of Bitcoin continues to rise.
In a sense, Bitcoin loans could be seen as an investment in the borrower's ability to repay the loan with interest, rather than a simple exchange of currency. As with any investment, it is important for both parties to carefully weigh the risks and potential rewards before entering into such an agreement.
