Credit is not money, it's debt. They owe you the money back, even if they fail. If you charge interest, they owe you the money back and then some, and that against a rapidly rising currency.
Discussion
If you want to give someone money, just give it to them. If you want returns on the money you give them, ask for the returns in a contract when you give the money. If you are wary of them simply taking the money and running, split your payments into tranches that track progress.
You can ask for equity and share in the general profits, a portion of the fees produced for X years, exclusive use of particular services, regular dinner parties and online meetings with the project team, attending the project lounge at conferences, etc. or even some combination.
There are lots of ways you can help finance their endeavor and share in their success that don't require debt. If none of these things sound appealing to you, then their project probably sounds unappealing to you, and then you should probably just walk away.
Don't give money to people who are attempting to build something you don't want.
That isn't me being snide, either, it's just the nature of Bitcoin because you don't NEED to invest any money at all, as Bitcoin already gives you nosebleed-high returns in increased purchasing power.
Bitcoin makes investing about building real things that people desire and value, not about "making money with money".
What do you think will happen when #Bitcoin already holds most of the value in the world? That would mean that the volatility becomes almost non-existent and just hodling offers no more nosebleed-high returns 🤔
This is so obviously the point.
You're missing the fact that people don't always succeed at the thing they attempt to do (with the big lump of money you gave them) and that even when they do, it doesn't work out for the creditor:
Say I'd enjoy it if there was a cathedral in town. Assume it's worth around 10 BTC to me wrt how much it will enrich my life. It costs 100 BTC to build. I have the money and there's a handy mason in town who has been dying to build himself a cathedral but doesn't have the initial capital.
Great, as long as he pays me back 90BTC, I can loan him the 100, let him build the thing and I'll still net out. I've "lost" 10 BTC but that's what the cathedral is worth to me, so it works out (if I were to lose any more than that, why would I even get involved? I don't do things that only put me in a worse situation, fiscally and emotionally/psychically). And he is happy because he's getting 10 BTC for his effort and a cathedral!
One problem: I give him 100BTC and he spends 5 months on the project and fails miserably. There's just a big pile of poorly-cut blocks in town that now we have to pay someone to remove. I'm out 100 BTC, don't have a cathedral, and the builder just says "aw sorry, didn't work out. Thanks anyway!".
Elsewhere you said "if you're worried about the debtor taking the money / not delivering, give the money in tranches and check progress" - that has numerous problems:
- I now have a part-time job of cathedral building site inspector. If I'm not an expert on the process I'm either going to have to trust the builder completely (if that was the case, why am I checking on him?) or hire an expert to consult. Now I'm out even more money that better be able to justify itself. Even without the expert consultant I'm spending _my_ time on this. Opportunity cost.
- What about a project that is nearly all up-front costs? Say 90 BTC is in buying the stone before starting work. The smallest feasible initial tranche is significant and risky enough that I won't do it.
Even if you assume that _all_ these problems can somehow go away, and everything succeeds... Great! Now the debtor is supposed to pay me back 90 BTC since he succeeded and we gave him some weird risk-free, zero-intrrest "loan" where he actually makes 10 BTC out of the deal and at the end of it he owns a cathedral...
We already know that he doesn't have 90 BTC lying around, which is why he needed an injection from us. And we have to assume that he expects to make revenue on cathedral ticket sales, or else he's scamming us with no intention to pay back the loan. Every year we're not made whole is basically an additional price to pay to personally enjoy the cathedral in town. I said it would be worth about 10 BTC to me, which was basically a statement about opportunity cost. If I had 10 BTC to spend to get lifetime access to a dozen different venues, I'd choose the cathedral out of the dozen.
But now for who-knows-how-many years I'm actually spending 90 additional BTC for access to the cathedral. I'm closing off nine more 10 BTC "lifetime access" activities until the loan is paid back.
That's _not_ what the cathedral was worth to me. It was worth 10. So why would I choose this, given that it's _not_ an outcome I desire, even when everything goes completely according to plan?
Nobody would invest 10 BTC and not share equity. He doesn't own the cathedral, he owns some shares in the cathedral and so does everyone else who invested.
Large, complex, long-term projects will invariably require equity-investment.
You don't give him 100 BTC, he finds 10 people and they each give him 10 BTC, and they all enjoy the common profits and losses and they all get to use the cathedral.
If it doesn't work out, you are out 10 BTC and you have no cathedral. It happens. Shareholders get wiped out all the time. Maybe he has a heart attack and dies and construction is canceled, so they sell the building materials and you get 2 BTC back.
If it does, then you are still out the 10 BTC, but you earn income in the form of fees for classical concerts, tours, weddings, access to the great views from the church tower, or whatnot, and you have a cathedral.
If you are afraid of losing 10 BTC, just keep your BTC and go to someplace else's cathedral.
This is already very common, by the way. Most churches and renovations of churches are paid for by the parishioners (who own the church) just giving money and hoping that they actually get a church building out of it and that the builder doesn't just grab the money and run. That is why builders put a lot of effort into establishing a reputation.
Look at the Frauenkirche, in Dresden. Over a million people donated money and it costed almost 200 million euros. Which would be almost 3340 BTC. And they got nothing back but a church. And that made them happy. Now they have a church and they go to the church and people come from all over the world to admire their beautiful church. And the businesses in the market around the church sell church models and church postcards and people sit in the cafes and sip overpriced coffee to admire their beautiful church.
if someone was proposing a credible church building project of the cathederal type i'd probably be interested in contributing to it also, and you betcha i would be glad to have a place to go be in the quiet and acoustic beauty of a proper cathederal and pray, light candles, and maybe even sometimes listen to a sermon
but er... yeah, ok, the denominations thing kinda puts that out of my likely interesting options
anyhow, meh! it was just about crowdsourced temple production, always the problem for me would be the corrupted orthodoxy
Relying on altruism and voluntary donations is not a reliable method to fund a complex society - except in the case of churches and other domains where people's supernatural value systems distort their economic thinking. The expected spiritual payback exceeds the investment.
Good discussion (on both sides) yet I agree with Laeserin on this one...
Investment doesn't have to be via interest...it's what we do, but it doesn't have to be that way (and there would be significant benefits to abolishing usury).
And usury (but extension) becomes taxation, and is leveraged by governments.
Complicated subject though (certainly)....
Well _I_ don't have a cathedral, I have a 10% share and a burden of governance.
And me and my 9 wealthy friends are apparently turning into something of a social elite. We have a lot of money, we determine what gets built, we have the positioning to determine the use of the cathedral. We're incentivized to be a sort of monolithic cabal (to avoid constantly fighting and voting against each other at board meetings).
So rather than a world in which competent entrepreneurs can get capital investments at the cost of a voluntarily-agreed interest payment and retain full ownership of their endeavor, instigating a flourishing of varied sole-proprietor businesses... You'd prefer the above? All just to avoid a debtor consenting to an interest payment?
They would need to charge at least 75% per annum in interest on the debt, to even have a chance of breaking even.
Which means you loan them 100 BTC and they pay you back 1641 BTC after 5 years, and you have no profits.
Try to find someone dumb enough to agree to take that loan.
You're like wow, these stupid religious people don't understand how great interest-bearing credit is. Why should they change that under Bitcoinization, just cuz their faith makes them totally regarded?
No, you are not willing to do the math. Bitcoin determines what form of financing makes sense and it is the anti-credit money. If you want to offer credit, then you will have to do it in a softer money. But why would the workers and suppliers accept your soft money, when some other group is like, Yo, we'll pay you 100 Bitcoin!
Yes, the people who offer Bitcoin will always have the advantage. Cry harder.
essentially, a hard credit system depends on people having savings, and keeping savings depends on the money not being inflationary
so, if you have a system with a non-inflationary money, you can't toy with credit unless you have high confidence and a big reserve to back your ass up when your bet goes south
we'd get rid of the entire VC fluff and endless makework and people wasting their time on highly speculative bets if we had hard money, and that would result in ... more results, instead of people getting paid to do something nobody is ever going to pay for
this is amply elaborated in Mises' book Human Action by the way
savings are an essential part of a healthy economy and with fiat money there is none, and so it's brittle and unstable, and ultimately unproductive
I'm well aware.
How an individual chooses to use their hard-money savings is up to them, including loaning it to others with an agreed-upon interest rate in a free-banking system.
Interest payments are merely the price of the "service" of acquiring access to capital (real, saved, hard money) sooner rather than later.
Yeah, you know people contributing 10 BTC aren't going to be passive, indifferent investors. They will be construction site tourists. They will expect regular tours and published accounting, monthly meetups to track progress and find out what the next steps are or what difficulty is underway.
People who invest their own hard-earned money really care. And that is the way it should be. We should not all be holding ETFs full of shares from companies we've never heard of that build stuff we don't care about.
Stock market circus and derivatives nightmare over.
and we are seeing this play out with nostr development, it's a beautiful thing
💯 Everyone who is funding or working on projects is highly invested in the development here, which is why so many of the most-popular accounts here are dev accounts. People want to hear about the new button or how you fixed the menu item bug and added some new feature.
People pay real money here. They ain't playin.
Compound interest enslaves people - pure and simple.
If you can't afford it...save the money, then buy it.
But DON'T take out a loan, and pay interest on it...
(And don't get me started on fractional banking--which relies on interest bearing notes)
Fr. Maybe you just can't afford a cathedral and you need to get over it.
Or you need to build one out of wood, cuz it's way cheaper.
Or you just get a chapel, and that is also nice.
Live within your budget, instead of pulling income forward with interest. That is spending future income that may never exist.
In a hard-money, free market system, the money represents real resources (this is a good thing. we agree).
In order to loan someone money, you would have had to save it first, representing a a deferment on claiming the real resources (this is what savings is). The monetary supply is unchanged throughout this process. We're not getting anywhere near fractional banking, don't worry.
"If you can't afford it, save first" sure, this is a choice someone can make. And a fine one.
But so is "the timing matters to my enterprise and I suspect I can do even better if I start today with a loan. If I start _now_, my expected revenue will more than cover the interest payment".
Why are you so insistent that an individual shouldn't make that choice for himself and his business?
The only "Bitcoin loans" we've had so far were unbacked. They just sold the Bitcoin, traded altcoins, and then tried (and sometimes failed) to get back into Bitcoin when the loan came due.
One collapse after another.
Wait what
These are the sort of "returns" you have to beat with your investment. It's possible, but highly unlikely.
Here, you go, five years. Beat 484% increase. Have fun. 😅
This entire debate is pointless. Hardly anyone can beat Bitcoin saving in returns. Nvidia, maybe, and that only once. Not 5-year span after 5-year span after 5-year span after...
bitcoin is a demonstration of what a hard currency can do
it's better than the best speculative investments
the biggest lie of fiat economists is that having a stable baseline metric doesn't help people make better decisions
and this is also the exact same thing with morality
build your wibbly wobbly church on opinions and consensus and you are screwed, long term
I bet Nvidia stonk was money laundering crypto gains 💯
Everyone who isn't hodling Bitcoin is going nuts, trying to keep up.
If you could generate enough profit within 5 years, to cover a loan that big, then you still wouldn't need a loan or equity sales. Just promise people part of the profits and they'll chase you down in the street, trying to get a contract.
Try changing the chart to compare bitcoin to boitcoin. then we can stop getting distracted by this tangential chart and return to the actual conversation: the ethics of lending.
That would eliminate the rise in purchasing power of the Bitcoin over the term of the loan.
The rise in purchasing power of Bitcoin **with respect to the Euro**. lol, right! That's my whole point.
You're just making an argument about sound money vs fiat bullshit. If that's your only point, we simply agree. But you've somehow taken that point and wrapped it in a false argument about lending. Either you are making an argument about lending itself (in which case you should pick a single monetary context and stay within it), or you are merely re-stating the sound money thesis in an irrelevant costume (lending).
Like I said. You think Bitcoin purchasing power will only increase against a fiat currency, and that it is not a core aspect of the currency, that the new supply unlocked steadily shrinks, while the economic activity covered expands, causing a steady rise in purchasing power, for the rest of our lifetimes.
You are completely misunderstanding and misrepresenting me.
I'm not endorsing fiat money or fractional-reserve banking.
I'm endorsing free banking on a free market with real, hard money (Bitcoin). In free banking, individuals can choose to save or choose to take loans (which are other people's _actual_ savings - real claims on real resources) + interest for the service of acquiring resources sooner rather than later.
You disagree about the **ethics** of interest. That's all. It's completely disingenuous for you and nostr:npub1fjqqy4a93z5zsjwsfxqhc2764kvykfdyttvldkkkdera8dr78vhsmmleku to start to insinuate that I'm a proponent of fiat banking.
Also, you are basing your lending argument on comparing Bitcoin to fiat. That's then not an argument about "lending" itself (in a hard-money context), nor the ethics of interest, it's just pointing to the fact we all already accept: hard money is better than fake money.
Yes, great, agreed. That's not what we were debating... You've veered this into a weird territory and those not paying careful attention are getting the wrong idea.
free banking, fiat banking, same stupid game
it's not the ethics of interest... islamic halal loans and jewish kosher loans are contracts
terms are set in stone, until the escape clause is triggered
any variable interest rate destroys that and incentivises one party to base their offers on contracts that put them in control of that rate, and then they can never lose
that is the problem, and if you don't understand how fundamental that is to the fallacy of fractional reserve banking there's not much more for me to say except think about it a bit more
Fine. What about a fixed interest rate? Do you have a problem with that?
if it's in the contract, and it can't be changed without bilateral agreement, the interest is fine, it's baked into the deal, it's essential to the economics
you defer future gains to give someone a chance to produce better gains than you estimate you can make
that's a halal contract, and that's not what any kind of fiat money finance is about
But that (fixed interest rate loans) is all I've been talking about.
Yet you and nostr:npub1m4ny6hjqzepn4rxknuq94c2gpqzr29ufkkw7ttcxyak7v43n6vvsajc2jl have been shifting the goalposts and straw manning like crazy to make me out to be a fiat lunatic.
If you agree there is nothing wrong with freely-agreed upon fixed rate loans, then we agree and we can finally shut up. The issue started when nostr:npub1m4ny6hjqzepn4rxknuq94c2gpqzr29ufkkw7ttcxyak7v43n6vvsajc2jl seemed to allude that "any interest rate == usury"
fixed interest rates are fine, did i say they were not?
just the reneging is not ok, and that's the essence of what usury means, it's a form of theft
Nobody said that we consider them usury. We're neither Jewish nor Muslim.
I picked the building of a major road with a bridge, to illustrate the sort of project that would be difficult to finance by private interest-bearing loans. In the near past, they were financed by the state and the money was simply pressed out of the populace through taxation or through cheap loans to the private builders that were supported by inflation.
That said, full-recourse loans (as opposed to something backed by collateral) are a form of indentured servitude, if they cannot easily discharge the debt. Mortgages (except the ones that allow you to walk away and leave the key) and US student loans are typical non-dischargeable, full-recourse loans.
I did not say that. I wrote an entire wiki article describing what usury is and said that I am generally against charging interest. That is because fixing the interest and then fiddling with the monetary supply, so that inflation/deflation effects the returns, is how they get out of the clause through a back door.
They can't do that as easily with Bitcoin. So, tell me how that makes sense in a rapidly deflating currency on a mid-term or long-term contract?
Obviously, it is possible for a week. Maybe a month, for a small loan.
But... 1 year? 5 years? 10 years?
No. It is economic nonsense.
I think aside from her moral beliefs, Laeserin's mathematical point is you can't denominate loan interest in Bitcoin because it's so deflationary and you can't really expect profit on loans under the early years of a Bitcoin standard for the same reason. Equity investment might be profitable but lending becomes a charitable act while there's such a deflationary currency available. Anyone borrowing 10 BTC will have a hard time returning 10 BTC while each Satoshi is gaining value faster than the rest of the economy's assets.
this is something that modern people barely even understand
until you have worked for a few asshole employers, then you learn a nice and important fact about contracts
unilateral binding in contracts is a violation of contract law
that is, if the asset being handled is not bilaterally handled, it is slavery
this is why at any point in an employment contract you can just walk out and sign off and trigger the escape clause
what fiat and free banking fractional reserve contracts do is make it so that one party does not have the right to cancel the contract when the other party changes the terms
that is a violation of contract law, it is not honoring your word and it is essentially deceit
You are trying to explain why the hardest money ever invented can be used to create a system of interest-bearing loans. Yes, it can. People can do anything they want.
Why don't you go set up a Bitcoin bank that lends out the principle for large projects and receives the principle+interest back and consistently beats hodling? Show us how its done.
Doesn't make practical sense while fiat money is still so broadly accepted. Because as you point out, the gains of "just holding" are better.
But that won't always be the case. On a Bitcoin standard, those "nosebleed" gains will disappear.
And you will once again have people seeking investment for projects they don't have the savings to start on the day they want to start it.
The core disagreement between the two of you seems to be over how deflationary Bitcoin is under a Bitcoin standard
To you, the Bitcoin standard hasn't started until we finish the wave of adoption driving value to increase
To Laeserin, we're already in the early days of the Bitcoin standard
No, we are disagreeing about whether Bitcoin is even a deflationary currency. Even a rate of 20% would make almost all lending unprofitable.
Couldn't deflation get below 20% someday though? I'd imagine it stabilizing someday to deflate by as much as gold and silver inflate, maybe times two for lost keys, that's still probably less than 10% a year
Yes, humans could die out so fast that BTC deflation slowed or even reversed.
Or a competing currency could take part of the monetary demand. A gold coin or CBDC, or a US treasury bond giving 40% rates in WW3, or whatever. That's what they're trying to do, now. Take away demand for Bitcoin with an inflationary money, to make interest-bearing credit great again.
Sorry but if humans are dying out we're gonna have algorithms printing money and posting new all time high trades on those tickers on the outsides of the buildings on wall street just like when life signs could be detected in new york city
I humans were dying out that rapidly, there wouldn't be any point in investing, as goods and resources would just be lying around, waiting to be used. People would revert to scavenging and most advanced civilization would decay.
Not the way things are headed. It's simple statistics, everyone is moving out of New York because it's becoming such a police state and corporations are taking over. If you graph the trend out into the future it projects that the last 100 people in Manhattan will be a tribe of NYPD officers answering to a mayor chat bot that has them drink Kool aid after all the server racks have been moved to the top floors for sea level rise
Hahahahahhaaha
As a friendly thought experiment, how would you make a profit in lending bitcoin given a 20% deflation rate? If you were tasked to do such a thing, how would you achieve it?
Lend to the US government at 21%. They always get their money.
why wouldn't I just loan to a well-positioned startup at 21%?
you're saying that 21% is effectively 1%, right?
Because you risk the loss of the principle and the principle is tied up for X years, for a measly 1% return. That does not cover the risk premium.
You need some nearly-guaranteed returns, like the US government can give because they have the monopoly on violence.
So charge 27%?
Haven't you just redefined the base rate?
No because she's not a central bank so even if she's guessing right she can't guarantee profits for herself and her cronies by changing it again on a whim
If I'm getting what she's saying
Like, with no party running the circle of monetary flow, no debt system can really be stable
"[...] This division of labor benefits the saver by delegating to the bank the task of successful forecasting – in which the saver may have no skill or desire to perform. Delegating the lending to the bank would in most cases provide the customer with a more secure investment than if he were to lend the money out himself on the basis of his own judgments of entrepreneurial success
...
Interest payments primarily are paid for the service of acquiring access to capital sooner rather than later
...
Bob has deposited money in a bank that will invest it in projects for him. it promises 5% interest.
Joe acquires a loan for 100 dollars + 10 percent interest from this bank. [after some time]
Joe has responsibly paid the bank the principal of his loan (one hundred dollars) along with the ten percent interest (ten dollars). The following month, Bob arrives to collect his investment, at which point in time, the bank may return to Bob his principal and interest or offer to keep the funds and renew the lending agreement. Even if Bob refuses the offer to continue and decides to collect his funds, both parties benefit as both parties become five dollars richer. Even Joe the borrower benefited by gaining access to capital needed to start his small business sooner as opposed to his waiting later. Perhaps starting the business at that current point of time was crucial to its success"
Who did anything about guaranteed profits? No profits are ever guaranteed. That's what separated the successful from the successful and insured society is benefitting from people's endeavours.
🏦
Wow sorry, billions of typos! Fixed:
"Who said anything about guaranteed profits? No profits are ever guaranteed in a truly free market. That's what separates the successful from the unsuccessful and insures value is delivered to society from the efforts of the successful"
Banks are just gonna prefer equity for a while I'd bet
> "ask for returns in the contract when you give the money"
This is literally what interest on a loan is... I give an amount of money and at the moment of giving I specify in the contract how much additional you'll pay me back for the value I've provided to you. Like any other service or good.
Unless you mean "returns only if the debtor succeeds"... But that completely de-risks the act of seeking a loan (for the loan seeker), which destroys the very kernel that allows proper free markets to bring value to society. It reduces _information_.
Without the assurance of payment even upon failure, there's no reason every person on earth wouldn't seek billion dollar loans for their crazy ideas, whether or not they are experienced, confident, ready with a plan, etc. You WANT the odds of their success reflected in the agreement. It's basically a spam filter.
I mean returns upon success, like a shareholder or Class A customer.
If they failed, they do not have enough money, with which to repay you. This is the reality, in Bitcoin.
The assurance of payment is trust. Credit scores are just one form of trust.
Trust isn't assurance, it's just more confidence, but not 100% assurance.
_Insurance_ is the assurance you're grasping for. If I don't pay my debits, my insurance should cover me. And you won't issue me a loan that my insurance policy won't cover.
Don't trust, verify (that the debtor has insurance)