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How would credit work post-hyperbitcoinization?

625 sats \ 13 comments \ @mudbloodvonfrei 27 May 2023 bitcoin

I'm trying to wrap my head around the implications of a deflationary monetary regime. In a world where bitcoin is the only currency, the nominal cost of every good should go down since the supply of bitcoin is essentially constant (after the next halving the bitcoin inflation rate will roughly equal world population growth rate, and it's all downhill from there). So, if I own bitcoin, why would I ever lend it out? Even without charging interest as compensation for default risk, a borrower would have a difficult time paying back the debt. With interest, credit markets at any meaningful scale seem impossible given that the currency supply is a zero sum game. Maybe I would be willing to part with some of my coin in return for equity in a very promising business but why would I ever fund something like a mortgage? Or even a mom-and-pop coffee shop for that matter.

I feel like I'm missing something simple and obvious here...

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303 sats \ 1 reply \ @gnilma 28 May 2023

Here’s what I think. When bitcoin is properly monetized and becomes the money of the world, its growth in value will slow down. In fact, I believe its value will grow approximately equal to the total productivity increase of the human race.

There will be businesses and/or technologies that will have better growth, and the investors with an eye to catch those (or those who think they have such eyes) will invest their bitcoin in them, expecting a higher return than the natural increase in value of bitcoin. Those who bet correctly will win big, and those who bet incorrectly will lose big, no bail outs; proper skin in the game. This promotes sound investment decisions and decreases the amount of mal-investments in the market. Loans will probably be mostly used for projects that will return a greater value than the value increase of bitcoin. Or at least loan providers will have such expectations on projects they loan to.

For those who do not wish to invest, there is of course the choice of saving money. Actually saving money, instead of the fake saving but actually slowly being robbed with fiat. Loans for future consumption will be heavily discouraged if not gone from existence, because you are correct, consumptive loans will be extremely difficult to pay back. Instead, people will learn to save money and wait until they have saved enough money to consume. But the money is increasing in purchasing power, so it’s probably not going to be that long of a wait. It definitely won’t be like the present day, where young people in expensive real estate markets feel that they will never be able to own real estate property.

That feeling of never being able to own anything significant will be gone. That feeling of hopelessness will be gone. As long as you are able to provide value to others, willing to work hard, and willing to save money; you will own what you desire and be happy.

0 sats \ 0 replies \ @mudbloodvonfrei OP 28 May 2023

Thank you!

Upon further thought, I don't think mortgages will disappear since those loans are backed by real estate and the government can't print land any more than it can bitcoin. But loans for taking a vacation or buying a car? Can't imagine that happening.

Also, I was thinking, The Bible forbade charging interest millennia ago and I think Islam does as well - it seems bizarre in today's world but if you have deflationary currency (gold could have been locally deflationary if there's no local gold reserves and a rapidly growing population) it kind of makes sense because getting repaid in nominal terms means your purchasing power has increased. I wouldn't loan to a stranger without interest because of default risk, but maybe in my local community I would.

132 sats \ 1 reply \ @DarthCoin 27 May 2023

You will learn how to save money for the times you will really need them.

Fiat = debt forever, spending technology, exacerbated consumerism Bitcoin = savings technology

Just look at this https://bitcoinorshit.com/

Many will want to fool you (again) into using your BTC as collateral for loans in exchange for some more shitcoins. And some people will fall into that trap (again and again).

1 sat \ 0 replies \ @mudbloodvonfrei OP 28 May 2023

Holy shit that site is hilarious. Also, thanks for not smiting me.

102 sats \ 1 reply \ @Undisciplined 27 May 2023

There will still be entrepreneurs who discover profit opportunities and people with bitcoin reserves to help with funding.

Fixed money supply doesn't mean there's no economic growth. If a venture expects to make a profit, then they could afford to pay back a loan with interest.

I think you're probably imagining something like money vanishing after a loan is paid, rather than it going back into circulation. You could pay back a loan with the same bitcoin over and over again, if you happened to be earning it back between payments.

0 sats \ 0 replies \ @mudbloodvonfrei OP 28 May 2023

You bring up a good point - money is flowing through the system in a circular fashion way faster than my imagination suggests.

30 sats \ 0 replies \ @DeltaClimbs 28 May 2023

You wouldn't!

Your thinking is exactly correct, and I explain precisely why there will in fact be zero credit after fiat dies, only equity in this brief thread. That means zero private credit as well, though without government interference, equity arrangements around revenue share agreements will be far more flexible.

Your discomfort is your conditioning from fiat and the psyop around Keyensianism leaving you with FALSE beliefs around downstream implications of this. "Oh, it means... So therefore..."--nope, it actually doesn't mean [] at all.

If you are a bitcoiner who thinks credit will exist after fiat dies, you are a rather lucky person to be in bitcoin today given you are the sort to have that misconception!

1 sat \ 0 replies \ @random_bitcoiner 28 May 2023

Only good shit will get funding & malinvestments will have a much shorter timespan

0 sats \ 0 replies \ @IanMalcolmPhd 7 Jun 2023

Is there a peer to peer lending protocol that does not have a counterparty risk?

0 sats \ 1 reply \ @Hopeful_Sat 28 May 2023

Not sure I understand everything you said but here goes:

Assumptions

Bitcoin is the "unit of account" used globally
Bitcoin is legal tender everywhere
People earn salaries and income in Bitcoin (mainly, not eliminating executives paid in stock, for example)

Credit and lending

It would word pretty much the same way that normal lending works today, except the nominal value of the debt and interest would be in BTC and not a government issued currency

I need to borrow 10BTC in order to buy a house somewhere I go to the Bitbank and ask to borrow 10BTC, repayable over 10 years at a 5% annual interest rate I provide the bank with proof of my income, being my salary from the one job that I work and I earn, for instance, 5BTC per annum

Assuming the bank approves my loan, at the end of every year, I will have to make a payment to the bank of about 1.3BTC. In year one the interest would be 0.5BTC and the rest a redemption of the debt and every year the interest amount will decrease

As long as I keep my job, I should be able to pay back the loan with interest without any issues and if I can't then the bank keeps the house

Hope this made sense and was what you were asking?

0 sats \ 0 replies \ @mudbloodvonfrei OP 28 May 2023

Well, in theory, your salary should go down in bitcoin terms. As the purchasing power of bitcoin goes up it becomes very expensive for your employer to pay you the same nominal sum (unless the value you provide as an employee is always increasing but that too approaches an asymptote). The nominal price of your house might go down as well (although this is hard to predict and depends on local supply and demand - a penthouse in NYC might even appreciate in bitcoin terms because there is high demand and no one can arbitrarily inflate the supply of penthouses overlooking Central Park). The longer the term of the loan the more difficult it is for you to pay me back even in nominal terms, much less with interest. So it's very difficult to justify lending you money.

0 sats \ 0 replies \ @nkmg1c_ventures 28 May 2023

I think past times with gold are an example -- you could still find someone to lend you money if you were part of a community and people knew you etc. Or community organizations, etc

0 sats \ 0 replies \ @IanMalcolmPhd 27 May 2023

You can loan p2p on hodlhodl or bisq, I think.