10 sats \ 2 replies \ @DiracDelta 30 Dec 2023 \ on: Loan shark: Super Testnet's non custodial, bitcoin only borrow and loan tool bitcoin
I think the most significant application could be as a USD yield product. One party puts a 1 bitcoin loan out, and then they get a dollar yield on the principal from someone who wants to take a leveraged position. The borrower puts up 5 bitcoin collateral, and then they are more or less 1.2x leveraged. The lender gets 10-20% yearly in USD, and as long as the price of bitcoin does not go too low, the lender does not get liquidated. (JW Weathermen posted a google doc with an idea like this).
If you make the term 5 years, AND make it so there is no intermediate liquidation, perhaps contingent upon partial repayment in dollar terms yearly, it then becomes a decentralized version of the bitcoin layaway product I wanted to build. (Faucet21.com)
The important thing to realize here is it goes well beyond simply wanting less than 100% bitcoin -- this is a vastly more secure way to know that you will be able to get your dollars. Usually, dollar exposure requires you to be a bank creditor and as SVB showed, your money can disappear in a moment. This is basically a safer USD savings account.
write
preview
20 sats \ 1 reply \ @supertestnet OP 30 Dec 2023
they get a dollar yield on the principal from someone who wants to take a leveraged position
I don't know how to do this part without introducing additional trust assumptions. Bitcoin only knows how many sats are sent in a transaction, now how much they are worth in USD. So if you want to say "you have to send the lender $50 worth of BTC next month" I don't know how to set up a contract where "bitcoin" enforces that, because when the payment is due, bitcoin won't know how much BTC is worth $50. You can fix this by bringing in additional counterparties, e.g. tether corp or an oracle, but then it's not a bitcoin only product anymore -- it's bitcoin plus "trust this third party."
AND make it so there is no intermediate liquidation
That part is already true
reply
0 sats \ 0 replies \ @DiracDelta 31 Dec 2023
Yeah, I think it might require DLCs with price oracles.
reply