Replies: 8 comments 15 replies
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Borrowing against, instead of selling one's bitcoin is a hot topic right now. It can be tax-beneficial to take a loan against your assets instead of selling it and paying ~30% CG tax. Ideas and experiences (including potential downsides) are covered well in https://stephanlivera.com/episode/251/ by Dan Held. Technical implementation was discussed in bisq-network/proposals#176, so perhaps now with sufficient interest in that feature it could be done? Ping @stejbac @sqrrm NYKNYC applies but I'm more likely to trust the Bisq DAO than the likes of Celcius, Nexo, BlockFi, Unchained Capital. [edit] bisq-network/proposals#176 is for BSQ/BTC loans. @pazza83 idea is for Fiat loans, both could be useful. More use-case examples would be good, esp the non-happy path scenarios. |
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I would be inclined to say I don't think we've got trading sorted to an acceptable level (i.e. lack of multiple payment methods per offer which increases liquidity immensely for everyone), so this should be ball packed until that is clearly the case. bisq-network/proposals#288 Both use cases are positive. Would be interested in negative scenarios of being unable to pay back etc. |
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@jmacxx
Thanks I did not see that before. I will take a look.
I agree, just thinking about potential use cases for future projects. Trades gone badLoans Here is the bad case for loans. In this case I assume the Bisq user that lends $50,000 is going to prefer BTC over fiat so their upside if things go wrong is the BTC collateral.
Interest Here is the bad case for interest. In this case I assume 1 BTC = 25,000 BSQ
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A simple implementation would be a trade with a very long trade duration (the repayment period). The fiat need to be sent asap but the trade does not get completed but instead the BTC seller sends back the fiat after the agreed period. Then it would be nice to have a trade complete path where the seller gets back the BTC (like for the cancel trade feature), otherwise they need to open mediation to close it in favor of the seller. |
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Thanks for the feedback. Does that mean it would be not require much dev resources to implement? |
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I guess conceptually there is not missing much (it would work already without any change if both traders are aware of the "deal"). To get that into a nice easy to understand UI is another challenge.
The Bisq trade protocol is an option trade as there is significant time delay and the security deposit is the price for the option. Lending is a future contract where the lender has both options: To pay back the load or to default and pay the price for the option via lost security deposit. |
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Bisq is willing to Guaranty all terms, of all contracts for the period of those contract times, meaning if something go wrong Bisq will take responsibility to reimburse all. At the moment Bisq doesnt stand in those loans and INTERESTS schemes meaning if Bisq accept anything relate to interest there some people that won't come to the plateform. Religious peoples goes to paxful because of this thing only, not because they have outrage fees but because of this mechanism of business. In this exemple i just take Muslim people not other religious country.
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Thanks for the information. I must admit I do have any real insight into Islamic finance. I am assuming that is what you are referring to? Please can you explain what Plaxful are doing that make their platform suitable for people wanting to adhere to Islamic finance beliefs. |
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Hi! @pazza83 Yes, that the rule of "ribâ" aka interest, i think its the only big major rule in islamic finance other religious people also follow that rule but they are not strict as is it for muslim people. It's a pretty simple rule. it can summarize it as follows :
Those are the simple way to explain this rule. But this rule goes beyond and explain all kind of situation and have scholar on this matter. |
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In Islamic translation just call it a "fee". Zippay in Australia, market 0% interest free loans. There is an admin fee of $5 per month balance is outstanding... 🤣 That is really just another way of charging the interest. Problem solved. |
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There are a lot of offers that call themselves "legal" aka Halal but muslim people still studies and find those laughable and tricky offers , they also make sure to remember for all of their communities. I think zippay is no adopt by those religious people in autralia. This rules go beyond those two point. They have history of people fool them so they make sure to remember those schemes. For them to take those "interest" aka ribâ is the same as to sleep with their mother (*′☉.̫☉) that is written in the Quran as example. There are not a lot of places that don't use loans and interest in crypto so if Bisq keep up without those two. It easily marketable for all Religious people. Count all "people of the book" on this matter. |
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Sorry for bringing this thread back from the dead. I just wanted to give my 2 cents on the mention of riba and Islam. In classical Islam there is quite a bit of evidence to say that riba (unlawful surpluss, colloquially equivilant to interest) is prohibited, but in terms of its adherence amongst Muslims is predictably varied. I have no measurables or data to support this, so please bear that in mind: There is a small inner circle of adherents which will have nothing to do with interest, not only does this include not participating in the Bisq network should it provide interest-based facilities, but also would not open bank accounts, would not work for companies that deal in interest, would not get credit cards (even if they pay them off one time and get charged no interest), not even have fiat which is associated with bonds thus interest. Bisq is probably the least impactful on their conduct as they would, effectively wish to divorce themselves from the entire financial system. Next out people become more and more relaxed, making more and more compromises. The point I am trying to raise is that anybody who would refuse to use Bisq because it offers an interest-based faciliation, would also not have bank accounts. Most Muslims in most countries have bank accounts, but would not take out any loans. Similarly, my guess is that these very people would happily use Bisq for trading Bitcoin even if they would avoid the interest part of it. I think a greater concern is that there are many Muslim scholars who are actually opining that Bitcoin and cryptocurrencies are Haram, anyway. |
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I am a regular user of Hodl Hodl, which appears to have a similar philosophy to Bisq (whereas Bisq, in my opinion, is a truly decentralised implementation) But this site also offers a faciliation service for loans where they use stablecoins. My guess is that if you stick to stablecoins it is much easier to verify independently if claimed payments were actually made or not. I have a few questions for @pazza83, regarding his idea:
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Thanks for the message. It is a while since I posted this but will try and answer your questions.
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The answer to the first question is a good one. The mediation mechanism helps a lot here. To clarify my second question, as far as I know, mark-to-market loans are loans where if the collateral dips below a certain value, a margin call is sent, if it dips even lower than this then the loan is liquidated, meaning that the collateral is immediately sent to the lender as a means of settling the loan. This method raises further questions such as what is used as the oracle for prices and how often are these checked to trigger liquidation. For the third question. My suggestion would be to set the percentage of the Loan-to-Value in the offer in a similar way that the price is set ? Mixing collateral types doesn't seem like it would work. |
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For my proposal I did not anticipate loans being liquidated. There would be no calling in the loan early or liquidations. Other platforms cannot really do this as they are centralized and it would be too high a risk. Bisq could do it because loans are p2p and the risk falls onto the individual users of the platform. For that reason interest would be accordingly priced and would likely be higher than interest charged in a situation where ones collateral can be liquidated to cover the loan.
Can you provide an example? |
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Yeah sure. So I am currently trying to lift and shift the way Hodl Hodl do it, and see if it could be applied in a truly decentralised p2p environment such as Bisq. Let us say that, for this example the current price of BTC is $10,000 per coin. I have $10,000 that's like to lend out at 10% APR for one year, and the LTV ratio I am prepared to offer is 50%. This means that my loan should be worth 50% of the current market value (meaning the collateral should be worth double) Thus my Offer would look something like this:
The final columna of APR and LTV is just to allow Users to sort by those columns as they would seem to be of interest to potential lenders. When the price of Bitcoin changes, my suggestion is to keep the loan amounts and percentages the same but change the amount of BTC required. Let us say the price changes from $10,000 to $20,000:
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Ok so in Bisq the BTC is fixed so when price changes the loan amount offered would go up So if the price of BTC increased from 10k to 20k would look something like this:
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So the lender would not define a dollar amount of loan they were happy to make. They would define the amount of BTC they want as collateral and the dollar amount would be calculated from this and changed with the market until the offer was taken. |
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Ahh yes, I had forgotten about that. It would be similar to the way somebody puts an offer on Bisq to buy some BTC. If the price goes up 10x, then they'll be obligated to pay 10x the prices, assuming they put on a relative price. One of the things that is most attractive about Bisq, is the requirement for a deposit, which serves as a filtering mechanism so you only get genuine interest (or at least interest who are will to put skin in the game, so to speak) I wonder how such a mechanism could work for this? |
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Security deposit would work in the same way as present. That way if either the lender or borrow do no go though with the loan then they would lose some of their 15% deposit user for security. Bob wants to borrow $10,000 and takes Alice's offer or from the other perspective Bob wants to borrow $10,000 and takes Alice's offer |
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This makes a lot of sense. I feel the second scenario would play a bit more like this: Bob wants to borrow $10,000 and takes Alice's offer There is also another potential failure point here: I really like this idea! |
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Yes, this is where the security deposits come in useful :) I think more innovative things can be developed in a trustless way using bitcoin secured in a multisig. I think something like this is a while off being developed for Bisq but would be nice to see included in something like a Bisq 2 trade protocol in the future. |
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Using your crypto to take out loans and access lucrative interest rates is increasing in popularity.
I thought I would add my thoughts here about how this could be achieved in Bisq for discussion.
Here is a rough idea of how it could work. I have not given it much thought just an idea that popped up.
Loans
Interest
The numbers above are not based on anything. I did not work out loan-to-value for BSQ / BTC etc. Just used even numbers to keep things simple.
These are just some initial thoughts about how BTC/BSQ could be used as collateral for loans but thought I would share to prompt any ideas / discussion.
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