Ethereum: What happens when Bitcoin appears
The emergence of Bitcoin loan has made an intensive debate in the cryptocurrency community. Some consider it to be changer of the game, others are afraid that this could lead to excessive dependence on debts and potentially catastrophic results for the global economy.
In this article we will deal with the potential consequences of Bitcoin loan and see what happens when you start to appear.
Problem with debts
Traditional loan work that borrowers offer access to funds in exchange for the repayment of the credit order plus percentage. However, when it comes to digital currencies like Bitcoin, there is a big mistake: Bitcoin’s entire offer is limited to 21 million, which means that new bitcoins cannot be created. This limits the potential of lending and borrowing.
If we theoretically introduce loans in the system, an endless number of people could theoretically borrow from each other, without hesitation regarding the expression of the available funds. However, this would create a paradoxical situation: if everyone lends money to an interest rate that “creates additional value”, wouldn’t it be impossible for anyone to repay the loan?
Zins dough
If we say that Bitcoin loans are based on the concept of additional added value, we refer to the idea that interest rates can be determined to get people to adhere to their participation. In the traditional loan system, the interest rate is simply a fee for borrowing money. With Bitcoin loans, however, the interest rate is related to the value of the underlying asset (in this case Bitcoin itself).
If the interest rate is set 10% per year and the investor borrowed $ 100 in Bitcoin, you have to return $ 110 per year. If the price for Bitcoin increases by 5%, the total participation is 115 US dollars, which means that you only owe 15 US dollar (115 to 100 US dollars = $ 15). This creates a perverse incentive for investors to hold on to their investments, not sell and buy back on the market.
Ding against Bitcoin credits
While it can theoretically imagine a system where Bitcoin credit creates additional value, there are several concerns that make it unlikely:
* Scalability : The current credit frastructure is plagued by the scalability problems, which means that the user is difficult to effectively fill and give bitcoins.
* Legislative uncertainty : Governments and administrations still have problems classifying Bitcoin as a currency or security. This uncertainty could suppress innovation and create unnecessary risks for lenders and borrowers.
* Safety concerns
: The lack of a regulation in the loan space has fraud, phishing attacks and other abuse caused.
Potential effects
If Bitcoin loans were widespread, we could see an increase in market volatility, especially for investors. The possible consequences of the representation of the creation in the system for digital currency are far -reaching:
* Increased speculative purchase : If people feel that they earn additional value due to the loan of bitcoins, they may be more inclined to invest in the market that can increase prices and possibly cause active blisters.
* Reduced investments in physical assets : Since investors are increasingly focusing on highly difficult credit options, they can separate their investments in real assets such as advertising campaigns, bonds or other goods instead of adhering to cryptocurrency.
Diploma
While the idea of Bitcoin loans is fascinating, it is important to understand the potential risks and consequences. The appearance of debts in the system for digital currency creates a characteristic paradox: How can we generate additional value if the total delivery is limited?
