How would you go about doing this? As an example, if you loaned someone 167 monero to buy a car and expect them to pay you back in 7 years like a bank does you would be requesting 167xmr*6.02% (to counter xmr inflation) for a total of 177.053xmr. 177.053xmr/84 (months in 7 years) would be 2.107xmr a month. At the moment that is fine, but if the usd price of monero rises and the borrower is being paid in usd then they are going to default and you will loose the xmr. The only way I could see to counteract this would be to lower the Monero payments per month, but then that would take even longer to be repaid.
Oh, I know. I’m talking about a business that would loan money to people and vet them like current banks do with credit scores.
The only way this would work is to peg it to fiat or commodity. Or expect that your ROI will either be nothing or an insane amount.
Right, and doing this means that short-term loans work fine because the price isn’t likely to change that dramatically in a year and the amounts would be low enough that you could just lower the payments and still get your monero back. But for long-term large loans such as houses and cars, people would not get loans to buy those items.
That’s a 30% decrease in about 2 months. As an aside, 30% is the APR for most high-interest loans.
The idea is there, but something like DAI would be better to look at, although it remains to be seen how long crypto will be used and accessible (especially once CBDC rolls out and legislators getting even more heavy-handed with non-CBDC coins.)
Something makes me think that crypto will be used even in a world of CBDCs. Primarily because it’s still highly divisible. It’s hard to pay in gold because it’s heavy and amounts useful for paying things would be untenably small. One gram of gold would pay for my internet, but would be serious overpayment for my Starbucks latte.
Edit: off chain gold i guess. I give starbucks 1 gram of gold and they give me lates the next 15 times i come in. (Prepaid accounts)
When gold was used as currency, it would be shaved off using a scale to confirm the weight (gold is a very soft metal, easily ‘sliced’ off the coin/bar. Shopkeepers had their own scales but wary customers could carry gold pocket scales to confirm the weight.
Just like you can spend fractions of a cryptocoin, you can spend fractions of a precious metal coin.
Are your local regulations okay with that or is it a grey area where you would have troubles legally collecting on defaulted loans?