I’m looking at Ethereum for a project, and I’d like to know if it will suit my needs.


Back


I’m wanting to create a form of crypto currency that is loaned into creation, the idea is to never have more in circulation than the amount of debt that creates it.

I don’t know much about crypto currencies, I know Bitcoins and some others must be mined, and that is not what I’m looking for, as I need to create this currency based on the demand for loans.

When the loans are repaid, I need this amour of currency to cease to exist.

Obviously I would like it to be as hard as possible to counterfeit, so I’m looking at blockchain.

Is this type of scenario possible with blockchain, or does it relay on “mining” for creation?


    on the one hand similar structures are usually programmed with Ethereum and smart contracts. You can implement small intelligent tokens that have a life cycle, like creation -> get payment -> send payment -> change ownership -> destroy …

    on the other hand, to implement generally dept based systems algoritmically is difficult, it is not a coincidence that all blockchain solutions and crypto are based on direct payment and on registering debt.

    The simplest use-case is the following:
    1. Bob gives a loan to Alice
    2. Alice uses the money, like buying things.
    3. Due date: Alice pays the money back.

    If Alice does not pay the money back, in classical business fields there is a whole banking and law system with many institutes that try to get the money back from Alice.

    With Blockchain protocols however, you have only the consensus mechanism and the code (in which all party trust): so you can force to get the money back from Alice if the money on the account of Alice, otherwise it is difficult (perhaps you do not even know who is Alice). I do not really see your use-case, perhaps there is a good workaround for that.

    Thanks Dan, I’m looking at smart contracts now. The seems to be a way to create a central bank, and mint tokens, that are essentially a cryptocurrency.

    I’ll play around with it for awhile.

    Depending on where you live and run your business from, I suggest take great care. Why: because you’re talking about “currency” and not “tokens” (a proxy for currency – arguably), you could come up against legal shocks.

    Even worse, any such additional challenges may only “show up” after you have done quite a lot of work, etc.

    These potential legal risks may be more relevant if you’re based in one or more of the G20 countries (https://www.g20.org/Webs/G20/EN/G20/Participants/participants_node.html).

    However, right now at least, in some G20 jurisdictions, you may be able to sidestep some legal risks by using tokens and ICOs instead.

    So before delving too deep into an idea, perhaps double-check the outside risks first. Then you can decide if any changes are best done, before delving into tech solutions.

    Also, in the EU, you’ll hit data protection and privacy protection issues too. Maybe in the USA “soon-ish” too, etc.

    Though setting up something like this to serve users in a country outside of the G20 group may encounter few legal stumbling blocks – if done in ways that are known to work for each country.

    Nevertheless, if you get beyond the legal issues and decide to call your currency a “token”, on the blockchain, that is managed by a custom designed smart contract, that might be the way to go.

    Though, do remember, the tech landscape is constantly changing – sometimes at breakneck speed. So I suggest much research, access to the right tech skills base, and lots of testing needed first.

    Edited on October 10, 2017
    Thanks Brian, the legal end of it is troubling, but then jail anti so bad;-)

    I think tokens is the way to go, I’m looking into it. Just need to figure out some way to dissolve the tokens once they are paid back, that is automated.

    Most likely, the technical changes are doable, though there would be the added ongoing tech overhead of keeping the code up to date with the currently ever-changing Ethereum and blockchain token landscape.

    One huge hurdle: as Daniel Szego has already highlighted, no matter what token system you may use, how can you ensure that each debt is repaid?

    Also, because your plan involves blockchain and what could be described as “innovative use of tokens”, how might your tokens be viewed for tax purposes?

    The following helpful guides / web pages may help further:

    https://hackernoon.com/all-you-need-to-know-about-cryptocurrencies-an-overview-for-the-savvy-investor-bdc035b14982

    https://bitsonblocks.net/2015/09/28/a-gentle-introduction-to-digital-tokens/

    https://hackernoon.com/all-you-need-to-know-about-cryptocurrencies-an-overview-for-the-savvy-investor-bdc035b14982

    Thanks again Brain, as far as debt being repaid, that is a hurdle, but I don’t see it as a real problem, yet.
    As people start to use it, hopefully, they will want to be able to borrow more, so that should keep most people repaying their debt. Of course I must setup an entire infrastructure for rating people’s ability and “willingness” to repay the debt.

    At some point, people “bankrupting ” their debt will clause a small amount of inflation.

    As the economist Steve Keen once put it,”Debts that can not be paid, will not be paid.”

    Edited on October 14, 2017
    On a related issue, I’ve been toying around with Mist on the macOS, and I have a few Ether, but for some unknown reason, I can’t get any smart contracts to work.
    I can create a contract, and deploy it, but no one ever picks up the contract.

    I can see the contract on EtherScan, but it always says “Pending”.

    I also can’t send any Ether, so that maybe related.

    I can sync to the Light Client, but if I try the Full Network, I’m unable to finish syncing, and my account shows no Ether in Mist.

    I get enough of the blockchain that my account should show Ether, if I look it up by block in Etherscan, it shows up.

    Maybe an issue with me not having enough Ram, as Mist seems to be a ram pig when it is trying to sync the blockchain.

    Anyone have any ideas why I’m having these issues?

    Edited on October 14, 2017