For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine ownself be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.i
A few months ago, an IRL friend asked to borrow a not inconsiderable number of bitcoins for a term of 6 months. He’s running a Bitcoin ATM and wanted to make sure that it wouldn’t run out of coins.ii I explained to him that, as much as I liked him, I wouldn’t do it.
For one, I couldn’t calculate a fair interest rate, nor could I have asked for anything less than his new Ford Focus as collateral. For another, since he would be borrowing bitcoins and repaying bitcoins, even if we could agree upon a fair rate, I didn’t see any way that he could borrow the fiat equivalent of x and repay the fiat equivalent of multiples of x just half a year later.iii Plus interest. I persuaded him that taking out a loan denominated in BTC is crazier than “investing in securities” denominated in BTC.
So what on God’s Green Earth possessed me to accept not one but two bitcoin-denominated loans? And from almost complete strangers, no less?
WoT, of course.
As I explored previously, the Web of Trust is sine qua non for those who matter in Bitcoin. As such, it’s also an obvious next step in my IRC Yeshiva and my quest to learn that Variety Speak.
Sidebar Lesson:
Your WoT rating is tied to your IRC nickname, which makes protecting your nickname of the utmost importance.iv Failure to protect your nickname can result in it being “squatted”, wherein impostors pose as you, taking advantage of your hard-earned reputation even though they can’t identify themselves with your PGP/GPG keys.v. To protect your IRC nickname from squatters, register it with the irc.freenode.net NickServ by entering the following commands in your IRC client:
(1) Type “/msg nickserv” and go to the new conversation that pops up.
(2) There, enter “/msg nickserv register YourPassword YourEmailAddress” replacing your appropriate info.
(3) Open the email message from freenode automailer, copy “/msg NickServ VERIFY REGISTER xxxxxxxx xxxxxxxx” and paste it into your conversation with NickServ.
(4) Type “/msg nickserv SET ENFORCE ON” to require a password upon future logins.
(5) Next time you login, if your client doesn’t prompt you for a password, type “/msg nickerv identify AccountName YourPassword”.
(6) Et voila!
/Sidebar Lesson
Nickname protected, now about those loans…
During this conversation, I was made two offers from two individuals, each with the same conditions. I would borrow 0.1 BTC on a Friday and repay 0.10001928 BTC a week later.vi I sent them each PGP/GPG-signed and encrypted e-mails,vii stating the terms of the contract and the public address that they would send the coins to. Once I’d received the loan, I waited for the ascribed week to come and go, then fulfilled my end of the contract as stated, sending back the loaned coins and interest from whence they came. Simple as that.viii
The purpose of all this, as with all WoT ratings, is to establish a reference guide to inform future decisions. Is this person a good actor or a bad actor? Do they act in good faith or do they lie+cheat+steal? Do they do what they say they’re going to do when they say they’re going to do it?ix
So although borrowing dulls the edge of husbandry, borrowing also shows that you’re not being false to, if not any man, a man. While this might be a debatable means of establishing a WoT rating, it’s a start.
The only way to eat an elephant is one bite at a time.
Update: If you’re technically-minded and a skilled programmer thinker, consider contributing a patch to therealbitcoin as a means of earning a rating. If you’re more of a writer and more politically-minded, consider contributing to Qntra as per these guidelines.
___ ___ ___
- Polonius, from Hamlet: Act I Scene III.↩
- As it turns out, the ATM hasn’t exactly been overwhelmed so far, rendering the loan’s purpose moot, but we couldn’t have known that then.↩
- Using historical data, had my friend borrowed $1,000 worth of BTC on January 1, 2013, I would’ve lent him 76.86939508 BTC. To repay that number of BTC on July 1, 2013, he would’ve needed to repay $6,575.71, or 6.5x the original loan. Such is the danger of trying to wedge Bitcoin into the world of fiat. Or more properly, vice versa.↩
- As I recently found out the hard way. Just another step in the IRC Yeshiva!↩
- As per the
;;eauth, ;;everify, ;;ident series of gribble commands!register, !up, and !verify assbot commands.↩ - Fair terms, wouldn’t you say?↩
- Confusingly at first, encrypting e-mails is done with other peoples’ PGP/GPG keys, which means that you have to import the recipient’s key from the key server. Thankfully, there’s the PillowFortress guide. The most important thing that I learned was to use a PLAIN TEXT FILE. This, however, assumes that you’ve already figured out how to create a PGP/GPG keypair in the first place. If you haven’t, see the Contravex PGP guide, Bingo Boingo’s handy document or the GPG Tools tutorial for Mac users.↩
- The deceptive aspect of this apparent simplicity is that not everyone gets such generous offers, or any offers for that matter. Am I lucky or am I me? Hmm…↩
- So far, so good.↩