[nikkwong]

Care to enlighten me on how you place a 'loan' on the blockchain? Isn't a loan issued from a bank -> borrower? My assumption in this case would be that the ETH contract would be written to change the legal owner of the loan? How is that then reflected in the real world?

[bostik]

Quoting myself from https://news.ycombinator.com/item?id=14775416 :

Cutting through all the [templated] legalese, we can say: "Contract A, between parties K and L, concerning transaction T: T shall be considered done and legally binding once Coloured Coin X has been paid from address [foo] to address [bar], and has been verified by no less than 20 subsequent blocks."

The idea of a Coloured Coins is that you use something uniquely identifiable to make a transaction in globally verifiable transaction log. (Iow: blockchain.) Real-world contracts can reference the binary result of "has this transaction happened?" to verify that a contract has been completed and an off-blockchain transaction is valid.

[austenallred]

Perhaps that's not the best example, but in this case the loan is securitized, so you're basically just trading a piece of paper (or digital representation) that represents who "owns" the loan. That's the way the vast majority of assets are traded these days - stocks, bonds, even cash are usually just numbers in some account somewhere.

[mshanu]

In Ethereum, you write contract (its the terminology but it does not mean in literal sense), where you can implement a logic of loan as code.