[thisisit]

The additional problem is everyone forgets a real world problem called "negotiations". If one were to accept the fact that loans or bonds can be put on blockchain for clear ownership, what happens in case there is a need for haircuts or re-negotiating the loan/bond? In a real world, I can talk to a person at the bank and re-negotiate the terms but given the nature of blockchain transactions, how will that work?

Edit: Not to mention, immutability means human errors cannot be recovered from - a wrongly worded contract cannot be restored.

[candiodari]

Generally for a loan there's a set of roles, each of which is different and perhaps not entirely independent, but mostly.

Negotiations would be done by the "servicer" of the loan, who gets to charge a fee for this. There is also the "originator" of the loan (think the website where the person taking out the loan clicked on the affiliate link, but in meatspace). The "owner" of the loan is generally considered to be the person who currently puts up the (remaining) principal.

Each of these roles may or may not change hands as a result of a transaction, but generally only the risk role changes.

There is a large business "originating" loans, and over time during the credit cycle the business becomes originating ever more risky loans until the whole thing blows up and we get into panic, tighten lending standards (overtighten, generally), and go back into the business of loosening up.

[flukus]

> Edit: Not to mention, immutability means human errors cannot be recovered from - a wrongly worded contract cannot be restored.

I can't speak for the blockchain stuff but typically in financial software data is treated as immutable as well and errors are accommodated for by adding an additional correction record. I assume blockchain would enforce this practice, but then again, I don't know how it would distribute the amended contract.

[thisisit]

Doesn't it depend on the data? Sure, the actual money transaction cannot be changed. Only journal entries can be passed to correct the amount.

But can't things like name of the person taking the loan can be changed? Obviously there is still a journaling entry recorded to track who and what changes were done. This is specially important because wrong names can and do affect credit ratings etc.

[flukus]

That will depend heavily on the particular domain for what can and can't change. Changing names might be fine in some areas of finance but not others. I know in some medical stuff you can't change names, even when a person gets married and changes their name. When you view an old script for instance, it has to display their name as it was (and as it was printed) at the time the script was created.

Nailing down this stuff is where you really appreciate a good architect.