Simple exercise: go to your bank today and try to withdraw $100k.
Alternatively: go apply for a mortgage if you have 80% for a down payment, a way to prove the legitimacy of the funds, but little-to-no credit history.
We're talking about taking out a loan where you don't have 100% of the amount in advance.
You could lose your job, your business could go south, you could ditch for another country and never use whatever bank account or wallet you had your downpayment in again, all those things that are basically currency-independent. Breaking a contract is a people issue, turning paperwork into "smart" code doesn't actually tie a chain around someone's ankle, and it certainly doesn't guarantee their future income.
> where you don't have 100% of the amount in advance.
This is not what I said. Willing to put 80% on down payment does not mean not having ways to pay things in full.
- You might have the cash, but not interested in becoming totally illiquid.
- You might be interested in getting a mortgage for the tax deductions.
- You might have only the cash the downpayment, but use another property that you already own as collateral.
- You might have only the cash for the downpayment, but you are going to buy the house to rent it.
Point is, with "traditional" finance, you can only do these things if you are negotiating the whole package with the same bank, and this is how they "get" you. If people could actually manage their own wealth, there would be no strings attached.
And let's not even get into the other kinds of issues such as bank's "rules" that seem totally reasonable but end up making the life of marginalized groups more difficult.
Ok, so a secured loan? Those exist, sure. What does crypto get you in most of those cases?
In the "all I've got is a million bucks in gold I stole from a vault and can't show a paper trail" case: I don't care. Not a valuable use case for me. That reason alone doesn't move the needle on crypto for me.
In other cases: seems like you're gonna have an easy time getting a loan. lending to people who don't need it is the easiest sort of loan to make.
(In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway...)
Edit: you added something about how with traditional banks you have to do it all-or-nothing with a single bank and that's how they "get" you. I'm not sure how anyone's being "gotten," especially in recent times where rate competition has resulted in cheaper money than ever before. But it's also not true in most of the cases you outlined. If you have multiple sorts of assets that you want to borrow against instead of securing the loan with the property itself, you can take out a bunch of other loans on those other assets and pay cash for the property.
Then you bring up historically marginalized communities and such... If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank... that would be a different convo, but "additional ways for people with assets to borrow money" doesn't sound so interesting, as it is.
Sorry, I was in the middle in the edit and I think I ended up sort-of responding to this comment.
> What does crypto get you in most of those cases?
Speed and reduced operational costs, for one. If I wanted, I could get a collaterized loan on DeFI and have the money on my bank account faster than it would take me to fill the bank load application form.
Most importantly, it gets disintermediation: a bank might be interested in selling a loan if it has some level of profitability. In DeFI, anyone can be a bank, so the market tends to be a lot more open and competitive.
> In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway...
Because, e.g, you've done the math and you realized that you don't want to pay more interested that is needed?
> If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank
Sure: https://trustlines.network/ TL;DR: it's a system where people can create distributed credit lines, local currencies (for use in impoverished communities that have no money but still need to have a credit rating mechanism) and so on. People could do this with community banks and credit co-ops, but it would be extremely difficult to have, e.g, such a system being capitalized by someone outside of the community. With Trustlines, you can have people in rich countries contributing for the system without middlemen like in a standard micro-credit alternative.
There are two separate things here: one is the ability to manage your own assets, the other the ability to enter in a contract.
I am talking about only the first one. The problems with banks is that they are intermediaries between you and your money.
> Try to get a loan in crypto with 80% collateral and then we can talk
First: a mortgage is overcollaterized. A bank will take the whole house from you if you default, not just what is due. They are taking your downpayment and effectively keeping control over the property.
Second: that is not even the point. The point is that a bank will not give you a mortgage even if you are good for it. Why, because they don't have proper systems in place to assess risk?
Yeah, sure, undercollaterized loans require a system that both parties can agree on and that can solved in case of breach of aggreement. IOW, it is not a trustless system. So it would not happen on the blockchain.
But you know what could happen on the blockchain? I could make a loan with someone I know using the current institutions, add that to my funds to get a overcollaterized loan and then I still don't need a bank. To go back to my first comment on this thread, adoption of crypto does not imply an all-or-nothing approach.
I can be a "web3 enthusiast" and still make use of the current institutions when they suit me. It's the increased optionality that interests me.
> First: a mortgage is overcollaterized. A bank will take the whole house from you if you default, not just what is due. They are taking your downpayment and effectively keeping control over the property.
Uh, no. They are required by law to sell the property at a balance between timeliness and recovery of owed monies. And they are required to return to the mortgagee funds in excess of what was owed.
You will have no problem withdrawing 100K, and substantially more, depending on branch you might need to call ahead of time, a many years ago there was poker night somewhere on wall street with 600K cash bonus, yep actual cash in office on table.
At least most banks across the world have liquidity requirements, and most have some insurance for limited amounts, for example if you want to open your own bank in Cayman's you need to have 30-50 million in liquid assets such bonds and gold deposits, it is similar for US banks, if recall correctly.
You might be able to transfer bitcoins from valet to valet, but they will be effectively useless, if banks stop releasing cash, cash will be the most valuable commodity, not digital bits. Furthermore, during the 90's (the really crazy times) in Russia many were doing bond trading just fine without any issues and without internet, this not some story, it happens so I met a few survivors from that time.
On another hand, the only useful thing I find for bitcoin that is "legal" is contributing to sci-hub projects, nothing else, for this reason and other reasons such as drugs and money laundering, bitcoin is here to stay.
Things might have changed since I bought property a few years ago, but back then I just took a screenshot of my bank account and tried to keep a straight face when giving it to my realtor.