Will you be able to take out your next loan in bitcoin? Believe it or not, a bitcoin loan isn't as far-fetched of an idea as it might seem!
Earlier this year, HAW Technologies and The Tokyo Tanshi presented a bitcoin-based lending market concept at an event hosted by Japan's central bank, bringing Japan one step closer where bitcoin lending is an actual consumer loan option.
HAW Technologies, a tech startup, and The Tokyo Tanshi, a main Japan-based inter-dealer broker,1 paired up to produce a unique kind of loan market that will do away with third parties, like banks, altogether. The bitcoin-based market makes use of the Open Assets Protocol, sometimes also known as "colored coin," in order to indicate commodified rights of redemption to a given loan. Rights and transfer of funds are done simultaneously in the process, making it almost instantaneous and intermediary free. Moreover, the bitcoin-based lending concept not only gets rid of the trusted third parties typically involved in any loan process, but also essentially creates a lending market without any borders.
Although an intermediary-free, borderless loan market is the goal, the lending concept is still a work in progress, and it will need to be fine-tuned. In its current state, it relies on intermediaries sitting between the creditor and the lender, and these mediators must create a transaction that is not signed to exchange assets and funds. The other two parties in the transactions must then sign the agreement. Then, after these signatures are received, a mediator can broadcast the transaction to the bitcoin blockchain so that it can be confirmed.
However, the long-term goal is cut these mediators out of the transaction. This will require the development of what are known as "layer 2" technologies for bitcoin. Lightning is an example of such a technology, being produced in order to allow for the development of bitcoin-specific payment channels. Assuming progress, however, intermediary-free bitcoin lending may not be too far off.
1) The Tokyo Tanshi Co., Ltd