As I haven’t seen many discussion about use cases for Peershares I thought I start one. My objective is to see whether Peershares is suitable for certain purposes and if not what else we would need to make it happen. This with the aim to create a market (buyers and sellers) for offerings on Peershares.
Use case: Finance a house
User X doesn’t want to go to a bank to finance a new house. The house costs $110,000, but he can pay for $10,000 himself leaving $100,000 to finance.
The common interest rate in his country is 8% for 10 years. He is keen to get his offer of Peershares and promises 7% interest/year as he thinks the community can do it cheaper.
Would user X be able to issue shares of say $1,000 each and pay 7% dividend in Peercoins each year? Guess the answer is yes to this.
But would we need to trust user X without involving a trusted 3rd party?
There are at least 3 issues to solve here:
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How do we know user X invests this money into a house and not just buy a flash car?
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How do we know user X would pay his yearly or monthly dividends?
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How do we know user X is user X?
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Ensuring the payment can be covered by someone who is willing to escrow. With e.g. multisig it can be ensured that user X buys or does what he says. Naturally the issuers would be willing to escrow, and probably have to do anyway as to ensure 100% of the required finance is raised. But can we manage 100 signatures and who would be the 3rd party? We need some broker I guess?
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Whereas with issue 1 we can get some assurances, issue 2 is more difficult as it comes down to trust. We can’t be sure he pays the dividend? A bank would check his income and capability to pay the interest over time. In this scenario we don’t have this information. So again we need a broker who investigates user X on his trustworthiness and capability to pay interest (dividends). Options are that user X creates an account specifically for this purpose and openly shares the balance and transactions on that in order to show that he is able to pay the interest when due. Although this would built some trust over time, this doesn’t solve the initial trust issue/risk profile investors would look for. In the case of the house, one could write a contract where user X is forced to sell the house and release the funds to the shareholders. This requires a broker again, just to enforce the contract and to ensure the funds from the house go back to the shareholders. So who or what can play the broker role here?
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For this issue are some white papers around about dealing with decentralised anonymous trusted accounts (just google for it), but I haven’t seen working implementations of it.
Potentially, with solving this we could also solve some of the elements of issue 2. E.g. if User X has done previous transactions and gained the trust of a number of users which are already trusted by the potential shareholders.
I used the example of a house, but you can easily translate that into other assets or even companies.
I’m keen to hear from the community what they think are the best solutions to the issues, if they have seen solutions or developments which might work or what would be needed to address them.
What you need is a trustless identity-verification system. I don’t know any particular reason this would be a hard problem; or sounds very similar problem conceptually to a transaction-verification scheme like peercoin.
I know the people over at BitShares have a decentralized identity product they call Keyhotee. There isn’t any working implementation yet, but I think their original ideas for it involved some kind of “mining your identity” or something like that. The idea is that for a decentralized identity scheme to work, it needs to be costly to forge someone’s identity. I’d encourage you to check out Keyhotee and see if you think it might begin to accomplish the things you’re interested in.
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[quote=“biophil, post:2, topic:2283”]What you need is a trustless identity-verification system. I don’t know any particular reason this would be a hard problem; or sounds very similar problem conceptually to a transaction-verification scheme like peercoin.
I know the people over at BitShares have a decentralized identity product they call Keyhotee. There isn’t any working implementation yet, but I think their original ideas for it involved some kind of “mining your identity” or something like that. The idea is that for a decentralized identity scheme to work, it needs to be costly to forge someone’s identity. I’d encourage you to check out Keyhotee and see if you think it might begin to accomplish the things you’re interested in.
Sent from my SCH-S720C using Tapatalk 2[/quote]
Great to get your reply.
I agree that it need to be costly to forge an identity, harder is to ensure an unique identity (at least in context) to prevent fake networks.
Will definitely check out Keyhotee.
I agree that it need to be costly to forge an identity, harder is to ensure an unique identity (at least in context) to prevent fake networks.
I don't see how making identity harder to create will help. As long as the identity is cheaper to create than it is to actually pay off your house, why would someone pay?
There need to be real world consequences for not paying your bills, such as house foreclosure. Unless houses are also registered in the blockchain, you will need to trust a 3rd party (some kind of bank) to make sure the house is taken away when the owner cannot pay anymore.
[quote=“quantumcoin, post:4, topic:2283”]
I agree that it need to be costly to forge an identity, harder is to ensure an unique identity (at least in context) to prevent fake networks.
I don’t see how making identity harder to create will help. As long as the identity is cheaper to create than it is to actually pay off your house, why would someone pay?
There need to be real world consequences for not paying your bills, such as house foreclosure. Unless houses are also registered in the blockchain, you will need to trust a 3rd party (some kind of bank) to make sure the house is taken away when the owner cannot pay anymore.[/quote]
I think you misunderstood slightly, it is about the cost of forging, not creation. The cost of creation need probably to be more than the value of creating contracts to counter spammy accounts though. Although you can also solve that at the contract level.
It would be interesting to know if one could make a legal construct/contract where the ownership of the house would be tied to a registration in the blockchain. In that case you would only need the 3rd party in case of a dispute.
The contract would say instead that the house belongs to X, it would say it belongs to the person who can proof that they control a certain address in the blockchain. With multisig a 3rd party would have the key to transfer ownership fully to one or the other (when payments stop or contract ends). There are already good concepts to assess reputation for 3rd parties. See the blockchain insurance dac video from Invictus.
I think you misunderstood slightly, it is about the cost of forging, not creation.
Ah ok, I think I did misunderstood a bit yes, it seems identity verification is viewed as the only problem for insurance in this thread?
But identity verification is the easy part, as it can be done with "who controls this address in the blockchain" or other kind of signing using PKI.
My point is if we are just talking about insurance of real world objects, that the interface with the real world is a much larger problem. You need a 3rd party to change ownership of the house and have so much power that you basically created a bank again.
Not sure why you think changing ownership is such a big problem. Most first world legal systems don’t need a bank as a third party to transfer ownership. The ownership of a house is mostly registered by government owned website and the registries behind it. Usually a notary or similar role can officially transfer ownership.
Assuming you can build a legal construct that the house transfers to the lender after x number of default payments you won’t have a problem. You won’t need a bank for that, only a notary (depending on local legislation). The problem is more likely to be the enforcement. Even if the house can be legally transferred into your ownership you might still face other issues e.g. to kick the previous owner out of the house and if you are not a citizen/resident of the country where the house resides, there might be other legal traps which prohibits transfers.
So yes, the interfaces with real world are not easy, but the issue is most likely not not the transfer of ownership.