Loans and Decay

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Michiel de Jong

Dec 19, 2020, 4:35:09 AM12/19/20
When resolving a debt loop, the nodes along the loop need to negotiate the amount of each hop. Each node has an exchange rate between their incoming hop and their outgoing hop.

I previously thought all hops should be valued equally, so that nobody wins. But maybe this is unrealistic.

Another option I wrote about in the past is "netting at equilibrium", where every node is at the stable point where they don't care if the loop flows clockwise or anti-clockwise.

This means that if someone is in a hurry to make the loop flow, they need to "cross the spread", i.e. they need to make their own exchange rate worse, so that others in the loop get incentivized to let it flow.

Viewing that in relation to the value of a peer credit, if a credit has existed for a long time, that may indicate that apparently nobody was interested in letting it empty out in the settlement of a debt loop. So it's estimated value would decay. This is of course the opposite of a credit gaining value through accumulation of interest.

I'm not sure exactly what that means. :)

But in a way, if all our debts and investments are continuously and actively renegotiated based on the market for debt loop resolution, wouldn't that lead to a more efficient economy?

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