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Comment by lottin | Hacker News Reader

I'm saying that blockchain technology is inherently incompatible with financing, which is the basic and most important function of finance.

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There's no reason why Blockchains can't also incorporate their own trust model to facilitate lending that isn't fully collateralized. There are already projects working towards this. Pseudonymous p2p lending isn't some impossible thing.

The current frothy state of crypto, unsustainable as it may be, is evidence that people are willing to trust crypto projects enough to give them money if there's a chance of getting some amount of more money. Much of this looks like equity financing. Debt financing isn't inherently off limits though it just is harder.

Debt financing is definitely not simply harder but entirely impossible. If you think otherwise, please explain how the borrower can be made to repay the debt with this technology.

Borrowers cannot be "made" to repay debt in traditional finance either. Lenders must make decisions based on some measure of the credit worthiness of potential borrowers. The same mechanisms could be replicated on blockchains. See:

https://docs.truefi.io/faq/ https://teller.gitbook.io/teller-docs/protocol-1/overview

What? Of course borrowers can be made to repay the debt in traditional finance. Get a loan from your bank, and refuse to pay it back. See what happens. If don't understand the basic mechanisms behind a loan agreement, there's no point in continuing this conversation.

> Get a loan from your bank, and refuse to pay it back.

I don't even know where to begin when it comes to examples of just that happening. Defaulting on debt is something that happens with every single form of credit. It's extremely fundamental to the idea of debt.

Nobody says defaults don't happen. Defaults happen all the time. When they happen the creditor will initiate legal action against the borrower. If the borrower continues to refuse to pay or is unable to do so, the court will seize the borrower's assets and will liquidate them in order to pay the debt to the extent possible. This is process is impossible to replicate with a "smart contract" because smart contracts lack the ability to seize assets.

The mechanism for "making" repayment mandatory is the state. Credit worthiness (or any other information) is useless if the debtor cannot be made to repay

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