Topic: Kernel-secured loans

It would be great if we could develop player-built mechanisms that allow cooperation for mutual benefit. Several CEOs said they were mildly interested in dutch auctions for corporate bonds, but there was insufficient interest; the largest and most reputable corporations are also not set up to accept public investments and grow them.

However, I can offer individual-to-individual secured loans. The collateral for a loan ought to be something which can be priced and easily liquidated at that price, and something where there are real incentives not to liquidate. The best collateral in this game is stacks of kernels.

A manufacturer has startup costs; decoder+prototype, plus materials and nic for the first run. Similarly, a researcher who currently has something researched to 100% and a customer may still need materials and nic to fill the order. A miner or transporter may want a larger bot and expect to be able to pay the loan off faster using the larger bot. One possibility would be to farm kernels, then sell to NPC demand.

I'm offering a better possibility - trade kernels to me at the infinite NPC price. I will keep them in a storage folder, and only liquidate them (by selling to NPC demand) if you do not pay the original sum back plus interest.

Talk to me in-game for details, I will generally be at Asintec Alpha. Also, I encourage you, if you trust someone else more than me (for example, your CEO?), ask them to give you a kernel-secured loan; it's a reasonable deal on both sides, and secured loans are just the start of the player-built social structures we can build.

Re: Kernel-secured loans

im confused,.. so what u want is instead of people selling there kernals to the npc they give them to u and u give them cash and then they have to buy the kernals back off u + intrest?

Re: Kernel-secured loans

Exactly, Excel - like a pawnbroker. Loans are tricky, and not easy to price (that is, interest rate is correct?) You have to know what you're doing to benefit from buying/selling loans, on both sides.

Here's a scenario: A new player wants to get into doing transport assignments, as part of working their way up in NIC and rep. In order to do that they need a Sequer. Their fastest means of making money is to farm kernels. They could farm up enough to buy the Sequer, and then sell them. But that's kindof a waste if they wanted to research those kernels personally or give them to a researcher alt or a corp researcher.

So they could farm up the kernels, then take a loan secured by that kernel stack (basically, the collateral is a protection against the new player ripping me off), and buy the Sequer, then make the principal+interest back using the Sequer, and terminate the loan in exchange for their kernel stack.

In this scenario, the loan is a way of buying the Sequer using transportation assignment nic, even if you're a new player without a corp that might just give you a Sequer or money for a Sequer.

The risk for me is kernels falling in price substantially, possibly due to devs changing NPC buy orders, and the player not doing the second half of the deal. The risk for the customer is me breaking my promise to keep the kernels available for the duration of the loan.

Re: Kernel-secured loans

Dutch auctions could fail for all the same reasons that you alluded to in the IRS investment thread. (just change the names)

Despite your suggestions elsewhere that IRS might be a small alt corp we are not.  In terms of size IRS is currently 2nd tier behind AXE, M2S and ECORP and we are growing.
Evidence - http://www.perpetuum-online.com/~gargaj/

Our internal structure is capitalist in nature and we ARE set up to accept public investments and grow them.  Link to a horribly derailed investment thread.
http://forums.perpetuum-online.com/topi … st-in-irs/

In general I'm opposed to secured loans.  Where a liquid market exists the borrower is better served by selling and buying back what would be the collateral through the market. In the absence of liquid markets the lender takes on the liquidation risk warranting a prohibitive cost of borrowing.

The borrower receives less than value, if not the lender losses the time value of the loan in the event of default.  If selling into the market, instead the "borrower" receives full market value and if they have the patience to place orders may profit on the spread.

Using 3rd star light robot kernels as a current example.
infinite buy - 10800
best bid   -   12000
best ask  -   14000

So assuming 10 kernels with an infinite buy value of 108,000 and a discount rate of 10% over a fixed period the Present Value (most I could borrow) is ~98,182.

Or the same 10 kernels could immediately be sold into the market (at 5% tax rate) for 120,000*.95 = 114000, that is 16.1% above my borrowing power. (16.1% less time spent kernel farming)

Buying back the kernels at market would result in a net borrowing cost of 22.8%. However, assuming I didn't need those kernels right now, I could split the bid/ask with a buy order @ 13000 per kernel with a resulting cost of borrowing of 14%.  Yes 14% is higher then 10% but I have absolutely NO time constraints on when or even if I must repay the loan to avoid default (losing all of my kernels at a sub-market value) plus the time time that I didn't spend farming kernels to secure my loan has value that IMO exceeds the price of a kernel.

Finally assume IMO the most likely scenario, I place a sell order and cost average out at 13,500 over the course of a day (while I'm farming more kernels, BS'ing, PVP'ing, enjoying my time, whatever). I put 128,250 in my pocket and at the end of the period cost average back in at 12,500/per=125,000 and rather than paying interest I book a gain of 2.6%

Anyway, I may be biased but I just don't like secured loans unless the borrower retains use of the collateral as in a mortgage or lease, but those rely on legal ownership structures that don't exist here so, we're back to issues of trust

"You're living in a parallel universe." ~Syndic

5 (edited by Artem Blue 2011-01-08 23:32:04)

Re: Kernel-secured loans

You're entirely correct, unsecured bond offerings are risky - I hope more corporations arrange to accept investments and grow them like IRS, and that investors investigate closely so that honest dealers gain advantages - lower interest rates, for example - from their honesty. Despite the risks, I endorsed the IRS offering.

Ember, if there is a liquid market with both buy-side and sell-side, I completely agree regarding selling the collateral and buying it back. My impression was (when I posted this) that people were buying, but not selling kernels. I could be mistaken, or it's possible the situation has improved since.