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Can be resolved I think

It seems kind of misguided to first invent our own currency and then try to reinvent all finance using our currency. If it's important to have stuff like loans denominated in M$, we should really just be using some existing crypto or fiat currency.

@mqp then you have the regulatory burden of dealing in real assets

This is a really interesting idea! People would operate mini-banks. Those who have really good judgment can borrow to increase their earnings faster. Those who have excess capital can lend it to traders — or to an intermediary who acts like a bank and does the coordinating to lend to good traders.

Seems like it would make markets more accurate by allowing capital to flow to better traders.

I don't know how you would deal with those who default on their loans though. Probably you just lose the money if you were the lender. So there's an element of risk, and reputation can matter for the borrower.

One effect is we'd see what the Mana interest rate is (by what banks pay for deposits). Which is also a measure of how easy it is to make gains betting in miscalibrated markets. As markets get more accurate, the interest rate should decrease.

Another effect is that it could multiply the money supply. Banks could accept deposits and then lend most of it out, which gets deposited a second time, which gets lent out again...

It'd be the coolest thing ever to get boom and bust cycles within Manifold. Inflation, then bank runs and depression, haha.

Seems like a killer first use case for mana-based smart contracts (cc: @Austin!)

@JamesGrugett I love almost all of this comment. But as for inflation and money supply and such -- I don't see how that comes into play when the currency is pegged to the dollar. (Except insofar as it's happening with the dollar itself of course.) And being pegged to the dollar is an extremely important feature.

@JamesGrugett Hypothetically we could do this right now "off book" using the Send Mana feature.

@dreev Yup, I think it's counter-intuitive that this would expand the money supply, and I wasn't sure myself.

Let's consider a concrete example.

• Alice transfers M$1000 to Bob who is acting as a bank. She's promised M$10 per month in interest.

• Bob lends out all M$1000 to Charlie and charges M$50 per month in interest.

• Charlie immediately bets all M$1000 at once and loses it to Derek.

• Derek then takes the M$1000 he won and deposits it with Bob (Remember Bob, the bank?).

• Bob lends out the M$1000 to Ezekiel.

• Ezekiel bets all M$1000 and loses it to Frank

• Frank deposits M$1000 with Bob.

At this point, Alice, Derek, and Frank each have M$1000 deposited with Bob, while Charlie and Ezekiel owe M$1000 each to Bob. Bob has M$1000 in reserve.

Certainly Bob would be bankrupt if Alice, Derek, and Frank came knocking to withdraw their deposit at the same time (or if two of them did). But if not, it's true that each of Alice, Derek, and Frank can credibly say they have their deposit, and make deals with people that rely on that money. That's M$3000 of purchasing power, even though "really" there's only M$1000 being passed back and forth.

@BTE is right that this is all possible today by using the Send Mana feature! It's just that it would be very annoying to execute for all involved.

@JamesGrugett Beautifully illustrated, and I'm on board. This is exactly how money is created in real life. We likely have no actual disagreements here but it's confusing so maybe we actually do? Maybe it's just the concept of inflation with a currency pegged to the dollar (again, not counting inflation of the dollar itself) that I dispute? In your example, a bunch of money got created but is there inflation? A manifold dollar remains worth 1 penny throughout all that crazy lending, right?

@dreev I think so. It's also a bit less like a real expansion of the money supply because in the example, none of the depositors can currently use that Mana in prediction markets or donate it to charity. They'd have to withdraw it first. So I'm not actually sure what this means for market pricing or inflation. Maybe there wouldn't actually be any inflation?