Saturday, December 15, 2007

Wild and crazy 'pinko commie' p2p banking notion

Back in 2001, five years before Prosper launched, Eliot Van Buskirk a senior CNET editor wrote an article about "wild and crazy" peer to peer ideas. Napster and music sharing was what everyone thought of when you mentioned p2p but people were begining to expand on the power behind interacting with peers. Buskirk titled the article My Pinko Commie P2P Notions and wrote, "Just because this architecture has made inroads in the area of music sharing doesn't mean that it can't be used for all kinds of other things. I've come up with a few wild and crazy ideas of my own for using peer-to-peer technology to replace everything from our electricity grid to the bank system. While some of these schemes are more plausible than others, they all demonstrate how powerful the concept of P2P really is. Shockingly, all of these ideas are (gasp) very, very communistic in nature, which might say something about where technology's taking us."

After p2p cell phones, p2p electricity and others he unveils p2p banking:

P2P banking

It's fairly common knowledge that the money in our bank accounts isn't sitting in some vault somewhere. Banks make money by loaning your money out to other businesses and individuals at a higher interest rate than they give you for loaning your savings to them. Instead of using a centralized lending service to transfer money from investors to borrowers, a P2P network in this capacity would directly match up chunks of money with chunks of debt, minus the bank part of the equation. Borrowers would run a node specifying how much money they need, for how long, and at what interest rate. Similarly, investors would tell their software how much they want to lend, for how long, and at what rate. Even though the likelihood of a one-to-one match between an investor and a borrower would be very small, the system would be able to work out complex arrangements to make the whole thing add up. Borrowers might be loaning from 50 different people at 50 different rates that work out to be exactly the deal they're looking for when all the rates are averaged. Likewise, investors might be lending their money to 500 different borrowers at 500 different rates that average out to the figure they specified. The P2P architecture could supplant the banking industry as we know it, with money flowing more efficiently between borrowers and lenders. Banks would no longer be able to charge tolls on money as it passed through their system.

Well, not too bad. I'd say he predicted the p2p lending market pretty well.

(CNET article found via Buskirk's comment on TechCrunch article - P2P Loans GainingTraction. Lending Club Goes Nationwide)


Mike said...

I'm always amused when folks call anything that doesn't have a business 'commie'. This is raw capitalism at it's finest.


Tom said...

Good point Mike.

minimum wage said...

It is privatized collectivism, which is sort of like having the best features of capitalism plus the best features of socialism, without the negative aspects.

Matt said...

I agree that this is how capitalism works. A communist system would be more like forcing everyone with extra money to give (notice the verb give not loan) to those with not enough money.