Greetings Bitcoin People.

 There has been much talk in the threads about Bitcoin based financial instruments lately.  Especially ways to hedge the future price of bitcoin.  For non-Finance types, this means ways to place a bet(hedge) on the projected future price of Bitcoin.  Once you have established the basic mechanism of DEBT and it's enforcement, you can then hedge against either appreciation or depreciation in an asset.

 How to do it?

 The first naive approach to this problem is simply create two transactions sending the BTC one way, and another returning the BTC sometime afterwards.  There is one key problem with this: you can't spend the bitcoins while you borrowed them(creates a double spend).  In order to profit from this scenario, you need to be able to exchange those BTC for USD, and then later buy back the BTC(at a lower price) and then return them(the basic put option).  Thus you might think, why not use other BTC in your account?  sounds clever, but in reality you haven't increased your leverage in this case.

 What is the easiest simplest way to create a loan mechanism in Bitcoin?

 

 -bm