Potential Interest Rate Swap use case in Cardano

Hi everyone,

Here is a quick video sharing some of my thoughts of potential use cases using Plutus. In this video, I discuss interest rate swap contracts.



In my opinion an interesting use case, however will the staking reward compensate for the volatility? Sometime in the future maybe, but right now I think the volatility would be greater than the potential reward.
No expert in anything though :see_no_evil: so just some critic which came to my mind to get some discussion going :sweat_smile: .
To be honest Cardano needs way more ideas like that so that they can be discussed, tried out and maybe some of them will prove to be a real use case…this certainly sounds interesting and logical to me, but it is quite far in the future when this would be appliable imo. Kudos to you for this contribution/idea!

HAPPY NEW YEAR :tada: :tada: and 2019 is the year of CARDANO according to chinese calendar :joy:

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100% agree with you. This is speculative at this moment. Volatility makes this impossible in the current markets. Mature markets will look different in a few years. It should be interesting. Happy new years to you as well. :grin:

interest rate swaps are used to take care of vola. one party pays the other a premium to not have to deal with fluctuations. I can talk about this and other topics at length from a financial professionals point of view.

Let me know if you have any questions.

Happy new year!


I do not like interests, that’s the cause of everything we can see in our current world. Earning money without work for it, that’s non-sense. Luckily Physics and therefore our Nature do not work like this.

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It is a widely held misconception outside finance or capital markets.

You get a return for saving your money and for taking risks with it to drive businesses and innovation. Nothing is guaranteed. You may lose all of your money.

Without capital that tries to earn returns by taking risks, much of what we know and enjoy wouldn’t exist…

Finally, the market determines your rate so you either take it or not, meaning you, as an individual, have a choice to spend all your money and/or not make loans or sell equity in your company. You can give away your money for free, but that wouldn’t last long :wink:

I’d like to know how things would work in your “interest-free” world.

It depends on which economic schools (Keynesian, Austrian, classical, monetarism, supply side, national socialism etc. etc. etc.) you were grown up. More schools studied in deep, then more broader view. If you stuck/believe in one or very few then you’re thinking inside the box.

If you understand math, therefore, you must clearly see what a graph shows based on interests and therefore cumulative interest. That’s why we need cycles. If that’s good for you, that’s ok, but it does not blend the deep truth (laws of nature/physics).

Check “The Wörgl Experiment” for start. I do not want to argue to anybody as I always try to avoid being involved in any “Intellectual who’s d*ck is the bigger one” game.

Of course, if we assume that interests can only be positive.:slight_smile:

In your world am I allowed to charge someone for the use of my car?

Of course, as that’s not an interest ( Interest is the cost for borrowing money or the payment for lending money. From wiki).
Watch the Goldsmith’s Tale for clarification, very entertaining.:slight_smile:

The issue /w the interest and therefore cumulative interest is the exponential growth nature which cannot be sustained. And the biggest issue is that the money converge to a few by the time, means centralisation of money and therefore power (money power), corruption (keep that power).

You forgot to take into consideration the risk. Governments, banks, individuals go bankrupt lending money at the wrong time to the wrong entities. Or simply miscalculating risk premiums.

It’s not like I have money and I charge you interest and live off of you for the rest of my life. People default and move on. It happens more than you think.

Read about the Worgl Experiment. Interesting. But in that experiment the mayor actually introduced inflation whereby increasing the velocity of money. This is what happens in real economy. That experiment actually supports Keynesian view that allows for economic stimulation via printing money in Economic downturns.

Anyway we can take this discussion private and talk a bit more.

We can agree the problem w/o agreeing the solution. Being able to lend you my money and get some compensation are fundamental, just like you let me use your car for the day for $25 (it’s not a great car). :grin:

No, I did not, and I indeed wrote abt it in my prev answer to you but removed before submit.

Yes, but the compensation can be different than those ones we got used to it.
Just a quick and simple example.
There are two contradictory properties of the money:

  1. The Store of Value (incentive to save or borrow) and
  2. the medium of exchange ( incentives of using it, means selling/buying necessities or other stuff).

Imagine a negative interest rate and two bank accounts. One for the store of value and one for the medium of exchange. If you do not sell or buy, your money in the MoE account, then it will lose its numbers and not its value by the time (so that has nothing to do anything /w the inflation, different roots).
Means incentives of using it, therefore, spending/buying → increasing the velocity of the money (economic growth).
But, if you transfer it to the store of value account (for a certain lockup period to that global basket for lending everyone’s money), then it won’t be punished by the negative interest (means 0 interests whihc is tha max int this system). Incentives to lend from the lenders and incentives to borrow from the investors/borrowers.

Banks still will do risk assessments, and they will earn similar interests (risk taking) as today. As 7%-3% and -7±3% is 4% growths anyway.

So, it’s just a simple shift down everything below to the 0 y-axis, which becomes to an f(x)= -1/x like function instead of the current f(x)=e^x.

So its graph will show a converge nature to the zero, while provides similar economic growth. This example is very oversimplified and is bleeding from a lot of wounds. But, it’s simple enough to give you some hints.

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