RE: The problem with Cryptocurrency that no one is talking about. Loans.
The current problems with Collateral in terms of physical assets are that they use old fashioned ways for 'proof of stake' as any asset (such as a home/car/things of significant value) currently use receipts and non-digital proof of purchase, I agree that the current system does need to improve but In the future purchase proofs will become digitized (much like receipts changed from written scripts in the middle ages to printed and tagged 'official documents' now.), once these become digitized it will be much easier to put up physical collateral in the form of deeds/receipts with certified digital proofs of purchase.
In terms of debt and debt-obligations I completely agree, the problem today is that even governments are taking massive loans and are themselves in debt and I have no idea how this would be solved even if cryptocurrency didn't take over; as at some point if everyone can just increase their own debt then we will be in a state of hyperinflation from debt and all currencies will become worthless.
For stability, this is mainly because of public perception, people do not think of cryptocurrencies yet as a 'foreign exchange currency' like the rest of currency pairs, they in fact treat it like an asset/stock which thrives on growth and holding mentality rather than necessity of use (Ie. Wanting to go to Europe and needing Euros), cryptocurrencies will begin to stabilize once they are accepted throughout the world as a legitimate form of currency as trading between the pairs will be as consistent as fiat currency and hence the large volumes on both SELL/BUY will cause the massive swings to dampen.
Locikll. Thanks.
Great point about digital proof of stake. I suppose the next step is transferring ownership of the asset as part of the smart contract. Its not enough to know that someone has a valuable asset to use for collateral if you can't be guaranteed that you can use it's value. For instance if I want to lend to someone on the other side of the world, I would need to know who he is, where he lives, what his asset is worth and whether I could sell it. Out of all of these verifying his identity would be the most difficult on the blockchain. There are also issues having everyone's identity linked with their assets and debts on a public ledger. Then of course you would need to know that the law is on your side to reposes the asset. It seems to me that loaning would always need to be done by an agency or institution, which means we are still tied to an authority that has a fair amount of control.
Absolutely, I believe the whole process and regulation of the whole process will be a very difficult thing indeed. Cryptocurrencies are a huge regulatory nightmare as it stands, and I'm not sure if it will be possible to fully regulate and do such things until we have major improvements to how Artificial intelligence operates in our society.