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You can use credit with Bitcoin for a variety of purposes, including making and accepting loans, establishing reputations, transferring value, and more.

There are two big reasons that borrowing or lending can be considered not very smart:

  • Bitcoin is extremely volatile.
  • Bitcoin is a bearer asset. "Not your keys not your coin."

Bitcoin credit

Any time a financial transaction takes place which leaves one party more obliged than the other, the obliged party is extending credit to the obliging party. This allows groups of people and organizations to cooperate even when their resources and needs are spread out over time and can be a highly valuable activity.

You can of course always lend or borrow Bitcoins casually with your friends, but when interacting with more distant social connections or for larger amounts, you may want to make use of a credit service. Such services can help you keep track of credit balances, interest rates, and amounts, and other figures, while providing many useful features such as credit score reports or even credit exchanges using Ripple routing.