As far as I’m aware, EVE Online has had Loan Contracts before, and it failed, because people abused it by using alt accounts to ship the loaned money to, and then default with the other character.
I am aware that it’s not exactly efficient for a Loan Contract system to ask any kinds of items as collateral. It would have to be something as universally traded of a commodity like ISK, but also not PLEX.
There is a solution to all of this. Also, CCP, this whole idea will very likely increase the demand for skill extractors. Wink wink.
Before we get to the idea, there seems to be an inescapable a downside, which Nevyn Auscent found and informed me:
Intentional failure of the loan contracts between friends or alts can be used as a way to ship skillpoints across EVE risk-free. This problem can only ever so slightly be mitigated by requiring both participants to be in the same station in order to accept the loan contract. While this would essentially avoid teleporting skillpoints from one place to another, it remains protected upon death. That is, risk-free shipping.
There is another downside, which Arronicus informed me, which can be fixed, but will require additional coding:
The risk-reward ratio is greatly off. A loan taker could be risking much more ISK with his collateralized skillpoints, than what the ISK he actually receives from a loan, because if he defaults, the diminishing returns from skill injectors cause the value of skillpoints to go up.
At worst, every skillpoint costs for the loan taker 5 - 6 times more than the revenue the loan giver receives. The biggest problem isn’t that this makes these loan contracts very unappealing. The problem is that it is likely to encourage defaulting players to quit the game.
The solution, however, is to give a defaulted character the option to, for a limited period time of his choosing, insure said skillpoints in their respective skills. During this time, he will be denied from accepting a new loan contract, and is able to receive the lost skillpoints back with skill injectors without diminishing returns (500k per Large Skill Injector), until the amount of lost skillpoints are covered.
The risk-reward ratio may still seem to be slightly off, since the collateral has to take in to account the price of a skill extractor for the loan giver, but that is a non-issue, because the loan receiver is given the privilege to not use one, when accepting the loan contract.
- Skillpoints are used as collateral. Skillpoints must come directly from skills and come back to the same skills after the contract is successfully finished to avoid cheap remapping.
- Only Omega accounts can take a loan.
- Skillpoints cannot go lower than 5 million for any given character (same amount as with skill extractors).
- Defaulted character will be, for a limited amount of time, given the opportunity to temporarily ignore diminishing returns from skill injectors, but only for the specific skills and by the specific amount, which he had lost.
- Introduce a new skillpoint button “extractable skillpoints”, from where you can only extract skillpoints - not use them directly.
They’re a universal commodity just like ISK and PLEX. There is always creation, demand, and a market for it.
ISK we obviously cannot use as collateral in ISK loan contracts, and the same reasoning goes for PLEX. If one can already afford PLEX to cover the expenses plus interest of a loan agreement, why not just sell the PLEX?
And if we used any tradable items as collateral, it would practically just be used as a failed futures contract; an agreement to buy or sell specific items at a specific price at a specific time, but with the exception that this is EVE, and contracts can be violated - even on the last second.
So basically, the same applies for the loan taker: why not just sell them for ISK?
And also, from the loan giver’s point of view: why not just buy them with ISK?
You are essentially just creating a delay, which can be violated/accepted by the loan receiver on the last second of the deadline by either paying or not paying, and there’s nothing stopping them from choosing the choice which is simply more profitable.
Now we get to skillpoints. The same question, why not just sell skillpoints if you need ISK? Here’s the catch. You need enough money to buy skill extractors in the first place, and for many players they cost dearly. Not only this, it greatly simplifies the whole loan contract ordeal by having just one commodity for collateral.
This is a solution to a problem that would be abused, if this didn’t exist. People could make loan agreements with people and fail them on purpose, just for the sake of cheaply sending skillpoints without an extractor to other players. This could also be used to cheaply and completely remap players’ skills.
With extractable skillpoints, you cannot hide from the fact that you still need a skill extractor, and it will cost you, and avoids this mechanic being abused.
Take note CCP, this why the demand for skill extractors would very likely go up. Wink wink.
Important to note: while the skillpoints may be away from the loan taker for the contract’s agreed time period, the Total Skill Points amount does not change. It may even be preferable, that the loan taker doesn’t lose the skillpoints during the loan contract at all, but I’ll leave that for CCP to decide, if this idea ever reaches their attention.
This is to prevent players from using loan contracts as a temporary skillpoint storage in order to cheaply lower their total skill points, use skill injectors without diminishing returns.
Only after the contract has failed and the skillpoints are gone for good, the Total Skill Points amount decreases.
Explanation of the process in detail:
Upon accepting a contract, the loan taker chooses the skills from where the collateral skillpoints are transferred from. A similar mechanic as with skill extractors.
If for any reason the loan taker character is terminated, the skillpoints can be immediately transferred from the contract to the loan giver’s Extractable Skillpoints pool. This is essentially the same mechanic if a courier fails a courier contract before its deadline.
If for any reason the loan giver character is terminated, the loaned ISK no longer needs to be repaid, and the contract is nullified. The collateralized skillpoints are also transferred to the loan taker.
If there are not enough eligible skillpoints to fulfill the collateral, the contract cannot be accepted. The same mechanic as with courier contracts.
Let us assume Alex sees a very lucrative investment opportunity and wants 1,000,000,000 ISK ASAP.
Alex wants to buy PLEX and sell it for ISK, but sometimes people like Alex cannot afford to do so.
Alex could also extract skillpoints of his own to quickly gain that money, but it comes at a cost. Skill extractors cost money, and buying skill extractors immediately and selling the skillpoints immediately will likely lead to losses. Alex does not want and/or does not have the time to look at the price margins of skill extractors and -injectors, and then patiently wait with buy/sell orders of his own.
Not to even mention diminishing returns!
Alex wants the money right here right now.
Luckily, there is John, who is willing to loan 1,000,000,000 ISK for 5% interest (50 million). Let us assume a 3.5% broker’s fee (35 million), so overall a 15 million profit.
For simplicity, let’s ignore small skill injectors for now, and assume that the current market prices are roughly:
Skill extractor: 250,000,000 ISK
Large skill injector: 625,000,000 ISK
To create a large skill injector, it will cost ≈250,000,000 ISK + 500,000 skillpoints.
625,000,000 ISK - 250,000,000 ISK = 375,000,000 ISK.
Hence, 500,000 skillpoints correlate to roughly 375,000,000 ISK, i.e. 750 ISK / skillpoint.
In reality prices vary, and smart John takes this in to account in order to gain a profit.
Let us assume John loans 1,000,000,000 ISK to Alex for one day, expects a 50,000,000 ISK interest, minus 35,000,000 ISK broker fees (3.5%) and as collateral asked for 1,450,000 skillpoints (correlating to 1,087,500,000 ISK).
If Alex succeeds to pay:
Alex opens up his contract, has at least 1,050,000,000 ISK in his wallet, and presses “Finish”.
John receives the money, Alex loses it. Alex gains his skillpoints back in to the very same skills where he took them from (or alternatively just gets to keep the skillpoints, which were never gone in the first place). The contract is now deemed finished. Simple.
If Alex fails to pay:
No matter for what reason Alex has failed to pay, John gains the 1,450,000 collateral skillpoints directly in to his Extractable Skillpoints pool. He will then need a skill extractor to make any use of those skillpoints, such as selling them in skill injectors.
Alex receives a pop up window informing him that he has defaulted on the loan contract, and is given an offer to insure the lost skillpoints in their respective skills. This will allow him to use skill injectors to refill only the lost skillpoints in the affected skills without diminishing returns for the given amount of time Alex chose to insure his skills for.
During this time, Alex will be denied from accepting a new loan contract.
This prevents any attempt of abusing the mechanic.
Why is there an insurance option after defaulting?
Otherwise the risk-reward ratio could be greatly off, because of diminishing returns in skill injectors.
Not only does this make loan contracts extremely risky, but if a player defaults, we would be encouraging him to quit the game, which we do not want to happen.
How John turns Extractable Skillpoints in to profit, an example:
John has received 1,450,000 skillpoints in to his Extractable Skillpoint pool. How exactly he should do this is all up to him, and he should’ve taken everything in to account, including the missing 50,000 skillpoints in order to make exactly 3 x Large skill injectors.
Assuming smart John already had 50,000 unallocated/extractable skillpoints lying around from before as a filler, he then proceeds to buy 3 x Skill extractors, creates 3 x Large skill injectors and sells them for ≈1,875,000,000 ISK total.
His profit? Take the ≈1,875,000,000 ISK
Minus the expenses of skill extractors ≈725,000,000 ISK
Minus the expenses of the earlier 50,000 skillpoints ≈37,500,000 ISK (in accordance to the 750 ISK / skillpoint ratio)
Minus the lost ISK that was loaned = 1,000,000,000 ISK
Minus the 3.5% broker fees paid earlier = 35,000,000 ISK
John’s net profit ≈77,500,000 ISK
- Loan Contracts where the collateral system works near identically with the Courier Contract system.
- Collateral may only be skillpoints.
- Introduce a new skillpoint button “extractable skillpoints”, from where you can only extract skillpoints - not use them directly (used for receiving collateral in case of failure).
- Only Omega accounts may participate in this contract.
- Cannot go under 5 million skillpoints (just like with skill extractors).
- Defaulted accounts are given a chance to, for a limited insurance time period, get back their lost skillpoints without diminishing returns with skill injectors. They will be unable to accept a loan contract during that insurance period.
Please, share your thoughts!