Loan Contracts that actually work - an idea

EVE Technology and Research Center Player Features & Ideas
1

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. :moneybag: :wink: :moneybag:

   Downside:

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.

   The idea:
  • 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.
    Tradeable Skillpoints
   Why skillpoints?

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.

   Extractable skillpoints?

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

   Summary:
  • 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! :slight_smile:

2 Likes
2

Looks workable. Did not expect that.

Just to clarify, the person who creates the contract, sets the isk amount and SP collateral amount is the loaner.

The the person who accepts, and subsequently finishes, the contract is the loanee?

I strongly advise against interest rates. They are a tool for the rich to get richer and to gouge, trap and exploit the unfortunate and naive. This is a game.

The loan mechanic should just be a guaranteed method of borrowing isk.

3

Looks workable. Did not expect that.

Thank you! :smiling_face_with_three_hearts:

Just to clarify, the person who creates the contract, sets the isk amount and SP collateral amount is the loaner.
The the person who accepts, and subsequently finishes, the contract is the loanee?

Correct!

I strongly advise against interest rates. They are a tool for the rich to get richer and to gouge, trap and exploit the unfortunate and naive. This is a game.

Very understandable, but I don’t see this working well among players unless there’s a profit.
You would just have to look for good loan contracts in the contracts list or in some loan channel.

1 Like
4

Minor level of abuse.
While you still need an extractor you could use this to channel SP to a single character thus avoiding any logistics issues and risk.

You can have a profit without interest.
Honestly I don’t think that this is desirable in the context of EVE though. The need to trust rather than have the game enforce trust is part of what makes EVE EVE.

5

While you still need an extractor you could use this to channel SP to a single character thus avoiding any logistics issues and risk.

Hmm, that is true. I didn’t think of avoiding logistics and risk.
Perhaps the simplest solution is the best here. Both people need to be in the same station.
I will edit that right in! Thank you.

You can have a profit without interest.

I don’t know how, unless they default and you get the sp.

Honestly I don’t think that this is desirable in the context of EVE though. The need to trust rather than have the game enforce trust is part of what makes EVE EVE.

I am sorry for the long post, but I really want to give you this for perspective.

I am the type of player who has grown to like trading and courier contracts in EVE. I enjoy EVE Online, as opposed to other games, because it’s risky and there’s many different ambitious opportunities. You can set up a stargate camp with a small group of bandit friends, or even set up a self organized corporation in null sec if you’re ambitious, and a whole lot more.

Other games like making things too risk-free, PvP being optional at most, and restricts trade so that the power of the wealthy is kept in check. From the get-go, all game currency in this kind of a game feels worthless. It’s either kill monsters, get better loot, kill better monsters, repeat - or it’s about chopping trees to get exp for levels so you can chop better trees. You feel me?

I want a sense of real victory, and grinding my way up in the food chain so that first I’m a miner, then I can afford to be a hauler, and then I am the one employing haulers, etc., gives me that feeling. Outsmarting people also gives me that feeling. Winning in PvP too - not to even mention about being able to organize a sizable corporation, that’s immensely ambitious and would feel great to achieve.

That’s what makes EVE EVE for me, basically.

And then one day I thought that why is EVE limiting trade in the way where you can only collateralize ISK in exchange for items, but not the other way around? I heard some reasons from users why it’s not a thing, but it still felt limiting, and that’s where the rabbit hole to this whole loan system began for me.
This would by no means be risk free still. Loaners would likely operate with small profit margins, and market changes in skill injectors/extractors can quickly turn in to a violation of contracts and a loss. You may see all of this as enforced trust, but all these contracts can be violated at will, and people will find ways.

Sorry for the long post again, turned in to a vent :sweat_smile:

1 Like
6

For the entire time of the contract? It’s impossible to sensibly close this loop hole, clone jump together, get it all set up to funnel to a single character who then has it in a safe pool that can’t be touched till they fly to Jita and do it all in 4-4. Or whatever station they pick.

No need to apologise for the long post, but I don’t see how this addresses what I said.

7

For the entire time of the contract? It’s impossible to sensibly close this loop hole, clone jump together, get it all set up to funnel to a single character who then has it in a safe pool that can’t be touched till they fly to Jita and do it all in 4-4. Or whatever station they pick.

I may have misunderstood. If the problem is safely sending skillpoints across EVE by purposefully violating the loan contracts with your alts, while there’s a high skillpoint collateral, then just accepting the contract in the same station makes that goal kinda useless. You would already be in the same station, so you could just as well extract the sp there and trade the skill injector to your alts directly - or vice versa.

Think of it like already giving the sp as collateral hand-to-hand and face-to-face.

8

If you were wanting to send it to your alt yes. But you would still need to send them all to one of the trade hubs to do so. Even if we add an ‘in same station’ limit you could do it in your WH and then only take the one character out of the hole to market.
And if you want to sell it all, the same applies.

10

Perhaps my approach with the new skill point button was a wrong one.
The immediate solution, yet a wrong one, that pops in to mind, would be to have the extractable skillpoints be an item instead, which you risk losing upon death, which also nullifies the contract. I think it could remain lootable still.

However, this causes an interesting situation where both participants could violate the contract for their own gain at will at anytime. In that case, having a contract at all seems irrelevant. It is essentially just trading the said item in exchange for ISK, and making a promise for the future.

The only change from the present would be that the one to offer the skillpoints won’t need a skill extractor.

Oh dear… have I failed?

11

Not entirely, it was probably the best least abusable proposal I’ve seen around contracts. At a certain point you can just accept certain loopholes in a mechanic as good enough, and this one might be inside that range.
But to me this is where my second point kicks in. EVE is a game about people, if we have perfect contracts then you no longer need to interact and get to know people. And that is a big loss to the game.

1 Like
12

it was probably the best least abusable proposal I’ve seen around contracts.

Thank you for the cheering words, I’ll try to come up with a new better system in the future.

But to me this is where my second point kicks in. EVE is a game about people, if we have perfect contracts then you no longer need to interact and get to know people.

Wouldn’t courier contracts fall under that category as well? The collateral ISK is untouchable, and there is a deadline that cannot be prolonged.

13

To a certain extent yes. But a courier contract the risk is actually taken on the courier side, who has to vet potential clients for scams, and research routes for gank risks. So substitute the courier for the loan/bank and now you should see the similarities.

15

I mean, skill extractors can be used remotely no? I feel like the slice of alts being used as skillpoint farms and can’t clone jump to Jita once a month is pretty narrow. I think if CCP considered teleporting skillpoints a problem then you wouldn’t be able to remotely inject.

All in, this seems like a good idea. Have you considered allowing the skillpoints to be still used by the debtor but unable to be extracted until the debt is either paid or defaulted on? I feel like that would make an even more attractive proposition since that player can take out a loan for something that he needs skills for but still secure his loan against them.

1 Like
16

This seems abusable.

Temporary titan skills.

17

How so? You’d still have to train into said skills and once you default the lender needs skill extractors to get the SP into a usable form, no?

18

The idea is interesting.

One aspect I don’t like is the fact that a RL monetary transaction has to be involved, the purchase of an extractor. It is little different than CCP saying “Only plex can be used to secure loans”. Loans and such transactions should all be “in the sand box” and not tainted by the real world, as it were.

If there were a new system, that for the purposes of loans, SP could be saved to an escrow of sorts, perhaps that would be better and keep it in the sandbox.

19

Oh i see. Forgive me. Despite my education in accountancy it’s honestly been that long since I’ve used the term debtor.

20

I’m not a fan of this idea at all.

Why? Three reasons, two of which are closely related:

  1. The maximum amount of isk you can borrow is capped by your skillpoints. This means a very wealthy player with only say, 30 million skillpoints, is limited to borrowing much smaller sums of isk, even if they have vast sums of isk in eskrow and assets.

  2. Like 1, it hard caps the amount of isk that you can borrow, to the amount of unnecessary skillpoints you have. Say you have 50 million skillpoints, and you do perfect refines for your corporation, and you fly a rorqual, giving max boosts. Right there with those two things combined, you’re around 50 million SP. Your ability to borrow would be extremely small, not because you don’t have assetts worth much, but because you don’t have SP you can spare without giving up what you play to do.

  3. The risk/reward is all wrong. Say you take out a loan for 50 billion isk, and you make a good investment, you make say, 10 billion off of it, great. You’re ahead 10 billion. But if that investment goes sour, which can be for reasons entirely out of your control, and you lose 10 billion, you’re not now 10 billion short. You’re short YEARS of skill training, to the tune of all the SP it cost to collateralize the loan, and even if it’s fragmented, you’re down the 10 billion worth of SP. Replacing that SP would cost far, far more than 10 billion, for an older character like myself who gets very little isk from injectors.

Risking the ability to even use ships, perform industry roles, giving links, etc, as the only form of collateral is just plain bad, and I’m shocked you’re not getting much blowback on that.

Let’s not forget that this will also lead to really risky gambling. People who don’t know what they’re doing, and don’t have the collateral to support large loans, will all of a sudden have more collateral than they did before. Now, with this implemented, they’ll take out a loan they can’t afford to default on, something will go wrong, they’ll lose months (or years) of training time, and quit.

21

Thank you! I didn’t think of that, silly me. Yeah! It turns out that the downside isn’t really that much of a downside after all. All that it really enables, assuming you wouldn’t need to be in the same station to accept the contract, is that you don’t have to jump clones to give the skillpoints, which can save some ISK. But that’s hardly a problem anymore :smile:

This seems a bit counter-intuitive, as it would be collateral yet still usable, but it is possible I think.
I am not completely sure though. I’d leave that for CCP to judge, if this idea ever reaches their attention :smiley:

22

I’m trying to not overcomplicate this much, but basically the need for a skill extractor is there for the purpose that there is still the cost of the extractor that you need to take in to account, so you can’t abuse the contract.
You could still use ISK to get the extractor from the marketplace, but considering the EVE economy overall, it would result in more real life money overall being spent on skill extractors, as the market may fail to catch up with the demand for them.
And the cost of turning the skillpoints in to an injector has to be exactly either what the market demands, or what CCP demands in real life money, to avoid circling around their costs one way or another. I’m not sure if an escrow of sorts could be used to counter this, shamefully :disappointed: