I haven't put too much thought into the details of this, but do I understand it right, that the borrower will never give up 100% control of his account? What I'm trying to understand is, how decentralized is this actually (I mean obviously apart from the fact that we don't have smart contracts a la Ethereum so there will always be some centralized server somewhere)?
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The borrower relinquishes 100% ownership of their account during the lending contract duration until all outstanding balances are paid. At this time the borrower will be allowed to retrieve their owner keys. This is where the term "account as collateral" comes from, as you're using your account and the value locked up in it as Hive Power to essentially insure that the loan is paid in full given enough time to power down.
The decentralization comes into play due to the fact we're using built in functionality of the decentralized blockchain in order to set up an environment in which the lender has zero possibility of losing their capital being lent out and the borrower, knowing fully well that the process of being eligible to even accept a loan contract involves not only having a whitelisted recovery account selected at least 30 days prior to accepting a lending contract but also that they'll have to hand over their account ownership completely.
The borrower gets access to the posting and active keys of the new set generated by the Hive.Loans service to take ownership of their account so they can keep posting and whatnot.. But the higher account functionality will be blocked and any attempt to circumvent this will be met with the borrowers account being locked down until the lending contract is repaid plus any contract tampering fees incurred.
Ah okay I see. I'm just trying to understand the risks involved for both parties. Let's say your server was hacked, there would be the possibility for the attacker to steal the account of a borrower. But you still have the requirement to set the recovery account to a trusted account and you know the new owner key of the borrower account, so you could recover jt right? But - purely theoretically - you could wrongfully take over the account of the borrower and he couldn't do anything about that, or not? Actually, now that I think about it, it can't work any other way, as long as the blockchain doesn't have a way to know whether the debt was repayed.
All account keys and sensitive data collected by the Hive.Loans account key custodian are going to be hashed and salted with encryption to make it incredibly difficult for a hacker to do anything with data obtained in the event of a server security breech.
Once the Hive.Loans account is set as your accounts recovery key you'll be able to use it for free whenever to recover your account keys assuming you don't have an active lending contract outstanding.
Debating the idea of leaving "breadcrumbs" on the blockchain to serve as evidence of functions going on with the service which would also have the side effect of allowing future decentralized incarnations of the service to replay up to a reproducible block state for all future clients.