Peer to Peer lending is a natural fit for peer to peer money. Borrowers and lenders connecting globally to do finance across the globe without a middleman besides a platform. It sounds great on paper, but has run into some road blocks in practice.
P2P lending in Bitcoin has actually been around quite some time. In 2012 BTCjam.com started off the P2P Bitcoin lending industry with a boom. Having raised significant venture capital and launched with a easy to use profession platform BTCJam grew quickly. However, they learned the hard way the banking with a 100% custodial and extremely volatile asset like BTC is not so easy.
Banking with Bitcoin is different than the way fiat loans work. There isn’t a standard digital identity or credit system, so, there is a very high incentive for scammers to take out loans and run with the BTC. BTCJam and BitcoinLendingClub.com learned the hard way wand both were closed.
The current Bitcoin P2P Lending industry is dominated by 2 players, Bitbond.com and Btcpop.co. Both have had to adjust their strategies following the rise and fall of the P2P lending industry (and Bitcoin’s price).
- Bitbond chose to go down the fiat route, denominating most loans in EUR or USD and focusing on small businesses.
- Btcpop chose to focus on cryptocurrencies implementing POS staking, an altcoin exchange, and other cryptocurrency related features.
How P2P Bitcoin lending works
Peer to Peer lending with Bitcoin works the same as other P2P services. People with money that want to lend it and earn interest connect with others that want a Bitcoin loan and are willing to pay interest. Which essentially cuts out the bank/banker in the well known fiat model. It is sort of like taking a loan from your rich uncle, but instead of your uncle its others around the world.
Borrowers have to verify their identity and work to prove their credit worthiness. They can do this by verification, linking accounts, or slowly building a repayment history like you do to build your credit rating. They then publish their loan on the platform and anyone from around the world can act as an investor and invest in their loan listing. Usually there are no set limits so investors can invest as little as .001 Bitcoin or fill the whole thing if they want. Once enough people invests and fill the listing, the borrower can then activate the loan. Once activated the borrower gets the Bitcoin, and the timer starts ticking down for their payments+interest.
P2P lending sites we looked into:
➜ Btcpop.co
➜ Bitbond.com
➜ Credible Friends
Btcpop.co
Around since 2014, Btcpop.co has been doing P2P Bitcoin lending for quite some time. Though it hit some rough patches and went through a management switch once Btcpop was able to survive through the booms and bust of P2P Bitcoin lending and Bitcoin’s Price.
Btcpop takes the free market approach for its P2P loans. Allowing borrowers to list completely customizable loan listings. Btcpop’s main feature, and likely the reason it was able to survive market cycles is Altcoin collateral for Bitcoin loans. So users can back their loan listings with other crypto assets such as Ethereum and 100’s of others.
If the borrower doesn’t repay, their collateral is liquidated on Btcpop’s exchange and applied towards their defaulted payment. Investors are also able to sell their investments (called notes) in P2P loans to other investors at a discount so their is some liquidity.
Btcpop’s P2P Bonds act a lot like P2P loans except the terms are like that of a bond with set number of bonds, optional coupon interest payments, and principal plus interest due on bond maturity.Btcpop has many other additional features besides P2P Bitcoin loans. Such as instant loans, P2P stocks and bonds, altcoin exchange, savings account, and even cloud mining.
Verification
➜ Borrower: ID, Address, letter in mail
➜ Normal user/investor: None
Fees:
➜ 1% Listing Fee on loans
➜ $2 Verification free for postage
Go to ➜ https://btcpop.co/home.php
Then click on "view fees" for more info
Terms:
➜ Completely customizable .01 BTC to 500 BTC
Other Loans:
➜ ETH, BCH, LTC, and Stablecoins (DAI, TUSD, USDC) planned for 2019
Borrowing Process:
➜ Btcpop is pretty easy to use. Sign up, verify and then you can list your loan offering. Verification consist of Photo ID, Address Verification (document and letter mailed to your address). Optional verification connecting social media accounts.
Listing your loan can be a bit intimidating as there are no set terms. However, the community is helpful and gives lots of feedback on loan listings and you can adjust from there. But, from what I can tell most loans don’t get funded right now without 50%+ collateral.
Investing process:Deposit Bitcoin, do your research, and invest freely at your own risk. Very quick and easy.
Good:
➜ Low fees
➜ Custom terms
➜ Collateral
Bad:
➜ Takes some trial and error for listing your loan offering
➜ User interface is clunky
Bitbond.com
Bitbond was funded in 2013 and started out as a Bitcoin P2P lending service. Their original service looked much like the Btcjam and Btcpop model where loans were taken out, denominated, and repaid in BTC. Individual investors invested in individual loans and received interest directly from repayment.
Bitbond still allows this service but it is much more refined. Borrowers and lenders do not even get the same UI. When signing up you pick to either be a borrower or a lender. To my knowledge an account cannot do both.
Bitbond then makes heavy use of auto investing compared to P2P investments which are still available just not utilized much. Lenders borrow to a diversified pool picking high, medium, or low risk and borrowing from 3-12 month terms.
For borrowers the service is very hands on. Borrowers apply and are vetted by their own loan servicer. Borrowing seems to be based heavily around small business and fiat denominated loans just using BTC as a payment method.
Verification➜ Borrower: ID, Address, video verification, business financials
➜ Investor: ID, Address, video verification,
Fees:➜ 2-3% Loan origination fee
➜ .01%/day late payment charge
➜ repayment fee kept(investor side)
➜ 3 months term loan 0.5% of the repayment amount
➜ 6 months term loan 0.7% of the repayment amount
➜ 12 months term loan 1.5% of the repayment amount
Terms:➜ Depend on financials with interest rates starting at 9%
Other Loans:➜ USD, EUR other fiat currencies
Borrowing Process:➜ Sign up, verify, share financials and other information then work with your loan servicer to find a loan that works for you.
Investing process➜ Sign up, Verify, and then choose your auto investment strategy which consist of risk, length, and geographical areas. Or wait for P2P loans to fund and fund them directly. Most all investing is done via auto investing.
Good:
➜ Professional website
➜ Regulated and access to fiat payments
➜ Available globally
Bad:
➜ Not much emphasis on P2P loans
➜ Not much customizability and less freedom of choice
➜ Not much emphasis on Bitcoin
Credible Friends
Credible friends is a extremely P2P service based on a mobile app. There is not much of a platform or market for loans its is basically a platform for borrowing Bitcoin between your known friends. For comparison sake it doesn’t really compare to Btcpop or Bitbond but its a cool P2P service and we wanted to share it.
Wrap up
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