bitcoins and P2P lending

[NyeFe]

I've been delaying writing this topic for a few days, but I'm sure its time to talk about it.

Before I begin, I'd be very interested if people could provide statistics of the amount of users who make some sort of re-payment after P2P lending has occurred.

With that said, I've seen that its almost impossible to guarantee, or even enforce users to keep up with P2P payments, after an agreement has been reached. It's even easier for them to create new accounts, and purchase any other prerequisites which is need to highlight integrity.

P2P lending is a great way to invest in talent, businesses and products. Its also a good method for passive income. How can we improve this, to provide more integrity and assurance both for the investor and investee?

[Wind_FURY]

The problem is what type of digital collateral would be the most acceptable for P2P lending online? We already are doing P2P lending in real life when we lend money face to face with our friends. In the Bitcoin world it could be done in a massive scale with strangers online, but again the problem of guarantee of payment. If you can answer what digital collateral is acceptable by all, then P2P lending will be easier to do.

[mocacinno]

The only experience i have was a small test i did depositing 0.05BTC to btcjam little over a year ago.

I made (very) small investments into 12 projects.
I allways made sure the borrower had a good rating, i liked the project and the loan wasn't suspicious (suspicious, for example, are people that have repayed 5 BTC in the past, and suddenly try to take a 50 BTC loan).

After a year, i stopped my exeriment with the following statistics:
Net return: -21%
5/12 borrowers defaulted, 1/12 is more than a month late (so in the end, i suppose 50% of the borrowers will have defaulted on their loans).

I've depostited 0.05BTC, and i've withdrawn 0.032792 (using 3 transactions, each transaction requires a fee). Substracting the fee of 0.0003681 I payed when funding my account, i can say:

I have sent 0.05 BTC to btcjam, after a year and after both deposit and withdrawal fees, i have a total return of 0.0324239. So in the end, i've lost both a year of my time and 0.0175761BTC by investing on a p2p lending platform.

[MadGamer]

It's 100% dead If we speak about platforms like BTCjam or Loanbase, those websites takes documents and your online accounts and give you a grade based on those informations which could be inaccurate or even fake and of course , anyone who use fake info is ready to run with the funds and don't look back . Loaning on Bitcointalk is much better where most of the users give a collateral and you can spot most of the scammers just by looking at their trust profile or their posting history.

[NyeFe]

The problem is what type of digital collateral would be the most acceptable for P2P lending online? We already are doing P2P lending in real life when we lend money face to face with our friends. In the Bitcoin world it could be done in a massive scale with strangers online, but again the problem of guarantee of payment. If you can answer what digital collateral is acceptable by all, then P2P lending will be easier to do.

You have a very good point here - finding the right collateral. Now, since this'll be an online/virtual service, all physical options aren't available. Personally, having access to local debt collection agencies could help us encourage users to make payments.

I also think we should have a "crypto credit score" database, which collects data from different P2P lending websites, and produce unique data and score for each user.

It's 100% dead If we speak about platforms like BTCjam or Loanbase, those websites takes documents

Now this means, having KYC documents and info from each platform, and making them available to other verified lending companies, who can use it to prevent identity theft, ....

[bittraffic]

I was also interested to get a loan from btcjam months ago. I just don't know if i can risk exposing myself there and put my facebook account
If altcoins can be accepted as collateral, it may just work of the users. Saw some users offer their tokens as collateral.

[deisik]

The problem is what type of digital collateral would be the most acceptable for P2P lending online? We already are doing P2P lending in real life when we lend money face to face with our friends. In the Bitcoin world it could be done in a massive scale with strangers online, but again the problem of guarantee of payment. If you can answer what digital collateral is acceptable by all, then P2P lending will be easier to do.

There is a proverb in many languages which basically says that you should never lend money to your friend if you don't want to lose both (for example, "short debts make long friends" in English). Regarding collateral for a loan which can be used online, I can only think of a high-ranked high-trusted account on this forum, either serving as a collateral itself or the trust of it. I mean if a borrower defaults on a loan, he will be given a negative trust which he may not quite like. Needless to say that a collateral of this kind would be obliging only to those who care for their trust (for example, long term forum members or participants in high paying signature campaigns here)...

I'd like to hear about other forms of collateral which can be used online too, provided there is any

[yayayo]

I don't have any actual statistics, but I would tell from observation that default rates on Bitcoin loans are the highest in the industry. The reason is the naivety of lenders, who don't demand sufficient collateral. Lending Bitcoin without sufficient collateral is the same as donating. Requiring ID and proofs of solvency are not a sufficient replacement for collateral, because these can be easily faked or obtained via identity theft.

Using a service like BTCJam is sure to generate a negative return, because they rate the quality of loan request solely on identity information and do not require collateral at all. If you really want to enter the high risk lending business you should verify each loan request yourself and always demand collateral (for very small amounts at the very least a high-ranked Bitcointalk account).

In general I consider lending not worth the effort. The risk is too high and the potential return is too low compared to the effort it takes.

ya.ya.yo!

[Oilacris]

The only experience i have was a small test i did depositing 0.05BTC to btcjam little over a year ago.

I made (very) small investments into 12 projects.
I allways made sure the borrower had a good rating, i liked the project and the loan wasn't suspicious (suspicious, for example, are people that have repayed 5 BTC in the past, and suddenly try to take a 50 BTC loan).

After a year, i stopped my exeriment with the following statistics:
Net return: -21%
5/12 borrowers defaulted, 1/12 is more than a month late (so in the end, i suppose 50% of the borrowers will have defaulted on their loans).

I've depostited 0.05BTC, and i've withdrawn 0.032792 (using 3 transactions, each transaction requires a fee). Substracting the fee of 0.0003681 I payed when funding my account, i can say:

I have sent 0.05 BTC to btcjam, after a year and after both deposit and withdrawal fees, i have a total return of 0.0324239. So in the end, i've lost both a year of my time and 0.0175761BTC by investing on a p2p lending platform.

Very sad to hear  on  your experience on  btcjam and i could   say  that  it was   totally useless on waiting for  a year   and you  gain negative profits   which is somehow  injustice for  us on  our   part. Id thinking  this  thing also  on the past which  i decided  to  put  up  money  on  btcjam for  this lending  investments  but  i do  some research first  and i found out that this  kind of   investment doesnt  work at all and the risk  is high thats why  i decide not  to proceed.

[talkbitcoin]

lending is based on trust and without it no one can even think about doing it and since bitcoin is providing some level of anonymity and it is all done online, that makes it all hard.

that is where collateral comes in and also brings about so many other problems again with trust that you are handing over your valuables to someone else to hold and not abuse.

[deisik]

I was also interested to get a loan from btcjam months ago. I just don't know if i can risk exposing myself there and put my facebook account
If altcoins can be accepted as collateral, it may just work of the users. Saw some users offer their tokens as collateral.

It is assumed that the amount you obtain from selling the collateral in case the borrower defaults substantially exceeds the amount you have lent out. Pawnshops usually require that the collateral was worth up to a few times the amount borrowed. In this manner, you will have an incentive to return the borrowed funds (and pay the interest), and, at the same time, the pawnshop broker will not have to sell your collateral, which may take time and require effort. So there is no rational reason to use altcoins as a collateral unless the guy that you take a loan from is a total dumbass to accept these coins if they are worthless...

Otherwise, you could just outright sell them and get the funds you need

[Ayers]

I was also interested to get a loan from btcjam months ago. I just don't know if i can risk exposing myself there and put my facebook account
If altcoins can be accepted as collateral, it may just work of the users. Saw some users offer their tokens as collateral.

It is assumed that the amount you obtain from selling the collateral in case the borrower defaults substantially exceeds the amount you have lent out. Pawnshops usually require that the collateral was worth up to a few times the amount borrowed. In this manner, you will have an incentive to return the borrowed funds (and pay the interest), and, at the same time, the pawnshop broker will not have to sell your collateral, which may take time and require effort. So there is no rational reason to use altcoins as a collateral unless the guy that you take a loan from is a total dumbass to accept these coins if they are worthless...

Otherwise, you could just outright sell them and get the funds you need

maybe you don't want to sell them because you believe that they will have a better price in the future, so that is a reason to use them as a collateral instead, but due to the high volatility compared to bitcoin like you said you need an amount that is bigger than what you requested

[deisik]

I was also interested to get a loan from btcjam months ago. I just don't know if i can risk exposing myself there and put my facebook account
If altcoins can be accepted as collateral, it may just work of the users. Saw some users offer their tokens as collateral.

It is assumed that the amount you obtain from selling the collateral in case the borrower defaults substantially exceeds the amount you have lent out. Pawnshops usually require that the collateral was worth up to a few times the amount borrowed. In this manner, you will have an incentive to return the borrowed funds (and pay the interest), and, at the same time, the pawnshop broker will not have to sell your collateral, which may take time and require effort. So there is no rational reason to use altcoins as a collateral unless the guy that you take a loan from is a total dumbass to accept these coins if they are worthless...

Otherwise, you could just outright sell them and get the funds you need

maybe you don't want to sell them because you believe that they will have a better price in the future, so that is a reason to use them as a collateral instead, but due to the high volatility compared to bitcoin like you said you need an amount that is bigger than what you requested

But does it make any sense?

If realized in practice, you would be essentially selling your precious altcoins to a lender at a price times below their current market value, since it is assumed that the collateral should have more value than the amount borrowed. You could just as well sell a smaller part of your stash of altcoins and get exactly the same amount of money that you need and want to borrow but without the obligation to pay a hefty interest at the end of the day

[NyeFe]

lending is based on trust and without it no one can even think about doing it and since bitcoin is providing some level of anonymity and it is all done online, that makes it all hard.

that is where collateral comes in and also brings about so many other problems again with trust that you are handing over your valuables to someone else to hold and not abuse.

Unlike how BTCJam and other lending sites work, I feel like the system and the people who provide it, should centrally collect, record, validate and store collaterals.

Obviously this would mean finding good online/virtual collaterals. I've found that eBay accounts as well as neutral/positive trust bitcoin accounts would be good for this. What other online account could be used?

I think we could solve most of these problems on this thread, which would help to improve existing systems.

[Yakamoto]

I've seen some other users who are lenders on sites like BTCJam or whatever shows some images of their investments and dashboards and whatever, and apparently a majority of the time users are just going to default on their loan, regardless of their ability to pay it back.

P2P lending, when unenforceable, is effectively dead. It might as well be giving away money for the most part.

[Xester]

I was also interested to get a loan from btcjam months ago. I just don't know if i can risk exposing myself there and put my facebook account
If altcoins can be accepted as collateral, it may just work of the users. Saw some users offer their tokens as collateral.

I tried to get a loan from different P2P lending but most of them was not user friendly and hard to understand their full requirements in getting a loan, I've already submitted the documents needed but the ranking was the issue, i don't know their basis in grading or ranking their borrower. I've tried TALA and presto I've get the loan, but the problem with this, TALA didn't required even Identification Card to know their borrower, and im sure dummy accounts was already created just to get loan from them.

[Dassi]

TALA might run out of business in no time, that is not the best way to grant someone a loan - it's almost like a donation.

[The Sceptical Chymist]

The problem is what type of digital collateral would be the most acceptable for P2P lending online? We already are doing P2P lending in real life when we lend money face to face with our friends. In the Bitcoin world it could be done in a massive scale with strangers online, but again the problem of guarantee of payment. If you can answer what digital collateral is acceptable by all, then P2P lending will be easier to do.

There is a proverb in many languages which basically says that you should never lend money to your friend if you don't want to lose both (for example, "short debts make long friends" in English). <snip>

This is so true.  As far as the statistics for the P2P lending that goes on in this forum--I'd give it 50/50 that a loan gets repaid on time and with the agreed upon interest.  What happens most often are straight-up scam attempts with shitty collateral, and those loans get refused (mostly). 

Bitcoin, and cryptocurrency in general, makes for really bad lending practices.  If I'm going to lend bitcoin, which can't be reversed, to some shmuck halfway around the world then they damn sure better put up something valid as collateral.  And therein lies the rub.  If these fuckers had anything of value that they could send halfway around the world, then they would just sell it and wouldn't need a loan. 

I think I loaned out money twice on this forum, and I got burned for 0.3BTC on one of those because the user was a Sr. member with green trust.  He took the money and disappeared and hasn't logged in to this forum since February.  You can't trust people here.  Collateral is a must, and it makes P2P lending really difficult.

[NyeFe]

The most common collaterials, which I've found are:

> LinkedIn
> eBay
> Reddit
> Instagram
> Twitter
> BitcoinTalk
> Runescape
(online MMORPG games like WOW, which are easy to change, and difficult to recover)

Could we continue this list, and grow it? - it'd be very, very valuable to solving this problem.

[cr1776]

The most common collaterials, which I've found are:

> LinkedIn
> eBay
> Reddit
> Instagram
> Twitter
> BitcoinTalk
> Runescape
(online MMORPG games like WOW, which are easy to change, and difficult to recover)

Could we continue this list, and grow it? - it'd be very, very valuable to solving this problem.

Assuming you are talking about accounts or the like at those web sites, I wouldn't accept any account as collateral for a loan.