BitLendingClub Merchant Credit ProgramBitcoin- Fatal Flaw or Golden FeatureIt is often cited that Bitcoin's deflationary nature and volatility are a fundamental flaw within the protocol. We believe that they're actually a feature whose benefit will be realized much further down the line. People often argue that consumers will delay buying things or opt out not to buy things altogether, because they think that their Bitcoins will be worth more in the future. There is very little evidence for this and the logic, while seemingly sound at first, misses a critical factor: consumers have needs now. Factored in with the fact that a consumer owning Bitcoin has seen a capital gain, there is an incentive for them to capitalize on that gain and buy things that they need now. This is the short term view, while the long term view is based on the assumption that Bitcoin's price will stabilize and the deflation will be predictable.
Regardless if one believes it's a feature or a flaw, the world is full of innovators who are willing to put their hard work into solving problems.
Solution to VolatilityMany merchants often don't really want to take on the volatility risk resulting from Bitcoin's fluctuating price. As a result, innovators have taken up the challenge of solving that problem. This has created a great opportunity for companies like BitPay, as well as investors who have funded them. BitPay eliminates the risk of holding Bitcoin by converting the bitcoins into fiat immediately and crediting the merchant's bank accounts.
Solution to DeflationThe BitLendingClub Merchant Credit Program is an innovative way to use Bitcoin to solve a long-standing problem of deflation within the Bitcoin ecosystem. BitLendingClub allows consumers to buy things on credit or to buy things with several installments. There are two ways which the merchant can sell a product on credit:
1. The merchant can provide the credit and earn interest on the credit they give.
2. The consumer can place the money in escrow and can automatically make payments which are settled in fiat.
Depending on the risk level a merchant is willing to accept, there are several ways for merchants to benefit:
• Merchants can earn an interest rate on products which they sell on credit.
• If a merchant isn't willing to bear the risk of credit default, then they can request the money be placed in BitLendingClub's system and they can receive monthly payments.
• Merchants can sell more expensive items with installments, thus increasing profits.
The consumers can place the bitcoins in escrow and make payments from the escrow account. When the item is paid off the remaining balance is returned to the consumer. The benefits for consumers:
• The consumers can buy things on credit, if the merchant is willing to take the risk.
• The consumer can retain more of their bitcoin net worth over time by deferring payments rather than paying the whole amount up front.
Solving Volatility and Deflation- The Big Picture!The intersection of payment processors and lending platforms is the critical factor in here. The merchants can still take advantage of the risk mitigation features they obtain from BitPay, while capitalizing on the ability to earn interest rate and/or sell products in multiple installments. The consumers benefit from paying less bitcoins over time, thus reducing the total cost of the product they buy.
Call to action!Please let us know what you think. We'd love to build this service, but we need to get some feedback that there will be people interested in using it.
Best Regards,
Kiril Gantchev
CEO of BitLendingClub
www.bitlendingclub.com
