Bitcoin lending reloaded - btcjam
Last update: April 08, 2016
Lending Bitcoin on BTCJam
We have already covered BTCJam briefly. It was admittedly put into shade by margin lending though.
Why would you lend Bitcoin on BTCJam then? Well, because it pays potentially more than margin swaps and rightly so as it also is far riskier.
Don’t forget that on BTCJam you are dealing with real people. On trade exchanges, margin lending pays out the lender automatically. This way the only one who can fuck you is the exchange but if traders could choose, do you think they would pay you back? On an exchange that doesn’t require verification, is based in Asia and trades something that is not legal tender anywhere on this planet? For sure, right?
So keep this in mind when you lend your money. Interests are high but some people will default.
Who borrows on BTCJam?
You will often see miners, right the now actually Ether miners. Most of them usually still has normal (verified) income though - luckily.
People in Latin America borrow for regular major expenses because the rates by banks can be higher than BTCJam in Brazil and neighboring countries.
You will also see a lot of trading loans. These are for places without margin swaps: Localbitcoins and other. Quite a good bet too.
Some people place reputation loans. These are instantly paid back and bear next to o risk. The point of these is reputation gain that comes with first 5 BTC paid back on time. That’s why some new borrowers will place a redundant loan to get to pass the 5 BTC milestone.
Fine thing about BTCJam (or at least the least annoying) is that as an investor you don’t need to get verified at all. You give the money, no questions asked.
Borrowers on the other hand get a credit score based on how much information they provide about themselves. Once your investment defaults it won’t help you get the money back but at least it makes some scammers turn away.
- Paypal (age of account, verification), credit card, bank accounts …
- ID and selfie with it
- Social networks (FB, G+, Reddit, LinkedIn, eBay …) and number of friends/connections
- Personal references from other BTCJam users
- Reputation - Feedback from investors
The risk of default
When you already have some monies lent out you will see people paying late and you will get defaults. If you are a beginner investor you will see those most definitely. Why? Because you lent money to anything that moved.
It is understandable that everyone in Bitcoin business hates AML/KYC but you will soon find out some due diligence is a good thing if you want to invest manually.
Someone shared a reasonable hint on Reddit:
Well rated Local bitcoins resellers make good borrowers.
And another one specifically advises to make relationships with your borrowers and stick with them.
I began to thoroughly vet the new investments/borrowers and not just jump into something because the numbers were good. … I would also see who (other users) would vouch for them… Now to date I have about 150 borrowers that I am becoming exclusive with. … my losses are evaporating.
Sounds sane, doesn’t it?
- Each loan listing has a comment section, do ask questions.
- See if borrower has passed the reputation milestone (5 BTC repaid)
- See if borrower has late payments. See the image up here? More than 100 BTC and never late, that’s impressive for sure.
- Check borrower’s feedback from investors.
- Check borrower’s references (do they look fake? do they borrow too, and default?)
That doesn’t mean a user with perfect score cannot default. Sometimes life happens against them, sometimes they will just exit-scam (sort of). Nothing is 100% certain - you know that sometimes even propaganda backfires. But it will definitely lower your risk.
Bitcoin wallets as a Swiss bank in your pocket. Redditor’s comment ~ ”Sometimes even propaganda backfires.”
Try to pick a few good borrowers, you will see that whenever they post a loan it gets funded extremely fast. They already have a crowd of faithful investors who are quite sure their investment will be paid back.
Picking good horses is indeed a good idea. That is, if you opt against auto-invest.
In summer 2015 there was a massive discussion about BTCJam’s annual expected profits and the actual results. While the expected profit was up to 18% a user lost 22%. Well, that’s statitics, right. Good news is though, the losses happened while using autoinvest 8 months ago. As someone explained, the autoinvest works on machine learning principle - it gets better over time.
You can see it on the picture above: Some time ago the number of dots below zero was quite big. Now the bulk of dots is moving safely above zero.
If you have tried autoinvest you might have noticed it does choose loans now. It doesn’t simply chuck your money in all loan offers. Not even with aggressive mode: it will still skip things like debt consolidation for a user with negative investor feedback. The surest way to screw up is indeed to come over check the dumb algorithm, right, and invest into absolutely everything without even looking at the loan offer.
Autoinvest comes in 3 versions - conservative, moderate and aggressive. The conservative is the most certain, it will only invest in borrowers with best credit score and feedback. The aggressive on the other hand invests also in people who didn’t verify their identity completely (but it will still skip anything that looks like trash).
BTCJam bots and helpers
Since autoinvest is already available there is no need to write bots.
But I hear you, of course there are bots to make your work easier.
In case you like the idea of having a crowd of trusted borrowers you might like this command line Ruby script. You need to specify user IDs of users that you like (see image above if you don’t know where to find someone’s user ID). After that you can simply run that script in a terminal window to check if some of your borrowers has opened a loan request that is not yet completely funded. Since profile pages are public there is no authentification. If you decide to invest you have to do that manually …
… Or you can play with the Rails app written by BTCJam directly.
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