The Evolution of the Lending Space

Nowadays there are dozens of ways to attract money for either personal or business purposes. Besides traditional financial banks, there are various alternative financing solutions that have experienced tremendous growth in the past decade, all serving different groups and targeting their specific needs. When considering these alternatives, you have to think, what is the origin and development of lending?

How It All Beganimage

The first traces of lending and borrowing go back to 12.000BC. Our ancestors implemented a system where they swapped goods in exchange for foodstuffs or tools. In Japan, for example, rice was used as the predominant form of currency for thousands of years. 3.000 years later, societies began to use coinage as a transaction method and pictographic tablets of clay to record economic transactions. Borrowers would receive a loan in coins (ie: to buy a cow) and the lenders would receive payments in goods (ie: milk). Eventually it was the ancient Romans that laid the foundation for the banking system, formalizing the administrative aspect and creating rules and regulations for financial transactions.

From the Romans to Medieval Times

In Roman times lending was primarily carried out by private individuals. Over time, large wealthy families replaced individual lenders as their own sort of “institution.” The Jewish played a significant role in the development of the banking industry in Europe and Africa since charging interest was forbidden by Christians.

Charging interest was commonly used in ancient times, but with the rise of new religions its moral basis became questionable and sometimes forbidden. Jewish people were not allowed to charge other Jews interest, but this restriction didn’t apply to people of other faiths. In contrast, the Christian church initially banned interest and kept this policy for centuries.

From the Middle Ages and thereafter, lending and other financial services were more formalized. These activities became predominantly carried out by budding banking institutions. Although the first bank was established in Venice, Italy, the banking industry spread to northern and western European countries soon after. The English and the Dutch established the first modern banks in the late 17th century, which were in many ways similar to how we know banks to be today.

21st Century

For decades, banks have been the main resource for capital investment; unfortunately, their reach does not go far enough. Banks have proven to be hesitant to service higher risk groups such as: start-ups, entrepreneurial enterprises, and people with an irregular income. To add to this, the strictness and limitation of banks worsened after the financial crisis of 2008. Financial institutions abruptly cut back on issuing loans, therefore, making it significantly harder, and in some cases impossible for people to get loans.

In reaction to the turmoil banks were facing and the new restrictions they implemented, alternative-financing companies stepped into the lending space. The three main new resources for people and businesses to attract capital are: peer-to-peer (P2P) lending, crowd-funding and micro-lending. These concepts have similar characteristics, the most importantly, they all avoid the intervention of traditional financial institutions. Often there are significant differences, which are sometimes forgotten, therefore, leading to confusion and misuse of the terms.

In the next blog post I will discuss these three alternative financing solutions, their key characteristics, and main purpose.

image – Isabelle de Clercq 

Milestone: One Million in Loans Serviced On BTCJam in June Alone

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BTCJam is proud to announce that we have hit a milestone of one million dollars (bitcoin equivalent) in loans serviced in the month of June alone! On top of that, we now have over 4,000 loans repaid since November 2012.

It has been an honor to pioneer global peer-to-peer lending powered by bitcoin. From doing experiments with anonymous loans to where we are at today, we are eternally grateful to our supporters and members. It is incredibly humbling to see many businesses get their initial liquidity on BTCJam, watch others fund their projects from America to Argentina to the Philippines, and have people use BTCJam as means of consolidating their fiat debt.

At BTCJam, we have unwavering dedication to provide the optimal platform for our members. We want users to be able to borrow at reasonable rates that they choose while still enabling investors receive healthy returns. We thank all of the investors that have supplied the liquidity that funded over $1,000,000 (bitcoin equivalent) in loans, and thank you to all the borrowers who have repaid over 4,000 loans!

Grow your bitcoins on BTCJam!

– The BTCJam Team

Announcing New Connected Wallet Features

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That’s right. It’s here, it’s fast, it’s efficient, it’s a connected wallet where you can automatically withdraw and add funds to your BTCJam account from Coinbase without having to leave BTCJam. We are happy to present the first of many new features that will come with connected wallets.

  • You can withdraw from Coinbase without leaving BTCJam
  • Your automatic payments can withdraw from your Coinbase wallet to make a payment

If you have a connected Coinbase wallet, you can view your balance and withdraw from that wallet in the Add Funds window on your BTCJam dashboard. For our borrowers, you no longer have to stress about adding your funds to BTCJam from your wallet provider! Enabling automatic payments and withdrawals from your Coinbase wallet will be automated to make payments for you.

Go to your settings to configure your wallet!

Wallet providers, we are looking to add more add wallets! Read our partners page here.

What Bitcoin Means For Peer-to-Peer Lending

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Endophytic fungi are primarily an altruistic fungi that partner with many plants–from grasses to trees. Their mycelia, the vegetative part of fungi that look like a network of threads and are vital to both aquatic and terrestrial ecosystems for their role of decomposition, weave through plant’s cell walls but do not enter. The mycelia enhances the plant’s growth and ability to absorb nutrients, while starving off parasites, infections, and predation from insects, other fungi, and herbivores.

In this same way, Bitcoin, an autonomous, decentralized payment system, entwines and connects people from around the world while improving the mode of transaction in an efficient and fast way despite where the sender and receiver are located. At the same time, it renders traditional modes of transacting as antiquated and unfit for the modern world. Bitcoin protects from ill-intended third-parties and negligent intermediaries; you can store your Bitcoins so only you have access, take an unlimited amount across borders, and send/receive with anyone anywhere around the world.

Bitcoin has weaved itself through many different industries, a profusion of people, and has fostered not only a sense of community, but also, a growing force of change and equality amongst its’ users.

When Bitcoin is incorporated with peer-to-peer lending, it accentuates and globalizes all of the benefits that lending and borrowing on a peer-to-peer network has to offer. That is customizable terms, easy application, lower interest rates, and faster funding rates for borrowers. Investors can spread risk, receive higher returns, and have the power to choose who they want to invest in.

Like how endophytic fungi on cocao tree leaves decrease leaf necrosis and mortality by a threefold, users on a P2P lending platform powered by Bitcoin will inherently be immune to the aches and pains that are structural of the orthdox payment and lending systems of today.

Typical payday loan providers charge $17.50 for every $100 your borrow, with late fees of the same rate for every full term period you are overdue, you could quickly find yourself in debt. (1) BTCJam, the first peer-to-peer lending platform using Bitcoin, allows borrowers to set their own interest rates that cater to them. Investors will then review the loans and decide if they want to invest or not.

The speed of funding on BTCJam is at an average of 6 days. This is due to the network of lenders based around the world using the decentralized, peer-to-peer cryptocurrency! The archetypal structure this follows resembles that of mycelia, the web-like Internet, neurological arrays in the mammalian brain, and so on. The advantage of P2P Bitcoin lending platforms is an inevtiable consequence of previously proven evolutionary models.

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The Milky Way also follows this archetype.

image– Alexis Aiono

Peer-to-Peer Lending Will Change Developing Countries

Scenario: You are a middle-aged labor worker in Sao Paulo, Brazil making minimum wage which is about $310 a month. Your wife has just given birth to your second child meanwhile living expenses have been depleted and you are in debt with one of your two credit cards from paying for medical operation and basic needs. You are faced with paying almost 200% APR on this debt, and your loan application to banks have been denied because of your negative credit rating.

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Unfortunately this is common situation in many developing countries. Hard-working individuals are financially trapped, tricked into accumulating more debt by payday loan providers, and they rarely triumph over these barriers, which prevent them from living a stable life.

People in Developing Countries need of solution that will:

  • Provide reasonable, equal opportunity interest rates
  • Have an easy application
  • Use a payment protocol that can transcend borders
  • Be transparent and efficient
  • Empower the individual

This is what peer-to-peer to lending powered by Bitcoin does.

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Taking out a loan on BTCJam is as easy as a few clicks; simply submit your identity documents to prove you are a real person. When creating a loan, you are given a suggested interest rate determined by the credit scoring algorithm; however, you may choose whichever rate works best for you. This effective and labor-saving process permits anyone to get a loan from the comfort of their own home regardless of origin, financial history, and state determined credit rating. Anyone with internet access has the opportunity to get a loan without going through unnecessary intermediaries.

With peer-to-peer lending using Bitcoin, entrepreneurs from developing countries are able to take out loans that they would not otherwise have access to and put the funds towards their ventures. For example, Gaston Azzollini, an Argentine borrower on BTCJam’s platform, has taken out a series of loans to put towards his various businesses in Villa Carlos Paz, Argentina. One of them is the restaurant Lo De Elvio where all BTCJammers are welcome to dine at a discounted rate.

Economies of local communities are being funded on a macro-level because of Bitcoin. BTCJam’s peer-to-peer lending platform is helping to strengthen the economies of developing countries while providing 24/7 nondiscriminatory access for consumer loans.

Plant your seed of Bitcoin today.

Photos of Gaston and his restraunt Lo De Elvio in Villa Carlos Paz, Argentina

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Bitcoin Loans and Currency Risk

Welcome to the BTCJam blog! We are always thinking about ways to provide information to help you make better decisions about your investment. We will be publishing a variety of information to share what’s on our minds with you and, of course we would love to know what’s on yours! We would like to disclaim that we are not claiming to be experts on the topics discussed here, but we would like to open the channel to have relevant and, hopefully, intelligent discussions. Also, if you are an expert on the topic discussed, please help us out by enriching the conversation! That said, the topic of the day is currency risk.

 Even though Bitcoin is a worldwide non-centralized currency, most of us still make a living earning regular (government/central bank issued) currencies, such as dollars, euros, rupees, etc… Hence, currency risk is something that is still on our minds (we say still in hopes that this problem will be in the past soon!).

 As most of you know, at BTCJam you can index your loan in USD, EUR, CAD or RUB (as of yet!), using bitcoins as a payment method; avoiding the bitcoin currency risk and that’s when the “regular” currency risk kicks in. Meaning: if you are applying for a loan and you want to index your payment in USD dollars, and your earnings are in another currency, you must take into account the risk of exchanging one currency to another. The market uses hedging tools to avoid currency risk exposure, and we hope to offer hedging options to you very soon; however we still don’t.  Hence, we believe that providing information on how currencies have been behaving could be useful. At least statistically, you can calculate the probability of your currency varying against the US dollar and incorporate that percentage into your payout offer.

We created an excel sheet (download it here) with the currencies most used in our platform (BRL, EUR, GPB, CAD and RUB) and their accumulated two month variation against the US dollar (we use two months because it’s the average loan term at BTCJam). The database comes with data from the past five years (daily rates), and in the “Currencies Analysis” tab we accumulated the changes to calculate the variance, the mean, the standard deviation and the min-max changes within a two month period.  Taking the average % change and the standard deviation into consideration when you are planning your payments will help you to account for the historical risk your currency have against the US Dollar. Please note that we are not dealing with futures market, it’s just historical data.

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We hope this information is useful and we would love to hear your thoughts and questions.

We are going to change the world, one bitcoin loan at a time!

Yours,

BTCJam Team