7

To the best of my knowledge, there's no bank lending in bitcoins, yet, which surprises me. Now that Bitcoin has stabilized to circa USD $100, I think it could be reasonable for an institution to start lending in this currency. By using Bitcoins instead of a national currency, the number of potential lenders goes way up than the number of banks in most countries, and the interest rates could potentially be way lower.

I thought of a way to make it even less risky for a potential lender to someone they don't know in a remote country: they could ask the potential client to ask for a loan in their national currency to a big, recognized bank. The bank would do the job of assessing the client's capability of payment, do the background checking, etc. and lend (in national currency) the amount they believe the client is capable of paying off, in the selected time period.

This amount would be transferred (via the traditional banking system) to the Bitcoin bank, and the documents for the loan would be scanned and faxed/e-mailed as well (with validated-transaltion attached, of course). The Bitcoin bank could then take the risk-assessment of the local bank at face-value, return aprox. 95% of the amount transferred in the very same national currency to the client so it can pay the loan to the bank almost immediately (thus paying a very small amount in interest to the local bank) and then loan 90% of the original amount but in Bitcoins - at hopefully a lower interest rate. Of course, the difference in the amounts plus the interest would be the profit.

In effect, grabbing the money from a recognized, traditional institution would be a way of saying "hey, look, other guys think I'm worthy of a credit up to aprox. this amount for this time-period". I for one would be happy to give it a try, taking a loan on Bitcoins!

Could this be feasible?

  • There are ones who do it, here's a listing: btcjam.com – Nick ODell Jun 1 '13 at 0:41
  • 4
    I'm not sure Bitcoin has stabilized around $100; it's volatility is much higher than the major currencies. From an economic perspective, it's too soon after several bubbles to tell if it's stabilized at all (it's only been a few months, after all, and it's still been pretty volatile since then). – user3930 Jul 2 '13 at 23:27
1

There is BTCJam, and I heard of at least one more company doing the same thing.

However, there is a HUGE problem with BTC lending - it is very fraud prone. I exchanged emails with their support and got this interesting factoid:

We have a repayment rate of 76.11%

That means about a quarter of their loans don't get repaid. BTCJam does not appear to pursue defaulting borrowers either, meaning that if you happen to lend your money to a scammer, your money is gone. They claim to have the person's social network status, paypal history, phone verification and all that stuff, but they do nothing with that information.

So while BTC lending is easy to do, enforcing repayment is nigh-impossible in such systems that are careless about what they do.

  • And a few hours after I posted my question I found the "Islamic Bank of Bitcoin" (ib-bitcoin.com) , though it's not very clear to me how they work. Thanks! – Joe Pineda Jun 3 '13 at 16:02
2

My co-founder and I just started a Bitbond.net where we connect borrowers and lenders and offer an online wallet. Our goal is to make banks obsolete by such a service.

You can borrow Bitcoins by issuing a Bitbond. Before that, we perfom a credit rating to assess the creditworthiness of the issuer. We also do an identity check so if a borrower is late on his or her payments this can hurt their credit score.

The good thing about it is that by connecting borrowers and lenders directly you match the maturities of bith sides. One big problem with banks is that they give out long term loans and refinance them with very short term money, i.e. their client's deposits or overnight loans from other banks. Since Bitcoin wants to be a better and more stable currency we believe that banking as such also needs to improve. That is why we built Bitbond.net

  • Bitbond.net looks broken on an iPhone. Can't even read the page content – rdymac Jul 4 '13 at 23:29
  • Thank you for taking a look! We haven't yet optimized it for mobile devices. We currently focus on the functionality in desktop browsers but will also improve mobile experience soon. – Radoslav Albrecht Jul 15 '13 at 9:09
  • If you like to check back, our site is now visible on mobile and tablet devices. – Radoslav Albrecht Jul 24 '13 at 20:04
  • One thing to note is that the basis for loans is a traditional currency, which can be good or bad. What I mean is: Let's assume the BTC exchange rate is 1.000 USD today and you borrow 10 BTC. You will then owe and have to pay back ... no ... not 10 BTC + interest but 10.000 USD + interest. Each installment is in traditional currency and will be converted to / from BTC at the exchange rate on the day of the transaction. So it is not a mean to speculate on the BTC exchange rate. Nevertheless, it's a fair and working service. I tried it. – TorstenS May 9 '18 at 8:23
1

Check out http://bitcoinswithfriends.com where people can lend Bitcoins to friends they have on Facebook.

0

Bitcoin lending would be done as in any bank lending - the bank opens a bit coin checking account for you in the amount of the loan. You pay back the loan and interest by using the funds other people have borroed from other bitcoin banks. As long as more & more banks make more & more loans its ok. As in any banking the banks only need a fraction of the bitcoins on hand to cover the loans made. This also gets rid of the bit coin deflation problem because the banks are inflating the bitcoihns by making all these bitcoin checking accounts. The big wall street bank could jump in by seting up bitcoin debet cards and bitcoin credits cards. Paypal could setup a system to support bitcoins. Once bitcoins get going you could have specilized version of bit coins. For example you could have a type of bitcoins the mostly are used for pork bellies. Or say a type of bitcoins that tend to only be used for realestate. That way the exchange between these types of bitcoins would soffen any bubbles that may appear. There may be 100s of different types of bitcoins. To make a transaction the user would use plastic that would altomaticly use the correct bitcoin type for the transaction and adjust the verious accounts of the user. The user would be protected from bubbles by the fact that only a few of the accounts would be effected by bubbles at any one time. So it a housing bubble broke you might find it hard to get a housingbitcoin loan but you still could get a transportationbitcoin loan to build a plane. We will therefore never have a problem like we had in 2008 again.

-2

I am not sure lending is a good idea for bitcoin, or at least not if the amount to be paid back was to be paid in bitcoins.

Many of the problems with the current banking system of how "the small people" get into trouble is due to lending and the very immoral interest system, that also increase to a higher % depending on how little funds you have available. Interest would be an even bigger problem in a currency with a fixed amount.

An example would be: Person A want to borrow 10.5 million bitcoins . AND person B also wants to borrow 10.5 million Bitcoins. Both person A and Person B promise to pay the lender 10% interest, yet there is only every going to exist 21 million bitcoins. However person A and person B have made a promise to pay back a total of 23.2 million bitcoins..... one of them is not going to have a good time! Ultimately the bank is not going to receive all the interest they were relying upon and will eventually need bailing out by our governments, so they can continue to trade and pay their staff high wages.....

Of course there is more people than just person A and person B and they will never be able to borrow half of the economy on their own. There is also more than 1 bank that will be lending. However on paper the calculations are the same, but as more people and more banks are thrown into the equation the time scales increase to cover many years, yet the inevitable will still happen as no matter how much good intention there is to repay the loans the fact is there is more owed than exists.

This is just the same with Fiat, although more money can be printed to cover this short fall, but that only serves to decrease the value of the money in our pockets unless our country can manage to take money from another country. BUT again the inevitable will happen and a country will soon no longer be able to afford to pay its own debts so it now having to borrow to cover its short falls... and eventually they will not be able to reply the loan that they have taken from your/our country.

No matter how you work out the calculations the inevitable will always == FUCKED! The best result possible is to postpone the inevitable for a few more years or past our generation...

I think Bitcoin could well be the answer to our broken financial systems, but if all bitcoin tries to do is imitate an already broken system, it will make it no different from the dollar or pound, as 110% of it will be controlled by large institutions.

loans and interest are NOT a good thing and while banks say they offer us these loans owing to them being good people and wanting to help "the small people" they are in fact doing it to help themselves only, and intend to postpone the inevitable past the point of their pay day!

"The Monkey may very well have got it right with bitcoin, dont break it now!"

Ford

  • In addition, the only way to win is to take out the loans from these banks and NOT repay them! So anyone that wants to offer me a loan, please do email me :-) – Ford Jul 16 '13 at 2:10
  • Wouldn't the bank run into problems much earlier, when they tried to buy every bitcoin in existence? – Nick ODell Jul 16 '13 at 3:38
  • the "every bitcoin" as an example of course would not happen, but it is easier to make the point of more would be owed with only person A and B as oppose to person 1 through to person 21 million. Of course money/bitcoins would circulate more with more people, but as said the result will still be the same, but over a greater period of time, as circulation can only go so far. – Ford Jul 16 '13 at 3:42
  • I also dont see what a "believer in bitcoin" would want to take out a loan. If the "believer" is correct in their assumptions and bitcoin becomes more popular and more valuable (exchangeable for an increasing quantity of goods), this can only mean that they are repaying at the higher value of bitcoins, so any gains are going to be very short lived and in the long run very costly. It would only work out to be a good financial move if the value of bitcoin were to drop (hence you could borrow enough for a car and only pay back enough for a donkey) + why the -1, it was an answer likable or not :-) – Ford Jul 16 '13 at 3:49
  • Even with a currency whose final amount is fixed, you do can have banks lending money with interest. In the end, to pay the interest, you simply take up a job at the bank and immediately give back your salary as payment. Even with fiat currencies, that's really how you pay your interest: donating a part of your work to the bank, albeit indirectly. – Joe Pineda Jul 26 '13 at 19:43

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