I decided that I wanted to take a portion of my Bitcoin savings and invest it. I wanted to focus on decidedly Bitcoin things in which to invest, however. These things needed to accept Bitcoin directly, have Bitcoin at the center of their product, or something of the sort. I haven’t really set the parameters down in stone, I just wanted to start with those basic guidelines. The first investment opportunity I discovered was Bitbond.
Bitbond touts itself as “the #unbank”. They use a modified maxim of the three wise monkeys, “See no bank. Hear no bank. Speak no bank.” They are a peer to peer lending platform, helping small businesses receive affordable loans and helping investors receive interest payments for funding those loans. Imagine being able to get a loan from anywhere in the world funded by people who understand you instead of having to deal with some stodgy old bank. Imagine being that stodgy old bank and earning interest off capital you loan to businesses. That, to me, is exciting. It may not be fully decentralized, but it’s a step in the right direction.
Bitbond put together an impressive team, as judged by their About page. Most people on the team provide links to their LinkedIn, Twitter, and/or GitHub profiles. I don’t really have much more than that to say about this. Look them up for yourself and see. They are a registered business in Germany and they provide their imprint on their page as well. There is a contact name, email, and phone number, business registration number, a tax ID. If you don’t trust them, feel free to verify the information provided. I have not, but it’s your right.
Bitbond currently claims over 23,000 users funding over 1100 loans for over $340,000 worth of Bitcoin. These numbers may not seem very large for a company that has been around over three years, especially when compared to some of the other competitors in the space. But, to be fair, I’m sure, due to rampant skepticism in the Bitcoin community, growth has been slow. The Bitcoin ecosystem is often compared to the American Wild West, with new scammers rushing to use old tricks in the new space, taking advantage of naivete and enthusiasm of people new to the world of investing. (Full disclosure: I’m one of those people new to the world of investing.) To me, it’s the old circular problem of everybody wants to invest in the established companies but nobody wants to invest in new companies to help them get established.
Part of what I like so much about Bitbond is the transparency. At the bottom of their page, in the Knowledge section of the footer, is a link to Statistics. You can download a CSV file of all of their loan history data. You can use this to run your own statistics. I downloaded it and did my own analysis. At the time of writing they have a history of 3349 loans, most of which have either expired or were canceled. If you take those numbers out, 1158 loans reached realization. A quick study of those numbers reveal that there are 85 loans that are current and 565 loans that were fully paid. The bad numbers are that there are 131 loans that have defaulted and 194 loans that have been charged off. To put the numbers in perspective, that means roughly 10% of the loans on the books are in funding or current, 50% were fully paid off, and 28% have defaulted or been charged off.
These numbers show that the skepticism I mentioned above is certainly not unwarranted, so protect yourself. A 28% default rate is quite high, to be honest. I’m going to mention this again despite the fact that you agreed to my earlier warning in order to even read this review because I can’t stress this enough: Do not invest more than you can afford to lose. There have been several scams reported on platforms providing the same service Bitbond is providing. It has to be noted, however, that the reported scams were never with the platforms themselves, but always with the borrowers. As good as any vetting system is there will be some that slip through the process unnoticed. If you agree to the responsibility of your own actions, then let’s start to look at the services Bitbond provides.
Bitbond’s lending process seems pretty straightforward. You have to put in your personal details, contact information, employment information including proof of income, place of residence, credentials, and identification. This is no different than getting a loan from a bank. Because they are in the business of loans they’re going to do their best to weed out scammers. It only makes sense. I’ll be honest and say that I didn’t go all the way through the loan process. I have no need for a loan at this point, so I’m not certain what happens after starting the process other than having a permanent orange bar on my screen asking me to complete the borrower application. There appears to be no way to cancel the process. That’s annoying and should be corrected.
Investing in loans is simple as well. You start with a deposit of Bitcoin into the Funds section of the site. You can do this using a QR or by copying the address. They provide a transaction address on each transaction so that you can trace it all. Once the funds are in your account, which takes a minimum of 3 confirmations, you’re all set to start investing.
There are two ways to invest in loans. You can do so manually by going to the Invest In Loans link at the top of the site. You can then sort through the loans, filtering by currency, rating, and term. The currency is which currency on which the loan is based. The rating is the risk rating based on the borrower, their background information provided in the lending process, and their loan history. The term is how long the borrower needs the money. Each loan will show an interest rate, country in which the borrower resides, how much they are asking to borrow, and how much they need to yet receive for the loan to become realized.
You can click on each loan and see the full details of the loan. You can see a description of the loan direct from the borrower. You can also see details of the borrower. If you wish to help fund a loan, click on Place Bid, put in how much you’re willing to loan, and then place your bid. Your amount will be added to the fund of the loan. If the loan expires or is canceled you’ll get your capital refunded to your account. If the loan is realized you’ll receive payments on the schedule set.
The other way to invest is to use AutoInvest. For this feature you need to fund your auto invest fund with at least 1 BTC. You select which currencies you’d like the loans to be based upon, the risk level you’re willing to accept, and the regions in which you’d like to loan. Once you enable auto invest you then update your profile. The system will automatically loan within the parameters you select. This is an easy way to have your money work for you. It automatically loans out small amounts to different loans while balancing your risk profile.
At the time of writing I’ve invested 1 BTC into AutoInvest. I have 21 USD loans, 9 in funding and 12 funded. I have 4 BTC loans, all funded. I use the Medium risk profile which says I should expect an average return of 15%, but I’m seeing as low as 21% and as high as 28%. This would be awesome, but the problem I’ve had with Bitbond so far is that none of the loans I’ve funded have actually been realized by the borrower. They all get canceled or expire for some reason. I’m not going to take this as a reflection of the service, of course. I’ll just let that money sit there and stew for a while, repeatedly being returned and reinvested. I have not invested more than I can afford to lose.
UPDATE 4/16/2016: The above paragraph is a out of date at this point. After I mentioned something loans started to be picked up. I’ve had 3 loans fully repaid. I currently have 36 loans open. 2 are in funding waiting to be fulfilled. 13 are funded and waiting to be picked up. 18 are current, all payments up to date. 2 are late, between 4 and 30 days. 1 is late between 30 and 90 days. At this point I’ve had no defaults. I’m currently looking at a return of 24-29%.
On a side note, Bitbond does allow their European customers to purchase Bitcoin directly through the site thanks to a partnership with bit4coin. If you’re in Europe, this could be another avenue for you to purchase Bitcoin.
Despite the issues I have with actually getting a loan to be realized and receive payments I have to say that I like investing with Bitbond. The process is easy for both borrower and investor, especially if you choose to automate it. I’m happy with the site, the service, and the options so far. If you’re looking for a way to invest your Bitcoin and make some money I recommend Bitbond as an option.