I’ve continued in my quest to find more places to invest with Bitcoin. For those of you new to my posts, I wanted to focus on decidedly Bitcoin things in which to invest. These things specifically needed to accept Bitcoin directly, have Bitcoin at the center of their product, or something of the sort. As I said in earlier reviews, I still haven’t set the parameters down in stone, I just started with those basic guidelines. The next opportunity I looked at turned out recently to be a bit controversial. I’ll get to that later, in this, my review of Loanbase.
Loanbase, formerly BitLendingClub is like two of my earlier reviews: Bitbond and BTCJam. It’s a peer to peer lending platform. If you didn’t read those reviews, this is a service that allows anyone to request a loan through their system. Other users can fund those loans, either in whole or in part. Loanbase makes the claim that they are the largest global lending marketplace using Blockchain technology. I’m not certain how accurate that claim is, considering they claim to have serviced half as many loans as BTCJam. Perhaps they mean to say they offer loans in a larger area? Again, I’m not sure what they base the claim on, but I can’t verify it.
I have a real problem with Loanbase’s transparency. I don’t like it when a company that offers financial services doesn’t list an official place of business with contact information. I can’t go to Google Maps and look up their address. I can’t see a sign on the building. I can’t call them. I couldn’t find any of this information anywhere.The only contact avenue provided is a contact form. It’s not a deal breaker, mind. But it makes me wary.
Another thing, I wonder why they list their business as incorporated in Delaware, but they don’t list any other licenses for anywhere else in the world. From what I can tell, the whole team appears to be Bulgarian. Again, why Delaware? Are they based in Bulgaria? I also wonder why their business, incorporated in Delaware, doesn’t have collection agency services in the US.
The team appears impressive enough, according to their resumes. I again looked them up on LinkedIn. They weren’t quite as impressive as Bitbond or BTCJam, but resumes only tell part of the story. They only tell what came before, not the current project. So, I don’t necessarily count that as a fault. I’m just giving the information as I find it.
Loanbase has a statistics page, which does give them a few points. Again, it’s not as open as Bitbond because you can’t download all the data and run your own statistics, but it appears slightly more open than BTCJam because you can see the data and filter it. You can see the full data in a giant list by clicking on “> Full view” under a category, but it doesn’t parse the data in any meaningful way initially. You can filter it in lots of different ways, but I’m not sure that they even work, and that makes me nervous. For instance here is the process I went through: Their stats page says they have an 11.27% default rate. I clicked on “> Full view”. This didn’t bring me to a page discussing the default rate data, it brought me to the full data list. I went to filter it and pull all loans that had defaulted. But “defaulted” wasn’t one of the filters in the list. I did notice that they had “Advanced filters” at the bottom, so I clicked on that. I did see where I could click on “Default” in the “Payment status” category. When I tried to filter by that it gave me 980 loans out of the original 9596 in the list. A quick set of taps on the calculator gives me 10.2%. That’s close to the 11.27% listed on their stats page, but still off.
Another strike against Loanbase is that, at the time of writing, they were recently hacked. Four user accounts were accessed. The hacker used a security weakness in WordPress, which Loanbase was using for blogging and had installed on the same server as their lending platform. The hacker was then able to run SQL commands on the database and attained login information for the users. It should be noted that these users reportedly did not have 2FA active on their accounts, which made the breach ever so much easier for the intruders. Loanbase reported that the intruder appears to have stolen 8 BTC, but that number could be as high as 20 BTC. Loanbase has made a promise to reimburse all affected users. They also handled it pretty well. They canceled any pending withdrawals, logged out all users, flagged all accounts to change their passwords, and then took the site down for a software update and to patch all security issues.
What comes next, however, frightens many remaining and potential users: Loanbase hired the hacker. This does actually happen quite often in the security world. A hacker contacts a company about a security flaw they found. They tell the company how they did it so the company can recreate it and then fix the problem. Sometimes the company will then bring the hacker on as a security consultant for further breach testing and such. Legal documents are signed, contracts negotiated, as per usual. What concerns me about the Loanbase announcement is that they retained the hacker, yet they still don’t know if it’s 8 BTC or 20 BTC that was lost. The hacker didn’t tell them? The hacker didn’t return the funds? Sure, the hacker signed forms that they wouldn’t disclose any of the private information they stole, but shouldn’t Loanbase have a better idea of exactly what was stolen? That seems kind of vague.
Now that we’re past all the parts of Loanbase that make me nervous I’m going to mention this again before we move on 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. If you agree to the responsibility of your own actions and haven’t been frightened away yet, then let’s start to look at the things I do like and dislike about the services Loanbase provides.
I’m not a big fan of the site, first off. It’s very slick looking, but the information it provides isn’t always easy to read, or apparently accurate. Aside from the data accuracy above, the Dashboard has some other more stylistic issues. There is an Investments section that shows how much you’ve invested, but it’s split up on tabs for each currency a loan was based upon. This means that in order to figure out how much you’ve invested you not only have to flip between tabs you also have to do currency conversion. The Investments section itself has tabs for information, but those tabs run along the left of the screen, not the top of the Investments section. It’s not very intuitive at all and I still have a hard time navigating it from time to time.
Loanbase does have a pretty rigorous verification process, though. It may be the best of the three so far. You have to verify your ID, address, phone number, income, and email in order to even start the loan process. I’m sure this cuts down on the scam and default rate. You have to be serious about even wanting a loan here to get through the lending process. There are other things you can verify to strengthen your account, but the above are required. As my account is unverified, I will not be reviewing that part. I would verify, but I’m not interested in receiving a loan, only lending at this point.
Loanbase offers both manual and automated lending. Again, because I’m a fan of automated income, I chose to go with automated. As per usual for these types of services, there were three levels of risk/reward: Cautious at ~5%, Balanced at ~7%, and Aggressive at ~8%. I chose balanced. I deposited 1 BTC and put it into the Balanced automated plan and let it go on its merry way. Right now, my projected profit appears to be ~9%. For reference, I’m seeing ~12.8% at BTCJam and 0% at Bitbond because nobody is actually accepting the loans they apply for.
Overall I have to say that Loanbase is just ok. I can’t shake a lot of the shady vibe I get from some of the lack of transparency. I also am kind of nervous about the hacker they hired and the lack of transparency surrounding that. Their service appears good, though. I’m lending, loans are being accepted, and I’m receiving payments. Again, I’m not getting rich, but they’re coming in. If I had to place this one in a list with my former reviews I’d say that I’m a bigger fan of BTCJam, but they stopped allowing US investors. I would say that Loanbase ranks higher than Bitbond, if only because the loans actually get accepted. Taking into account the level of shady here, I’d reverse the last two if Bitbond actually got some loans to go out and I started making money. That being said, if you’re willing to give it a shot, try lending at Loanbase, just don’t risk more than you’re prepared to lose.