BTCjam: Bitcoin Micro-lending

Posted on September 27, 2012


Today I’ve been having a look at BTCjam, a new Bitcoin P2P micro-lending service which lets users request or fund loans (see the forum announcement here). As a borrower, you get funded by many people to increase the chances of getting the loan, and as a lender you can invest in multiple loans to spread risk. It’s a bit like Funding Circle and other similar services (I’ve played with Kiva for a few years), but with Bitcoins. Obviously.

I created a login with the aim of lending in small amounts. As with most new sites, there are only a handful of people looking for loans at the moment, but the site feels really good and simple to use, so I’d expect this to go up fairly quickly if people find it. There’s a nice easy way to see how “verified” a user is, which shows you which forms of ID (national ID, address, phone, etc) they’ve entered:

From a quick look, you can improve your credit rating through a variety of means – uploading scanned documents of government ID, proof of address, etc. There’s also a background check that gets run according to this post, with a more in-depth check through Experian coming vaguely soon.

I deposited a handful of Bitcoins and started looking around for suitable places to invest them, settling first on a loan for a mining rig. The process works well – you can see key information quickly, and you can add a comment very easily to suggest what people requesting loans could do to reassure lenders. I made the loan using my Android phone, which mucked up the layout a bit, but the site worked.

The service ranks well on my “gut-instinct-o-meter” [tm]. As with pretty much all Bitcoin-holding sites, I’d like to see more details about security measures on the site itself, and some kind of policy on insurance/payback if anything happens to the site. There are also obvious questions about what happens if a borrower defaults/disappears, but maybe the credit and reputation system is better at avoiding this than anything else.

It’s pretty amazing and a bit scary that you can lend “money” like this so easily now (assuming it works, ha). In essence, I could buy Bitcoins and lend them out in around an hour (taking block confirmations into account), which has amazing potential. It’s hard to ignore the combination of micro-lending and Kickstarter-style funding that seems to really be taking hold as part of  the future economy.