One of my favorite way to invest my bitcoins is using peer-to-peer (P2P) lending, which means lending money directly to individuals. Basically, it means you are playing the bank to help people realise their projects. In return, people pay you back on a given schedule, and you earn interests at each payment. Many of this kind of lending websites already exist for more traditional currencies, for example LendingClub or Prosper for dollars.
But it’s also possible to do so using Bitcoins, and in this article I will show you how to do that using a website called BTCJam. There are some of these bitcoin lending websites out there, but BTCJam is my favorite by far. We’ll see what it is exactly, how to get you started, and how to make your first investment over there. Let’s get started!
What is BTCJam?
BTCJam is P2P lending website based on bitcoins. You can either take the role of a lender (which is what we will talk about here) or the role of a borrower. As a lender on this website, you can browse listings, which are basically offers from borrowers to get money.
Borrowers post on this website to get money for various reasons. Many borrowers ask money for investment, for example investing in bitcoin mining, but also in other kind of investments, like buying websites, buying real estate, etc. Other people also ask loans for other reasons, like repaying debt, paying for christmas gifts, buying a new car …
As an investor, you’ll be able to browse through all these listings, and invest your bitcoins in the ones you like. You will be able to see the reputation of the borrower, some basic data about him (like verified identity, proof of income, etc). This way, you can make the best decision for your investment.
As I mentioned in a previous article, the returns you can get on lending bitcoins are usually around 20%, which is a great investment opportunity. What I really like about the website itself and bitcoin lending in general is that you can establish a good contact with the people you are giving money to before investing, and therefore reducing the risk of investing into scam & loosing all your money.
Creating an Account
The first step you need to take is to create an account. To do so, just go to their website:
You will be greeted by their welcome page:
By clicking on the Sign Up button, you will be taken to a page where you can create your account:
Once this is done, it’s time to load up your account with some bitcoins. I won’t detail here how to get bitcoins, there are plenty of ways to do so and you will find plenty of articles about it on the web. Just go to the main page inside BTCJam and click on Add Funds on the right:
You will be redirected with another page where you can load up your funds. There is no minimum amount to lend money, so you can try BTCJam with a very small amount of bitcoins. This is the page where you can either get a bitcoin address, or scan a QR code:
Once that’s done, it will take about an hour or two to get the bitcoins on your BTCJam account. Now that you have some bitcoins over there, let’s invest them!
Investing Your First Bitcoins
Investing on BTCJam is quite easy: you just need to click on the green Invest button on top of the page. You will then be taken to the listings, where you can find all the current listings where people are asking for loans. You can sort them by length of the loan, type, and score.
The score is the most important: it is a score applied to each person asking for a loan, and can rapidly help you decide if a loan is risky or not. This is the page when this article was written, where I only selected the less risky loans:
Let’s explore a loan to see what it is made of. You have the basic information about the loan itself, like how much the borrower is asking for, and what is the term of the loan. You can also see how much was already funded. On the left, you will also find some information about the borrower, and especially see his active/repaid loans, which is a critical information:
This is not an article about how to select the best loans, but you can see in the Listing Rating section some very important data about the borrower, for example if his income or his identity was verified. Inside the Borrower Reputation section, you can also check the reputation of the borrower from previous loans.
Once you found a loan that you find suitable for the level of risk you can accept, you can simply invest by clicking on the Invest! button. You will then be able to invest all or part of your available bitcoins. Congratulations, you just made your first bitcoin investment!
What to Do Next
The first thing I recommend doing after your first investment in a loan is to see how it is going on. Check if your first payment is coming on time, and talk to the borrower to see if he/she has any difficulties with repaying the loan.
Then, you can move on and add more bitcoins to the account, and invest in more loans. Always diversify, diversify, and diversify. Also always remember to reinvest your gains to benefit from a nice compounding effect at the end of the year. For example, I reinvest the money that has been paid back usually once every month.
Finally, explore other bitcoin lending websites! At the date this article was written there was all smaller than BTCJam, but I am convinced that P2P lending with bitcoin will grow in the future, just as P2P lending using traditional currencies grew significantly during the past years.