A great alternative for bitcoin cloud mining contracts are investments in bitcoin peer to peer lending. In this article, I will review one of the first blockchain peer to peer marketplaces - Bitbond.The site is operated by Bitbond GmbH which is based in Berlin, Germany.
Bitbond is the first global marketplace lending platform for small business loans. Bitboind leverages blockchain technology to connect creditworthy borrowers with individual and institutional investors.
Disclosure: This article contains affiliate links to Bitbond website, by clicking on links on this page and by deciding to invest in bitcoin loans I might earn an affiliate income at no cost to you. Remember investments in crypto are a high-risk investment, cryptos are volatile, and you could lose some or all of your capital invested.Do your due diligence before investing in Bitbond or any other crypto asset.
Although the cryptocurrency lenders are already familiar with lending on Poloniex.com, in case of Bitbond you actually invest in small business loans instead funding margin trade on exchanges.
Bitbond is saying it could yield up to 13% annually in bitcoin lending by investing in USD and EUR denominated loans.
Let's admit for peer to peer lending, 13% annually is really attractive
Interest rates are set according to a borrower's creditworthiness which is determined by the rating (risk based pricing). Interest rates vary according to the rating and the term of the loan. All payments of interest and principal are paid to lenders according to their number of notes held.
Currently, there are not many loans to invest in available, just about 56 active loans.
By innovating in the fields of payments and credit scoring, Bitbond makes financial inclusion a reality around the world. All payment transactions on Bitbond are conducted via the bitcoin blockchain. Therefore service is available worldwide via the internet and is independent of banks.
In order to score borrowers who are not covered by conventional credit bureaus, we use alternative data for credit scoring. This includes transactions of small business owners from accounts like eBay, Amazon, Etsy, MercadoLibre, Shopify, PayPal, bank accounts and many others. The data gets evaluated with our proprietary machine learning algorithm.
Unfortunately, it doesn't seem that Bitbond is offering a buyback guarantee for a bad debt, instead, investors are encouraged to diversify across multiple loans.
Banks offer historically low-interest rates on fixed-term deposits. The actual return is often negative when inflation is taken into account. Bitbond lets you avoid losing capital with interest rates of 10% to 35%. The expected return is approximately 13% per year in a diversified portfolio after bad debt. You can choose from loan terms of 6 weeks to 5 years. All of this while you help entrepreneurs to grow their business.
As an investor on Bitbond you can either pick the loans you like to fund manually or you use AutoInvest tool. AutoInvest lets you create a diversified portfolio of loans according to your preferences in an automated way. The great benefit for investors who use Bitbond is that you can create a portfolio of loans that are diversified across many different countries.