I think BTCJam is really cool and I generally love P2P lending. So I did a simple experiment. I collected historical data from BTCjam and other Bitcoin P2P lending sites. Then I ran a simple simulation, where I invested into each loan on the platform and observed the outcome. Needless to say, I ended up with a huge loss.

Now this is interesting because all these P2P Bitcoin lending sites have a feature, called AutoInvest, which basically invests equally into all loans. That gives an expected net return in the range of 14% according to the sites. I really wonder how they came up with this number, given that investing into the all historical loans gives huge negative returns.

There's two explanations, either I did the analysis wrong, which is possible, or these sites are outright lying about their rates, their credit scores based on PayPal, Ebay etc are completely meaningless, and effectively they're just a massive scam fest. I contacted each site, including BTCJam, but received no reply.