Quote from: Phildo on December 30, 2014, 03:38:17 PM

Quote from: Puppet on December 30, 2014, 02:35:33 PM

Quote from: byteSized on December 30, 2014, 02:29:15 PM

Might try bitcoin lending at BTCJam next, but then who's to say they're any better. Undecided

Now that people are finally beginning to wake up to the reality of cloudmining, perhaps I should focus my attention on the next looming disaster: lending bitcoins. Here is what I wrote in another thread:

Lending bitcoins is generally an even worse idea than (cloud) mining. Its hard to see why a legitimate borrower would want to borrow bitcoins, considering its volatility. Most investments and costs are still fiat denominated, so the exchange risk is enormous for a borrower, he might see his debt double or triple in mere months. The sad reality is that most of these borrowers will end up using the BTC for (cloudmining) ponzi's and will default on their loans when said ponzi collapses, for gambling (same thing, you might as well gamble yourself), as a way to short sell bitcoin (probably resulting in a default if BTC price goes up significantly) or plain old scamming the lenders by taking out ever bigger loans, increasing their credibility rating each time, until one day, they run. Cloudmining is usually a bad idea, lending out BTC an even worse one.

As for 'investing'; there is pretty much nothing you should even consider investing BTC in. Out of 100's or 1000's of IPO and scheme's Ive seen over the years, I can name precisely ONE that actually returned substantially more to its investors than it collected (asicminer). There are plenty of BTC related companies I would like to be able to invest in (bitpay to name just one), but none of them raise capital through BTC, for the same reasons explained above.

In the end, bitcoin itself is your investment. Dont try to 'grow' it, you dont do that with an investment in gold or silver either. Put it in a cold wallet and hang on to it. Thats the only truly sensible thing you can do with it, besides using it for buying stuff.

I thought about taking a loan to get a truck for my business, but then decided against it and vowed not to lend money either when breaking it down. if the price of bitcoin stays the same, everyone would be happy. If the price goes down I could get the truck for much less than taking out an auto loan, and that would work for me, but not that great for the lender. If the price goes up there is no way I could pay the loan off, and I'm not enough of an asshole to run with the debt, so I didn't even look.

And that boils down to why it's dumb to lend bitcoins. If the price goes down you get back your worthless coins, if the price goes up you are probably fucked because if someone actually needs the loan they aren't going to be able to pay you back if there is a spike.

I had the same experience with being scammed four times. I started to do micro funding instead (~ 0.01 to 0.05) depending on the borrower. You'll have runners but at least it won't be as bad.

And just to add, I only fund loans that are pure BTC (not tied to USD).

I recently got an arbitration notice from BTCJam. I have never gotten my lost money from a runner before.

Quote

NOTICE OF ARBITRATION

We would like to inform you that the loan Rep Loan #2 in which you invested, will be sent to arbitration in exactly 14 days and soon you will be receiving a reply.

To avoid arbitration, you can still negotiate the borrower's debt by contacting him through the comments page.

In order to maintain good profits and make sure this never happens again, you should take the following precautions:

Try to spread your investments in small chunks across several listings in order to reduce the risk of default.
Note the user reputation before lending.
Be wary of very high rates.
We also remind you that under no circumstances should you attempt collection on a late payment yourself. In doing so you run the risk of creating a legal liability for yourself and the website cannot be hold responsible.

Legal Department
BTCJam - Peer to Peer Bitcoin Lending
btcjam.com