Bitbond is a Berlin based peer-to-peer (P2P) company. The platform offers small business loans to borrowers and has a global aim. What sets Bitbond apart from other P2P platforms is the fact that it utilizes the bitcoin blockchain for all payment transactions.
The aim of Bitbond is similar to every other P2P platform and I will talk more about the general platform later. The key distinction for Bitbond is the fact that it is based on blockchain technology and the bitcoin crypto currency. If you don’t know what bitcoin is, I recommend doing some research – same goes for blockchain as I will only touch on the basics here.
Bitcoin is a digital- or crypto currency and is very different from our dollars, euros etc. First of all, transactions are instant and there are no banks involved in any transactions. This also means that transactions are done near zero cost and fraud is all but impossible. Bitbond references some good resources to get more information if needed on both bitcoin and the blockchain. Bitcoin is still very much an experimental and young currency but more and more shops and online merchants are accepting it as a form of payment.
Bitbond review shows that all payments on Bitbond are conducted in bitcoin but the site grants the ability to select a base currency for the investor and borrower to see payment/repayment schedule in a regular currency. The base currency also fixes the payment/repayment in terms of that currency – ie. if an investor gets monthly repayments of 100$ it will not change, the price of bitcoins however might change and thus the amount of bitcoins investors receive changes too.
You have to buy bitcoins in order to invest via Bitbond. Investors therefore have to go to a bitcoin exchange and buy the currency which can then be deposited to their Bitbond account.
Bitbond review for investors
Once all the necessary steps are done and you as an investor have transferred bitcoins to your Bitbond account, you can finally start investing. I will highlight a key point again when investing on Bitbond:
As described previously, investors have the choice to select a base currency for their bitcoin loan. This feature was introduced by Bitbond in 2014 and essentially pegs the exchange rate between bitcoins and USD (the site also allows filtering for EUR, but their resource page only uses USD as an example of a pegged loan. I assume EUR loans are also pegged but I am not sure). Selecting USD as a base currency will fix the USD amount investors receives in repayment BUT investors still receives this value in Bitcoins.
The minimum investment amount is 0.01 BTC (Bitcoins) and all loans are divided into this increment. Investors can either invest manually by personally selecting what loans to invest in or use Bitbonds autoinvest tool. This will automatically invest funds for the investor based on pre-specified investment criteria.
Risk & Return
Unfortunately, I have not been able to find any information about returns on the Bitbond website. They state the all rates are stated as annual rates but they don’t disclose return history. This might be because of bitcoin being the currency used and the dollar value of bitcoin fluctuates like any other asset. This means that return numbers would be relative.
We can still talk about risks when investing via Bitbond and there is a couple. First of all the fact that bitcoin is the form of currency on the platform. This represents both a positive and negative. On the positive side it means very low transaction costs (if any), because zero bank involvement is needed (it is based on an independent online ledger). The negative comes from the fact that investors inevitably are exposed to currency risk. Unless you plan on spending your bitcoins you will have to sell them for dollars (or other currencies). Again if you don’t know much about bitcoin I highly recommend doing some research, you will quickly realize that the volatility of bitcoin (and other digital currencies) has previously been extremely high.
Bitbond review shows that a platform conducts a credit check on every borrower before they are allowed to publish loan requests on the platform. The platform has its own rating scale from A to F, where A is least likely to default and F is a highly speculative/high risk borrower. All loans get rated on this scale and it’s based on factors such as financial data, credit bureau score, paypal transactions and Bitbond payment history. Borrowers are not allowed to publish new loans if they have late outstanding payments.
Bitbond is regulated by the German financial supervisory authority.
Bitbond has built their P2P platform on something very interesting and very relevant, bitcoin. Personally this is the first platform I’ve seen that is based on bitcoin. I would however say that unless you as an investor see a future for bitcoin you should probably look for other P2P platforms. This is mostly because of the fact that as soon as you invest via Bitbond you are exposed to bitcoin and why use bitcoin as a medium of value transfer unless you believe in it. The website has a very easy to use layout and looks good – and I have to highlight their “Statistics” section which is very cool. They provide a good overview of loans available for investment but as I stressed previously they do not provide return numbers (I did not create a login, so they might provide more transparency for users). Bitbond charges a fee for investors on repayments (sum of interest and capital repayment) they receive, it is 1% per default but is subject to change based on the specific loan.
Bitbond review shows that the platform does not provide any safety measures outside of what is to be expected and the pegged currency loans stops mitigating risk as soon as you receive your repayment. If you are already involved in bitcoin and digital currencies this provides a great opportunity to use your bitcoins for other types of investments.
Written by Phillip McFall