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Figuring out my return on lending

Author's note: This article is part of an ongoing blog about my adventures in the world of alternate currencies.

BTCJam is a great website which allows anyone with any amount of Bitcoin to become a lender. Let's say you have worked hard watching ads and completing crowd sourced tasks and you have finally scrimped 0.01 BTC together. At current market prices that would work out to be right around $7.50.

Seven dollars and fifty cents may not be much, but it is enough to lend out to people who really need the money now on BTCJam. No amount is too small. I have loaned out as little as 0.0001 BTC to various borrowers. Investing a small amount in a loan allows me to track the loan as an “investment” while not committing too much to it. I will often do this when I want to try out a new borrower with little in the way of reputation points and see if that borrower will be able to get his or her loans funded in the first place, and once funded, whether or not he will make good on his loans. Even if I don't profit much on three separate loans where I invested 0.0001, if all three loans have been repaid, then I have a track record of this borrower repaying loans and I will more seriously consider making a larger investment next time he lists a loan.

My point is that 0.01 BTC is more than enough to get started on BTCJam. The word to the wise on BTCJam as on any other site involving investments is that you only invest what you can afford to lose. Psychologically, you do want to hold that 0.01 BTC lightly as there's always a chance you could lose it. You want to make sure that you have a way to replace it should you lose it. This means that whatever you did to acquire this 0.01 BTC in the first place, you want to keep doing while you're putting it on the line.

With that said, there are some precautions you can take on BTCJam to minimize the potential for losing your investment. The main one is to only stick with A+ borrowers with plenty of positive feedback points. Borrowers like CintronDigital and MAC are perfect for first time investors because they consistently repay their loans. You can find their profiles on BTCJam and follow them. When they list a new loan, you will be notified by email. You can then log in and invest your BTC on their next loan. You can also look for any “funding in progress” loans listed on their profiles and invest in those immediately. Business loans fund at 70 percent so any loan that is close to 70 percent or over 70 percent funded will definitely fund. If you invest in a loan that you know will fund, then you will be putting your BTC to work sooner and more quickly earn a return. But if there are no in progress loans, then simply follow the borrower and then wait for the notification that they lave listed a new loan to arrive in your inbox.

Each loan is different in terms of how long it will take to fund, how many payments, the interest rate and more. The borrower sets most of the terms, but it's the investors themselves who determine whether or not the loan will fund. If no one invests in the loan, then there are no funds for the borrower. This occasionally happens to even the best borrowers, and they usually try again. If you invest in a loan that doesn't fund, you will get your money back and you are free to invest it into a new loan.

If you know exactly how much BTC you started out with, you can pretty easily figure out how much profit you made. If you invested all of your 0.01 BTC in one loan and you received 0.0105 BTC back, then you know you have made a profit of 0.0005 BTC.

But if you have more BTC to invest–perhaps like me you write for the Devtome and have that way of acquiring BTC–odds are good that you will have invested it in several different loans, and those loans will have begun repaying at different times and intervals. Then when you receive a payment, perhaps you immediately invested it in a new loan so as to increase your profits even further.

That's what happened to me. I quickly saw a couple loans I liked so I placed the amount of BTC I had deposited into them, and then I went and sold a few more DVC to get more BTC to further invest in those loans. When those loans funded and I started getting paid back, I quickly reinvested the payments into new loans. There is truly no shortage of listings vying for your investment BTC!

I got to the point where I had no idea how much I'd originally invested and how many times I may have recycled a certain amount of Bitcoin. BTCJam doesn't give you a history of deposits, or if it does I have not yet found it. The site could use some improvement in terms of helping investors figure out their actual profits–that is, profits realized from full repayment of loans.

In the beginning it made sense for me to continue to simply reinvest the payments I received, but one thing I've learned about Bitcoin investments or any kind of cryptocoin earnings is that it is absolutely important that you take profits. You do not want to reinvest everything and risk losing it all. My policy with investments is that I cash out half the profits and reinvest the other half, and I'm going to do the same thing with BTCJam profits.

By entering all my current and pending investments into an Excel spreadsheet and running a few calculations I was able to figure how much I've realized in actual profits. I've been at this long enough to have invested in a few completely repaid loans. I do have way more funds out there waiting to be paid back, but I have to date realized 0.015159 BTC in actual profits. I usually like to wait until that amount goes to 0.04 or 0.05 BTC before cashing out because normally there are withdrawal fees as high as 0.001 or 0.002 BTC. BTCJam does not charge any withdrawal fees, which is great news for small investors. However, it does insist that you reserve 0.001 in your account after your withdraw. If you are starting out small, you may be reinvesting profits for a while before you realize even 0.001 in profits. At this point you want to keep adding to the pool you have to invest so that it grows faster.

Now that I know what profits I have realized I am looking to take some out and cash them out when I earn a few more. Then I will reinvest the remainder so that my pool of investment funds grows, leading to more profit taking down the road.

Figuring out my BTCJam profits has been more complicated than figuring out my mining profits, but I did it, and if you start recording your investments in a spreadsheet right from the beginning, you will have an easier time figuring this out than I did. I still don't know how much I originally put in. You should keep track of this yourself because BTCJam doesn't do it for you.

Devtome Writers

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