DEVTOME.COM HOSTING COSTS HAVE BEGUN TO EXCEED 115$ MONTHLY. THE ADMINISTRATION IS NO LONGER ABLE TO HANDLE THE COST WITHOUT ASSISTANCE DUE TO THE RISING COST. THIS HAS BEEN OCCURRING FOR ALMOST A YEAR, BUT WE HAVE BEEN HANDLING IT FROM OUR OWN POCKETS. HOWEVER, WITH LITERALLY NO DONATIONS FOR THE PAST 2+ YEARS IT HAS DEPLETED THE BUDGET IN SHORT ORDER WITH THE INCREASE IN ACTIVITY ON THE SITE IN THE PAST 6 MONTHS. OUR CPU USAGE HAS BECOME TOO HIGH TO REMAIN ON A REASONABLE COSTING PLAN THAT WE COULD MAINTAIN. IF YOU WOULD LIKE TO SUPPORT THE DEVTOME PROJECT AND KEEP THE SITE UP/ALIVE PLEASE DONATE (EVEN IF ITS A SATOSHI) TO OUR DEVCOIN 1M4PCuMXvpWX6LHPkBEf3LJ2z1boZv4EQa OR OUR BTC WALLET 16eqEcqfw4zHUh2znvMcmRzGVwCn7CJLxR TO ALLOW US TO AFFORD THE HOSTING.

THE DEVCOIN AND DEVTOME PROJECTS ARE BOTH VERY IMPORTANT TO THE COMMUNITY. PLEASE CONTRIBUTE TO ITS FURTHER SUCCESS FOR ANOTHER 5 OR MORE YEARS!

Idea Proposal

I am proposing a peer-to-peer investment business where investors go to a website and browse online business investment proposals and decide on which one they would like to invest. Once enough investors have invested the requested amount of money, the loan would then be funded and money related to the borrower. The borrower would then be required to make monthly payments with interest until the loan has been repaid.

The difference between this proposal and similar businesses is that this one would only operate by using cryptocurrencies and at the same time develop a type of crypto credit rating that could be used by the user for future applications.

The investment proposals could be anything from website ideas, releasing new computer equipment, building an app or even starting a crypto mining pool. The proposals could be as limitless as the ideas.

Investors would be enticed to fund the loans of the borrowers through the offering of great interest rates that could mitigate possible losses.

The website owner could make money through a variety of different methods by charging the borrower both a set amount and an ongoing percentage of the total loan amount.

Proof of concept

They aren’t exactly the same ideas as I am proposing, but two peer-to-peer lending sites could serve as a proof of concept for a business idea of this manner.

The Lending Club - A peer-to-peer lending company that has been around since 2007. They have a mission statement of creating an alternative to banks that offers both borrowers and investors a great rate. According to the “About Us” section on their website, they have paid out over $292 million dollars to investors to date. They offer an affiliate program that both gives its affiliates a good rate for referring borrowers and investors and also gives their business more exposure.

Latest company statistics At 07:07 AM on 12/30/2013:

  • Loans funded to date: $3,221,912,850
  • Loans funded last month: $234,045,450
  • Interest paid to members since inception : $292,125,720

Prosper - A peer-to-peer lending company that offers borrowers an interest rate starting at 6.73%. They are not as big as The Lending Club but have funded over $692 million dollars worth of loans to date. They also offer a generous affiliate program that both benefits affiliates and the company.

Latest company statistics:

  • Members : Over 2,000,000
  • Loans funded : $692,000,000
  • Personally Invested : Company claims that 92% of their employees are also investors

Both of the above peer-to-peer businesses operate in a similar manner. They have people who want to borrow money after going through a vetting process that includes a credit check. The borrowers then post a borrowing proposal and the investors (potential lenders) get to decide which proposals are acceptable then invest in them.

If the investors decide to invest in the borrower, they then decide how many shares (or how much loan percentage) they want to purchase. Once the loan gets enough people to invest in the requested amount, the loan is then funded. The borrower is required to pay back the loan under a predetermined set of terms which includes monthly payments. The investor (lender) will get back a percentage of the monthly payments based on how much of the loan they own.

(Due to many confusing state and country laws regarding lending, it would probably be necessary to allow any potential borrowers the ability to repay the loan in full without penalty.)

Example of a loan scenario:
Investor A owns 25% of a loan to borrower B. The total loan amount to borrower B was 2.5 Bitcoins.
Borrower B is required under the terms of the loan to repay it at a rate of 0.20 Bitcoins per month.
Since Investor A owns a 25% stake in the loan, he/she will get 0.05 Bitcoins (or 25% of the repayment amount) every time a loan payment has been made by
borrower B.

Developing a crypto credit rating for borrowers

Given the relative anonymity involved in buying and selling, it might be difficult for investors to trust that the borrowers will pay back the borrowed money. When people borrow money from The Lending Club or Proper (both fiat currency peer-to-peer lenders), they have to pass a standard credit check. I am not sure if a standard credit would work when dealing with cryptocurrencies, so other checks and balances might have to be used.

I have come up with some vetting processes that might help alleviate some of the fears potential investors might have about possible loan defaults.

1. Require that the borrowers : Make their crypto currency addresses public. Verify their phone number. Verify their email address. 2. Allow admin to closely examine the business proposals of the potential borrowers and respond to follow-up questions.

3. Require borrowers to deposit a percentage of the amount they want to borrow as collateral.

4. Require borrowers to purchase a “borrower's account” upgrade that can only be bought through a verified Paypal address. The cost of the upgrade could be nominal as this is only done to get their verified Paypal address on record.

5. Funding the projects in a piecemeal fashion and only releasing more coins to the borrowers after certain benchmarks have been accomplished.

6. Require borrowers to verify their Facebook and/or Twitter accounts.

7. Require borrowers to submit a detailed business plan. The plan could be enhanced if the potential borrower included contact information for people who want to ask him/her questions about the proposal.

8. Have a contract that says once a certain amount of payments have been missed the account is in a technical default. The borrower’s collateral could then be used to pay shareholders in the project their monthly dividends and no further coins would be released to the borrower until an updated business plan has been submitted (along with making their payment current).

9. Require borrowers to verify their home address. This could be accomplished by sending the borrower a piece of physical mail to their home address. Once they receive the mail, they would need to enter a code included in the mail on the website to verify that it was shipped to the proper address. This verification procedure would be limited to physical addresses only and absolutely no post office boxes of any kind.

10. Require a potential borrower to submit copies of his driver’s license or passport and a utility bill that has the borrower’s name and physical address. The name and address on the drivers license and utility bill would have to match exactly before being approved.

11. Have a site forum and requiring a certain amount of posts before allowing anyone to post a borrowing proposal.

12. Allow investors to post both positive and negative encounters with the potential borrower.

13. Advise the borrower that they are entering a legal binding contract (similar to eBay) and defaults could have legal consequences.

The entire process of obtaining a crypto credit rating would have to be completed before a potential borrower would be allowed to post a proposal on the website. The vetting of potential borrowers would certainly not be limited to just the above ideas. There could be several more ways to verify a person’s identity that would be far more efficient than the ones I listed.

Once some basic levels of verifying one’s identity have been established, there could be badges next to the username that allow potential lenders to see what levels of verification they have gone through.

It might be difficult to know what the future applications would be for a crypto credit rating other than on the loan site, but once cryptocurrencies become more widely adopted the potential uses of the credit rating should become more clear.

Can this business idea can make money?

Yes, it is possible for this idea to make some money. The website could money by collecting both a set amount from the borrower and an ongoing percentage of the loan amount after it is funded. Of course, the set amount of money collected and the ongoing percentage for the life of the loan are up to the people implementing the business idea. If people aren’t interested in becoming a borrower or investor, it might be possible to charge them for the credit rating.

Try to keep those loan defaults as low as possible

The way to get around the defaults is to keep them as infrequent as possible. This is why a very robust vetting process has to take place for any potential buyer. If borrowers know the site admins also have some legal recourse in the event of a default, it could further mitigate the amount of borrowers willing to default.

Conclusion

Peer-to-peer lending is not a new concept, but it is a proven concept. The problem is the use of cryptocurrencies instead of fiat currencies could present more problems than the owner of this business could overcome at this time. Perhaps this is an idea for a later date when some of the volatility of cryptocurrencies has been worked out. It is also possible if the business idea I am proposing becomes popular, it could add some stability to the crypto-community as a whole.

Finance | Business | Investing


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