@SteemFund has been a great learning experience so far. The main goal was to crowdfund projects with votes, at the beginning this was hard but with the decline in price and rewards it has now become impossible to raise significant amounts.
On our previous campaigns we have managed to raise up to 30 SBD with votes and have gather a few donations from witness sponsors. However, we have done little to contribute to the campaigns that usually require at least 500 SBD to finish their projects.
SteemFund as a lending platform
Thinking of ways to accomplish our initial goal I thought about the possibility of shifting from a crowdfund platform to a P2P intermediary.
In previous posts published under my account @chitty, I have pondered the idea of using Steemit reputation system as a way to boost investor’s confidence on borrowers:
“…the reputation system makes Steemit an ideal platform for p2p lending. Users who ask for money have more to lose, since they are putting their reputation at risk, you could even limit borrower´s account reputation so that only people with a certain reputation can ask for loans.” - Steemit as a p2p lending platform
How it could work
Borrowers will send their application similar to how they have been sending crowdfunding projects so far, stating what the loan would be used for, the time frame to repay it and number of installments.
@SteemFund would set a minimum reputation required to apply for a loan and a minimum Annual Interest Rate depending on the reputation of each user:
| REP | Annual Direct Interest |
|---|---|
| 70+ | 10% |
| 65+ | 15% |
| 60+ | 20% |
| 55+ | 25% |
| 50+ | Cannot Apply for Loan |
Loan Example
So let’s say I tested the system first and asked for a 1,000 Steem loan with my account @chitty that has 66 Rep. The loan Application could look something like this:
| Overview | I would use this loan to short Steem. I believe price will keep declining so I should make enough profit to repay it in 3 months. If things go wrong, I have enough SP to repay the loan. |
|---|---|
| Amount of Loan in Steem | 1,000 |
| Annual Interest Rate | 15% |
| Monthly installments | 3 |
| Total Interest during loan period | 3.75% |
| Total Amount to repay | 1,037.5% |
| Monthly payments | 345.833 Steem |
@SteemFund account would act as in intermediary, it will collect the borrower real name and address, this information would only be released if the borrower defaults.
@steemfund account would also collect payments and distribute them to all the investors.
Challenges
Because I do not have the money or the knowledge needed to make this an automated process, I would have to review each of the applications manually, I would also be handling payouts to investors. This could be quite time consuming. If steemfund becomes successful I would be looking for the help of a python programmer to build a payment script similar to the one @steemsports uses for payouts.
Since we would be managing community funds, I would prefer if I have a partner that we could all trust to give them active authority over this account or create a multi-sig account (not sure if possible yet).
Conclusion
SteemFund lending system would work like many others P2P lending platform, but it will have steemit reputation as an added security for investors. A borrower with high reputation is less likely to commit fraud since he would be risking potential future blogging rewards.
I would love to read your comments on the subject.
Regards,
@chitty
@chitty if you are planning to have this be a US based business, I would advise you to look into the history of microlending, specifically with Prosper. I was an early adopter on Prosper, before the SEC ruled it had oversight. Prosper was hit with fines, registration and reporting requirements and so on which severely hindered it for a number of years, eventually causing it to lose its dominant position to Lending Club.
I would imagine you'd have to register with them and have a number of hoops to jump through, so I would consider basing it in another country. Also take a moment to sit with an attorney to get their perspective.
I wouldnt do it in the U.S. and I would basically copy the already existing P2P bitcoin models.
Some of those Bitcoin P2P models are already struggling due to regulations. BitLendingClub for example closed down citing regulatory pressure. BTCjam had to abandon major markets, locking out users from certain countries. I do think crypto P2P lending will win out in the end, but it's challenging fighting in a domain where the state (and banks) assert control today.
The legal issues with this are beyond me, but it should be technically achievable. There are some whales who could afford to loan in return for some payment
Yes, but would the legal issues would be any different than wayniloans.com?... that is a fully operational site.
Not heard of them. Anyone setting up a loans business will attract attention from legal people
there are many loan sites for BTC already so i dont think thats an issue
This is great, @chitty i DM you on steemit chat .
It's great that you're thinking about this and launching the discussion.
Yes, I know I wont be able to do this alone, but even if I dont go ahead with it I would be more than happy for some1 else to take these ideas and make it happen
You can also P2P Lend with Bitcoin (maybe eventually Steem) At Btcpop.co Today!
Its not a quick or easy process to get a P2P Lending platform started or right (remember Btcjam and Btclendingclub?) But we support growth of any sort in the space and are happy to compete!
Awesome idea, would love to see it happening.
I'd rather earn my merit than go getting loans. Slower payoff, yes, but actual guarantee of having it.
I really love the idea and I hope it works out! :)
I'm not too sure about lending but it is an interesting idea. I would wonder how that could integrate with a possible "marketplace" for businesses.
It is a good idea.It will help some people.
This is a good idea @chitty, good luck with it!
Seems like a good idea to me! I would take out a small short term loan just to try it out and reward the lender with some interest!
Hey Kenny, you want to try out getting a loan?
I believe I would! I'm not on steem chat though. Can you Email me at kenny at YouTubeStars.com with the details?
Hey Kenny, that seems great..we can try it out for sure... I have also been contacted by a few others who want to ask for loans, there seems to be some interest here.
Send me a PM on steem.chat and we can work out the details.
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