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Is it Possible? Business Funding through Bitcoin

Dec 08, 2017 Posted /  4761 Views

Is it Possible? Business Funding through Bitcoin

Bitcoin is gaining popularity and thrust into the mainstream world of business. However, this scenario wasn’t apparent a year ago as it was only accepted by a handful of hipster coffee shops and a few artisanal food trucks. Today, huge websites like Overstock and Expedia have joined the current trend of investing in digital currency and the list is prominently growing. Thousands of entrepreneurs are competing to take advantage of a new and budding market of cryptocurrency causing a constant hum of activity bubbles in the newly emerged Bitcoin community. One area that’s flourishing with prospects at the moment is peer-to-peer (P2P) personal and small business loans. There are lots of evaluations happening in the digital currency area pertaining to the viability of Bitcoins for lending loans. Further, there is a question occurring about the services that are currently on offer, and if bitcoin loans have the potential to become another avenue for small business funding.

The Mechanics

Bitcoin is not just a currency. A better definition would be an open-source, decentralized exchange, capable of hosting a whole range of financial products. This exchange has many properties that are far more suited to the needs of an international marketplace than our current foreign exchange markets. It is considered highly accessible. The bitcoin network exists purely online, meaning anyone with an internet connection can send and receive coins. It has a very low transaction fees. Transferring coins over the bitcoin network is more like dealing in cash than the card, in that there is no middleman. You only pay a small fee for maintaining the network. One of the main reason is that it facilitates Fast transfers. Forget waiting days for IBACS and SWIFT payments. Again, thanks to the more direct nature of bitcoin, transfers take minutes rather than days, no matter how large the geographical distance.

Further, it keeps the information anonymous giving it a wider scope of not being traced.  You don’t need to enter any personal details to start sending and receiving bitcoin. The only thing that’s logged from a transfer is the amount and the bitcoin addresses involved. Bitcoin can be considered as an excellent choice for crowd-sourced loans due to all such factors. It has potential to open up your business to a whole new world of potential investors and funders due to its borderless nature. It is possible to keep themselves anonymous for funders and thus their participation is encouraged. Let us also consider the services it offers. The three main companies offering crowd-sourced bitcoin loans at the moment are BTCJam, BitLendingClub, and Bit Bonds. They all are operational and functional in a similar manner and they have “traditional” currency counterparts, such as Prosper and Lending Club.

You can make a request for loans after creating your profile as a borrower. All you need is to state an appropriate reason why you need the money and how much. Your approval is based on your timely payments of the loan and it leads to lowering of interest rates encouraging more funders to participate in this. As a lender, you simply browse the listings of prospective borrowers and fund whichever ones you think to offer the best or safest returns. Once the loan is paid back, you get whatever you put in, plus an interest rate determined by the website.

Bit Bonds is the only bitcoin P2P lender that specifically customizes and markets itself for business loans. It has a mission to close the funding gap between small businesses and ensure to deliver higher returns than other fixed income products. It helps to build a more stable and trustworthy financial system by distributing credit risk.

Evaluation of Problems and benefits

Price fluctuation is one of the biggest problems that any investors face when considering the market of Bitcoin. The price has fluctuated many times to double during 2013 start, peaking at double during the end of the year and then collapse to half in next few weeks. Relatively, only a few companies are accepting actual Bitcoin as payment. Hence those small businesses that accept bitcoin loans must still rely on selling to exchanges for traditional currency. When the massive price increase occurs, it could lead the borrowers to the struggle of paying back the amount they owe in bitcoins on time. Alternatively, the use of bitcoin means borrowers have immediate access to funding from all over the world, and the reduced transaction fees mean that everyone gets more value for money.

Primarily, it’s a question of adoption. Prosper has been successful in laundering billions of dollars worth of loans for its users; however, none of the bitcoin lenders are yet able to compete with this. The reality is that bitcoin is not very widely used and it limits the usefulness of services like P2P lending. This limitation is because they rely on large-scale participation to make them work.

The Future

The funding put into Bit Bonds shows that expert financial investors have confidence in the potential of bitcoin P2P loans. If adoption continues to increase, it seems likely that bitcoin alternatives could surpass their traditional counterparts. The world of cryptocurrency is evolving at a staggering speed, with some of the greatest development minds in the world working on new projects such as ethereum and decentralized network. As it encourages huge liquidity and security, the implications are hugely anticipated in the international financing like never before. Companies like Bit Bonds are currently only in its advent phase.

Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .

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Tags: bitcoin Bitcoin network receiving bitcoin bitcoin P2P bitcoin loans bitcoin lenders

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