In one of my previous posts on Bitcoin lending, I talked about the biggest site for BTC based peer to peer lending, BTCJAM and how it works. Ryan from Peer and Social Lending (another good p2p lending blogger) also recently posted about lending on BTCJAM with a nominal amount of cash. It is in fact the biggest, but it is not the best platform for BTC based peer lending. The best is BitLendingClub.

If you have ever noticed the big edge that insiders have in all financial areas (like the stock market, real estate markets, etc) then you are not alone. Being inside provides huge advantages especially when you are big enough to move markets like a Goldman Sachs is with the stock market. They also get the very best deals and know where to look for the best deals. What's cool in the BTC world is that you can become an insider yourself by going where the insiders are and seeing exactly what they do.

How do I know this? I did it myself and now the insiders count me among them. Thanks BIGers. And you can follow me.

If you want to see what the real Bitcoin based businesses, entrepreneurs and investors are doing, then BitLendingClub (BLC) is where you need to go. Why is BitLendingClub better?

1) Extensive Borrower Due Diligence

One of the biggest reasons why Prosper and Lending Club are successful is that investors trust the platforms. Trust is earned over time. The reason why investors trust Prosper and LC is because we all KNOW for a fact that they put strict underwriting guidelines into their loans. Often, as many as 8 out of 10 applicants are declined between these 2 platforms. We know that they do not just let anyone who want to apply on the platform do so just so they can collect the origination fee. It's tremendous for inspiring investor trust.

Sadly, there is alot of evidence to suggest that BTCJAM does exactly the opposite and lets everyone apply who wants to so they can collect those fees. I am in the minority of insider opinion when I say that I think the reason for this is the pressure from their outside investors and because they have grown too fast too soon. Their investors include Ribbit Capital and the 500 Startups VC firm and business accelerator and there is lots of pressure to perform. Others with more experience lending on the Jam with more BTC than I do believe they are intentional in this practice and not that they are overwhelmed with growth and the pressure to deliver.

As an investor in peer loans, the why doesn't matter. What does matter is they do very little to screen their borrowers. One of my early loans on the platform was a scammer with a fake profile who is now in Federal custody due to the size and amount of the theft. I've yet to experience a loss on BLC although I do now have a late payment.

BitLendingClub, on the other hand, does bigtime front end borrower screening. The team of founder Kiril Gantchev, his right hand man Yasen Yankov the CTO and Boryana Kulinska, the community manager does lots of due diligence and online research aside from standard due diligence requests like identity and address verifications. I've seen this in action myself as they go onto various forums and groups, including Facebook to ask questions and answer questions about various applicants without revealing confidential information. The active nature of their search for information is something that provides great peace of mind to us investors.

2) Manual Withdrawals of Bitcoin

At BLC, ALL withdrawals are manual and require approval and confirmation of BLC management. As an investor who only invests and has yet to borrow, I must admit this is a little bit of a pain in the ass to me personally since I am only withdrawing my own BTC that I have invested. This is a small price to pay to insure that every lender that wants to withdraw their BTC that they borrow is screened and approved before allowing them to access their borrowed coin. I have seen this one in action too where a quick request to withdraw in a likely attempt to run with the Bitcoin is denied by Kiril. BTCJAM lets anyone withdraw at anytime making it easy to scam investors.

BLC goes beyond this. A withdrawal was approved by accident when numerous recommendations for the same borrower came from the same IP address. Check out Kiril's own comments on the forum.

This is what active management of your due diligence process looks like. He is taking blame and has promised to cover any potential losses. Nice job, Kiril. And don't worry. Everyone makes mistakes. It's what you do about it that counts. As an investor, this kind of care makes me feel much safer about lending my coin.

Slight Correction: According to Kiril, 'we allow automatic withdrawals of funds for users who do not have outstanding loans and for users with a reputation > 100. Users who we have detected to have multiple accounts are automatically sent for manual approval of their withdrawal.' I guess it's just my own lack of patience that made me think my withdrawal was also monitored and approved. It still shows the care that goes into the release of coin to the borrowers.

3) Active Forums including a section on Fraud Prevention

BLC has a very active forum and it includes a forum on how we as investors can prevent fraud AND what BLC does to prevent fraud. This comment above mentions something called Jumio that I had never even heard of that scans and validates ID's and credit cards. This is pretty sweet that they do this on their borrowers. They also greatly encourage the use of the excellent due diligence provider Ardeva, created by my friend Frederic Houle as a supplementary service for additional verification. You may remember them on my post about Coinsortium for equity based BTC funding.

4) Better borrowers get better deals with Reverse Dutch Auction

BLC does their loans in reverse dutch auction style allowing lenders to bid on the amount and rate they would like. This rewards experienced borrowers with better rates while still giving investors good returns. The Jam has a suggested interest rate and if you decide to borrow for less you are termed more risky as a loan opportunity. These loans also don't show unless you disable their 'Safe Search' feature. This is an example of something that sounded like it might be a good idea at the time but actually hurts good experienced borrowers by forcing them to pay more instead of letting the market decide. BLC lets the investor market decide and thus gets better borrowers. As an investor, I want to go where the best borrowers are. Don't you?

Conclusion

If it sounds like there is a big focus here on security and fraud, then you understand the big differences of why BLC is the choice of the most enthusiastic and biggest BTC investors. Unlike in the USD peer lending world, these are very big concerns due to the relative anonymity on Bitcoin. I say relatively anonymous because things are sent to a 33 or 37 alphanumeric address like 1a4g6j789g etc. instead of to a person. That address can be tracked but it could be difficult to nearly impossible to track the owner of the actual Bitcoin address. BLC inspires confidence in its investors. If you want to see what insiders in the BTC world do, then you should invest there also. I'm StuFinancestech there, just like my twitter handle and you can see exactly what I invest in and why. I invite you to come do so. My repayment rate and returns are good at the Jam and even better at BLC. Try it for yourself.