An affordable investment – 2

The risks – International P2P lending

I also looked at some International P2P finance organisations. The one that appealed most to me was Bitbond, run from Germany. It transacts in Bitcoin and doesn’t require a huge investment startup deposit, however the part I was wary of, was the Bitcoin itself. The value of Bitcoin is extremely volatile, especially lately with hackers stealing from exchanges. Also they favored European accounts, making it a bit messy for anyone starting up outside the European community. Lately, thinking about security (as opposed to being user friendly) they asked for video identification as an extra security measure. That sounded fine at first, until I discovered they wanted me to hold up my passport to my face, in the video. Imagine if their security was preached, what would that be worth to an identity thief?

My investigations uncovered some complaints about unusually high losses resulting from loan defaults with Bitbond. It seemed they did very little to follow up defaults. Their last resort was to give you the details and let you pursue yourself. Oh yeah – I’m going to chase an eBay seller in Paraguay?
At that default rate, it wouldn’t be long before they gained a reputation as a soft target and all their customers were Nigerians. (They have since partnered with a credit collection organisation and significantly reduced their default problem.)

While they gave me assurances that their system was secure, the customer I.D. number didn’t work in their software either. As a programmer for over 30 years, if you can’t get your software to work in one area, you can’t assure people your security will work in another. It’s a whole package that either works or not. Much in all as I liked the international aspect of Bitbond, I have serious doubts about supplying such sensitive personal information to any organisation with software issues. While I have researched their methods, I have not opened an account and tested them and would have strong reservations about advising anyone else to do so. Bitcoin transactions attract hackers like bees to honey so you can’t be over cautious, in my view.

The risk with any form of lending, is the person could default and not repay the loan. Harmoney use the same credit collection practices as any other lender, so the risk is no higher than if you loaned the money through a solicitor, in my view, with one huge exception: if the Harmoney customer person defaults I’d lose $25. If the solicitor customer defaults, I’d lose at least $2,000.

To summarise, International P2P lending has more risks than local P2P lending because:

  1. It uses cyber currency, requiring extra security for your currency.
  2. It is usually based in Europe or the USA and has problems, or at least extra steps to deal with a nion European or non U.S. bank.
  3. Collection problems – it’s difficult and very costly to collect debts from hundreds of different countries.
  4. Because you are dealing in a foreign currency,transaction fees can eat heavily into your returns.
  5. Higher defaults because the borrower is not local and difficult to recover funds from.
  6. Higher debt recovery costs because they are operating overseas through agents with extra exchange rates and fees between you and the borrower.

While there’s a certain romance in becoming an International Investor, come back to earth – there’s also a lot of added costs. Unless you are looking to invest a large sum, I would not suggest International P2P lending with any organisation. There’s better opportunities closer to home.

Next installment we’ll look at one.

11. Cryptocurrency – Privacy

Because all Bitcoins transactions are visible, one of the ways it is proofed against fraud and manipulation, you need to take some effort to protect your privacy with Bitcoin. Because all transactions are stored publicly on the network, they show the cyber address, generated by your wallet and the balance of your Bitcoin account. The cyber address does not give away your real address until the purchase take place and even then, only to the other party in the transaction, not to anyone else on line. However anyone obtaining this address can see all the transaction related to that address. For this reason you should only use a Bitcoin address only once.

To protect your privacy, you should use a new Bitcoin address each time you receive a new payment. Additionally, you can use multiple wallets for different purposes. Doing so allows you to isolate each of your transactions in such a way that it is not possible to associate them all together. People who send you money cannot see what other Bitcoin addresses you own and what you do with them. This is probably the most important advice you should keep in mind.

Publishing a Bitcoin address on any public space such as a website or social network is not a good idea when it comes to privacy. If you choose to do so, always remember that if you move any funds with this address to one of your other addresses, they too will be publicly tainted by the history of your public address. Additionally, you might also want to be careful not to publish information about your transactions and purchases that could allow someone to identify your Bitcoin addresses.

Because Bitcoin operates on a peer to peer network, you IP address can be read with any transaction. There are ways to trace an IP address back to a physical address, so it’s a good idea to conceal your IP address with a program like Tor ( ).

Another method of concealing your identity is using a mixing service. This is a deceptive and misleading method that is considered as akin to tax evasion in some countries. Also the mixing organisation has all your information, so you need to trust them and hope they have sufficient cyber security in force.