Peer to peer lending. The latest threat to the banking system, or just another fad?
The Bitcoin was the centre of ruthless attack over the last couple of years because it threatened to undermine currencies on an international scale.
Satoshi Nakamoto introduced bitcoins to the world in 2009 and in under five years, the lid has been firmly trapped on the money.
Silk Road were shut down, China enforced their own, brand new laws to prohibit the exchange of bitcoins for the Yuan and th ECB are thinking up ways to protect their Euro. Bitcoins can be stolen, there's no insurance and as we can see our states won't fully recognise a currency unless they can plant laws on it.
The idea was simple, a way to do away with banks. A cyptocurrency that's all digital. People would open up their wallet and go bitcoin mining, swapping goods and standard currency for those funny digitized coins, sure to be worth so much more a couple years down the line.
It was also peer to peer exchange and this was the problem banks couldn't handle. Without customer's borrowing money from banks, they were investing their money in bitcoins instead. The currency grew, more bitcoins were 'minted' the more people used them, essentially converting the almighty US dollar, Euro, Yuan and whichever other currency was to hand, into bitcoins.
People trading with people. The bank was now out of the loop because we had transformed them into a computer program that would fit neatly on our smart phone. Clever!
Peer to Peer
The plagues of payday loans can stretch interest rates into thousands of per cent charges. Borrow £10, pay back £10,000.
Doesn't quite seem right but there is no ceiling to stop anyone charging as much interest as they want. Banks don't need to. Their risk, reward interest rates are far more savvy. Banks have far more collateral than payday loan companies. They are therefore safe to speculate that if you don't pay back that ten pounds, they can take your house instead. Sound familiar?
Now the bitcoin is dead, the lingering notion still exists that we didn't really need it anyway. We can do the exact same thing with normal currency.
This is peer to peer lending is just borrowing a tenner from your best mate, or his best mate. More than that, the idea only works if the interest rate is wholesale. You can only borrow so much for so long for said interest, based on your credit rating. You can't borrow for longer, can't borrow more and the interest you pay back, can't go any higher!
There must be some problem with this. It sounds almost exactly what banks do anyway.
Indeed that's the principal. A bank is supposed to be little more than a crowd fund. We all get together to help out Bob with his chicken farm and Maria pay back her student loan.
The only difference between P2P lending and banks, is that there is no middleman. You're borrowing directly with that person or those people. It really is their money and belongs to no bank.
There are no cuts, no fees, no bonuses. No bank!
Hyperconnectivity
The other article that brought this together can be found here and for the time being, nobody seems to have any answers. Without rehashing the entire debate (it's quite funny if you read between the lines) there's no way for a business to get a handle on their customers when it comes to social networks.
While people can sing praises on social media, we can also destroy bad businesses with a handful of well chosen words in the right arena. The machines that are doing all the trading, all the networking and even have our bitcoin wallets in the palm of their hand, can't be stopped.
Breaking this particular barrier is going to be a challenge for banks.
They simply are not going to allow people to take control of their own money and yet the very same machines that have kept them in business during the technological revolution, are starting to kill them off.
Should P2P lending marry itself with the likes of Google+, Facebook, Twitter and the next generations of social networks, then we might just be sending 'Thanks' in a comment box or update to a stranger halfway across the world for his investment in your start up business.
#P2P #banks #hyperconnectivity
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