It is really sad to see businesses get shut down, especially those new ones with a lot of potential. It almost feels like robbery - no one will ever know what that venture could have become if it was allowed to actually grow.
In the case of BTCjam, it is even more saddening because it is bitcoin-related. Seeing what cryptocurrency has grown to be, one can only imagine the important role that BTCjam would have played in the world today.
Perhaps, the unique idea behind BTCjam - which made it so attractive to people, is the reason the company was shut down. For a business that started as far back as 2012 when bitcoin was still new to so many people, it operated with a technique that’s way ahead of its time.
BTCjam was a peer-to-peer crowdfunding site that operated from 2012 to 2017. Unlike common crowdfunding sites we all know today, BTCjam was only used for bitcoin transactions.
It was basically a lending service that involved providing bitcoin loans to the various people that needed it. The business was not limited to the United States because the aim was to allow users in other countries who couldn’t secure loans because of their low credit score system, to have access to credit in the form of cryptocurrency.
This business idea received open arms from people in many countries, as those who found it nearly impossible to receive loans the regular way jumped at this opportunity.
Within the first year of operation, BTCjam was able to loan users an average of $500. This led big names like 500 startup, Rabbit Capital, and foundation startup to invest in the company in 2013. As a result, the company grew and attracted even more investors.
By 2016, after just four years of operation, BTCjam was fully operational in 121 countries - servicing over 16,000 loans. Most of these countries were often described as “unbanked”, so the use of bitcoin really made things easier for the people.
All this success made the United States government to focus on BTCjam, and shortly afterwards, they could no longer operate in the United States. Eventually, the company stopped all operations and shut down in 2017.
For a company that had attained so much success and fame, one would have expected the government to work hand in hand with BTCjam, but the business was shut down instead…quite discomforting.
How did BTCjam work?
The mode of operation was simple. In the most basic sense, you can picture it this way: if you had bitcoin and were willing to loan it out, you could easily get matched to someone that needed it for business or other personal reasons.
As the business grew bigger and reached more people, the demand for bitcoin loans increased, which led to the crowdfunding of bitcoin. Members of the website were able to contribute parts of the required amount of bitcoin that would be loaned out.
For each bitcoin loan amount that was completed, hundreds or even thousands of people must have contributed their own parts that led to that completion. At this point, the loan would then be issued to those that asked for it and when the repayment was due, each and every member of the site that contributed towards the total amount of that loan would be repaid according to the amount of bitcoin they contributed.
This crowdfunding and peer to peer system was no doubt easier and faster than the traditional banking method of acquiring loans. It also created more awareness on cryptocurrency and bitcoin since the topic was still very new at that time.
What led to the shutting down of BTCjam?
Despite the obvious success of the company, BTCjam had their own share of challenges just like every other business venture. They never had business shortages, but not all the loans they gave out were paid back, which is a typical problem with every loan company. For some reason, this loan repayment problem started to affect BTCjam’s excellent reputation, but is not the reason the company was shut down.
We all know that our government likes to regulate everything, but they could not really regulate bitcoin and that became a major issue between the United State government and BTCjam.
This company was able to use cryptocurrency to solve credit problems around the globe by introducing bitcoin to even the poor countries, but because it could not be regulated like the regular banking system, the government had a bad eye for it.
The ease of doing business with BTCjam made more and more people stop using their country's traditional bank to apply for loans. For those who did not stop, it simply was no longer their first choice. This development most likely led the banking system to notice a decline in loan applications.
In layman terms, it is right to say that the government was losing loan applicants along with their huge repayment interests to this cryptocurrency loan company that was not easy to regulate. So they shut it down!
From mid 2017, people were no longer allowed to issue new loans on the BTCjam website. As for those who already had their funds trapped in the website, they were given a grace period of one year to withdraw any bitcoin they had left in the business.
It is important to remember that as this business got shut down by the government, it was not only the bitcoin of lenders that was trapped in, those who had debts to clear off were also trapped. And unlike lenders who would naturally rush to withdraw their money, those who had debts to pay were hesitant to pay back. You expected that, right?
That was a big challenge for BTCjam. Even when the business was fully operational, some borrowers did not pay back on time. Now imagine the losses the business had to endure after the curtain call.
For the morally upright people who actually intended to clear their debts despite the shut down, they had the option to do so with ease on the BTCjam website. For them, it was business as usual until they completely paid everything off.
BTCjam was way ahead of its time and bitcoin lending is a brilliant idea from any angle you choose to look at it. It is beyond unfortunate to have watched this promising business venture get shut down the way it did, for reasons that were unnecessary.
The government currently prints trillions of dollars every year, but does this money get to the common household? No. They do not have access to it, but they pay tax and have rights, so it was really unfair to shut down BTCjam that made bitcoin available to even the poorest people.
With the government holding a monopoly on healthcare, the media, the financial industry, and so many other aspects of life, we as a people should be more helpful to each other. The money we work for should go to the things we want, this is a democracy after all.
It is unclear if the BTCjam founders will get back into the business with a different model, but if they do, so many people will be happy.
