Tales from Bitcointalk Forum - Lending in The Early Days of Bitcoin #1
Ever since I've been a member of the Bitcointalk forum, there have been quite a lot of notable events that have not reached the public's eye. With this new series, I'll try to give you a feel of how the Bitcoin community was back in the day. Officially I've been a member since 2013, which isn't that long ago, but I had been reading the forum a few years prior to registering. A lot has changed since then and you'd be amazed reading some of the stories from that time.
Bitcointalk forum was a fairly tight-knit community back then. Members were often ready to lend out a couple of Bitcoins to other members, for a variety of reasons. Usually this took place without any problems whatsoever, which is pretty amazing, considering the anonymity of both lenders and borrowers. Other times, people did get scammed and some lost substantial amounts of Bitcoin.
Community and Trust
Having a lot less members than today, the forum had way more of a community feel to it. Members with high forum and trust ranks could realistically get any sort of loan back then. If you look back in time in the Lending section, you'll see that people had absolutely no problem with lending someone +50 BTC. Scouring through those early threads, it's pretty amazing to see that they were usually paid back in time as well.
Just the idea that people were lending each other hundreds, if not thousands of dollars of a newly created currency, is pretty amazing when you think about it. Some people didn't even bother to charge any interests on loans.
My own experience with lending on Bitcointalk happened when DobZombie's website got hacked and he asked the community for a loan. I chipped in half a Bitcoin and was repaid after a short amount of time. The guy even sent me a key-chain to thank me. This sort of stuff doesn't happen any more sadly, but with good reason. More about that in the next segment!
When Things Didn't Work Out
It's difficult to point at one single event that destroyed the Lending section of Bitcointalk forum. There were a number of instances where lenders got scammed or borrowers were forced to default on their loans. Slowly but surely, scammers caught on to the fact that free Bitcoins could easily be obtained through the Bitcointalk forum. Gullible and naive lenders would start giving out loans to newbies and untrusted members.
One saga that I remember pretty vividly was the one between two long-time forum members, Dank (borrower) & Squall1066 (lender). Dank had a questionable reputation from the start, often admitting to buying drugs with Bitcoin. Mid-2012 he came up with the idea to start up his own Bitcoin bank and decided he would ask for a loan to fund his endeavor. Against better judgment, Squall1066 decided he would fill in this loan request and lent Dank 75 BTC. The whole thing turned into a complete fiasco, leaving Squall1066 with 53 BTC that he would never see back again.
Issues also arose when the Bitcoin prices suddenly started rising significantly in a short amount of time. Often causing borrowers to be unable to pay back the owed BTC amount of the loan. This caused many people to either default or try to change the terms of the loan after it was made.
In the end, word spread to other parts of the internet that it was fairly easy to scam people on Bitcointalk via these loans. Something had to be done to stop these opportunistic fraudsters. More about that in the next segment!
Due to the ever-increasing number of scams happening on a daily basis, it slowly became common practice to start asking for collateral. People would need to offer altcoins as collateral, if they wanted to secure a loan. Usually this meant the borrower needed to deposit 110% of the value of the loan amount, as collateral to a trusted escrow.
With this measure in place, there was a pretty big decline in accepted loans. Usually the loan amounts became a lot smaller too. Some collateral-free loan services continued to exist, but these were often reserved for highly trusted members and had a low maximum loan amount.
It's pretty logical that measures like these had to be taken, as trust in other member declined with more and more people joining the forum. Nowadays the Loan section is still in use, but it has lost much of its appeal.
It's pretty amazing to think there once was a time when people were just able to send hundreds of Bitcoins to anonymous people all around the world and had reasonable expectations to get their money back. Some people started entire businesses of off those loans, while paying back everything they owed in the end.
I do think everybody kind of knew that this wasn't going to last forever. It was very fund while it lasted, though I can imagine some people really got burned as well.
There are tons of interesting stories left to be told, most of which didn't make it to the front page of mainstream news website, like the Bitcoin pizza story. I hope I can help document some of those before the forum shuts down one day.