A new peer-to-peer Bitcoin lending platform, Credible Friends, officially launched on April 30, 2016, with a unique approach: borrowing and lending between real-life friends based on trust rather than traditional credit scores. Developed by Gavin Knight and Zach Doty, the platform aims to spread Bitcoin awareness by enabling preferential lines of credit among people who already know and trust each other.
Trust Over Credit Scores
Unlike existing Bitcoin lending services such as BTCJam, Credible Friends is not targeted at strangers seeking loans. Instead, it leverages existing relationships to remove barriers to entry for Bitcoin. “It’s about the relationship and the trust, not a credit score,” Knight explained to Bitcoin.com. The platform intentionally omits escrow or formal financial protection, as the nature of revolving credit means funds are taken and become a matter between the two parties. The developers encourage users to do business with people they know and to rely on past usage history and mutual trust.
The app allows users to set up a BTC wallet, obtain credit lines from friends, and spend those funds wherever Bitcoin is accepted. Lenders are incentivized by a flat interest rate of 25% APR, a portion of which is paid to them once the credit is fully repaid. The amount a borrower can access depends on their reputation within the platform’s feedback system, similar to LocalBitcoins. Terms such as loan duration and amount are entirely negotiable between friends. Borrowers can even repay outside the platform, in person or through other arrangements.
Cold Storage and Global Ambitions
Security is a key concern. Knight stated that all user funds are kept in cold storage with distributed keys, inaccessible via the platform itself. The hot wallet is funded directly by the company. Initially, the company takes on the risk with its own Bitcoin holdings to ensure customer safety, though this model may evolve as scale increases.
The platform is designed to operate in any market, especially developing regions where traditional loans are hard to secure and third-party trust is lacking. Knight noted that Facebook and Twitter are worldwide tools, enabling coverage in most markets except China. Because user groups are isolated among friends and not open to everyone, the risk of fraud is minimized. Users are advised to transact only with existing standing parties they can personally verify.
Credible Friends represents an experiment in bringing Bitcoin to the masses through interpersonal trust. Its success will depend on whether the friend-to-friend model can overcome the inherent risks of unsecured lending while delivering a user-friendly gateway to cryptocurrency.