How lending works

The terms, in plain words

Coupon is the annual rate the borrower pays, quoted before any loss and net of the platform’s servicing fee. It is simple interest, not compounded: a 12% coupon on $500 over two years pays $120, not $127.

What you are paid in, and why it is two things

Principal comes back in whatever went out. A borrower who drew BSV owes BSV; one who drew MNEE owes dollars. Whoever holds that leg holds the price risk on it, and they chose to.

The coupon is always paid in a dollar stablecoin. Never in BSV. A lender promised 12% and paid in a coin that fell 30% was not paid 12%: they were sold a bet with a coupon attached, and every platform that has blurred those two things was describing a different product to the one it delivered. So the interest leg is fixed in dollars on the day the loan draws down, at the rate published on the listing, and settled in MNEE: a stablecoin redeemable one-for-one against a dollar, collateralised in US T-bills and cash, issued on BSV.

The borrower chooses which stablecoin at application. The terms admit any USD-denominated stablecoin issued on BSV; today MNEE is the only one that qualifies, so today it is the only option offered. That is a fact about the market rather than a preference, and it will change without anything above it changing.

The consequence worth understanding before you lend: on a BSV-denominated loan your two legs move differently. The dollar value of your principal follows the price; the dollar value of your coupon does not. On a stablecoin loan neither moves, and you are lending dollars at a fixed rate to a small business with a published credit note.

Term is how long your money is committed. There is no early exit as of right: you can list a position for transfer or sell it into a standing bid, but BitBacker matches nothing and guarantees nobody, and on a thirty-six-month loan you should assume there will be no buyer.

Structure is how the principal comes back. Amortising pays it down with every instalment, so your exposure falls month by month. Bullet pays interest only until maturity and then all the principal at once, which is a materially different risk for the same headline rate. Callable means the borrower may repay early.

Seniority is where your money sits if the borrower cannot pay everyone. Senior is repaid before other debt; unitranche is a single class with nobody ahead or behind; subordinated is repaid last.

Collateral is what a lender can actually reach. Every listing describes the charge and puts a figure on it: a value marked on a stated day by the reviewer, the haircuts they applied, and that figure divided by what is still owed. A charge over physical stock in a bonded warehouse marks well above the loan; a charge over a software repository is carried at nil. Most of this book covers less than once over, and the ratio is published so you do not have to take the word “secured” on trust.

The reserve is not collateral and does not belong to any one loan. Two points of every loan’s principal, out of the origination fee, accumulate in it and are paid to lenders before they take a loss. It is small on purpose and the risk statement publishes what it holds against what is currently in default.

The credit grades

Grades are set by the reviewer who wrote the memo, not by an agency, and they are a judgement rather than a measurement. Where one has proved wrong the note stays up saying so: the defaulted loan on this platform was graded C by a reviewer who has since written publicly that it should have been a D and why.

The badges

Four, and every one is a fact you can check against a figure already published on the page carrying it. That is the only rule they follow: a badge on a lending platform is a claim about somebody’s money, and a badge whose criteria are not written down is decoration dressed as diligence. Nobody applies for these and nobody can buy one.

What people sign about each other

The badges above are derived: they measure whether money arrived and nothing else. What the schedule cannot tell you is whether a borrower answered a straight question, or whether the lender arguing hardest in a restructure had read the memo. So anybody who had money in a loan can sign a statement about anybody else who did, with their own key.

• Standing is the whole rule. Only somebody who held a position can attest about that borrower, and only a co-lender on the same loan or the borrower of it can attest about a lender. Brigading this costs capital rather than the price of making a wallet.
• The claim is from a fixed list. Seven of them, warnings included. One optional sentence explains it. A comment box on a page about somebody’s creditworthiness is a defamation surface with a cursor in it.
• One per person, per subject, per loan. Otherwise a lender signs the same thing eleven times and is counted as eleven lenders.
• Nothing can be deleted — not by its author, not by the subject, not by this platform. That is the entire mechanism. If you sign that a borrower pays as agreed and they stop paying two months later, your statement stays on their page and on yours, and anybody can see what you vouched for and when.

There is no score, and there will not be one. “Four lenders holding 61% of the last loan say they were warned early” is something you can check. A number is a black box, on a platform that publishes the rule for everything else it does.

What gets signed

Four things, all with the BRC-100 key the wallet already holds, and each stored beside the exact bytes it covers so anybody can rebuild the statement and check it rather than trusting our rendering of it.

• Attestations, above.
• Arbitration votes. A vote here binds the platform and decides what happens to other people’s money. It should not be an unsigned click, and a lender should not be able to say afterwards that they never cast it.
• Credit notes. The reviewer signs their own memo. The note that graded the defaulted loan wrong is still published and still signed by the person who wrote it.
• Borrower updates. The 72-hour disclosure rule turns on somebody having said something by a date. Signed, it is a statement they cannot later say they did not make.

The demo wallet produces a stand-in signature, deterministic over the message rather than a real ECDSA one, and nothing on this platform claims a demo signature verifies against a key. The seam is real; the substrate behind it is honest about being a stand-in.

When a borrower stops paying

This is the part of a lending platform that decides whether it is worth using, so it is written out in full rather than summarised.

1. A missed instalment moves the loan to “late”. The borrower is required to post an update within 72 hours of knowing they will miss it. The good ones post before the due date rather than after: the loan that is late on this platform right now was disclosed three weeks early, which is why a restructure is still on the table.
2. A second missed instalment opens a case automatically. Any lender holding a position can also open one at any time, for any reason, including a disclosure complaint against a borrower who is paying perfectly well.
3. Evidence is filed. Lenders, the borrower and the arbitrator can all add exhibits to the case file. Nobody can remove one, and nothing already filed can be edited.
4. The arbitrator publishes a recommendation. With their reasoning, in the case room, where every lender on the loan can argue with it: including the borrower.
5. Lenders vote. Fourteen days, weighted by principal, simple majority. Abstentions do not count toward the majority. The vote binds the platform.
6. The outcome is published permanently. Including the recovery percentage, and including cases where the platform’s own credit assessment was wrong.

What BitBacker takes

An origination fee of 5–6% of principal, charged to the borrower at drawdown and shown as a line item in every loan’s use of funds: you can see exactly what the platform took. A servicing fee of 0.75% per annum, deducted before the coupon reaches you, so the rate on the listing is already net of it. A recovery fee of 12% on amounts actually recovered through arbitration, and nothing if nothing is recovered.

BitBacker takes nothing on the spread between what a borrower pays and what a lender receives, because that is the fee nobody can see. Full detail is on the fees page.