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Prosper: An Example of Peer-To-Peer Microlending

Prosper is a web application that provides an example of the possibility of peer-to-peer money lending. Prosper's site is a marketplace for borrowing and lending money. Those looking to borrow put out their request and potential lenders bid on the loan, specifying how much money they're willing to lend and at what interest rate.

For borrowers, the system determines which loan bids have the lowest interest rates and add up to the total loan amount. For lenders, the system provides an Ebay-like rating that grades potential borrowers on how well they've behaved within the system. Borrowers are also able to join groups who will vouch for them (a concept common in conventional microlending).

As Ebay created new markets for goods, Prosper may create new a market for loans, potentially weakening the monopoly held by banks. While banks rely on trust in a monolithic organization, peer-to-peer money lending relies on trust in a network of individuals. As the banking crisis in Argentina showed, trust in monolithic structures can sometimes be colosally betrayed. Networks require vigilance and risk management, but are less prone to collapse.

Systems like Prosper are also more likely to be under the radar of anti-money-laundering (AML) software. AML software is a type of already being used by the state to track money and map social networks. The war on terrorism has already become a low intensity war on dissidence. As financial privacy has less legal protection than communications privacy, AML software is likely already being used by the state to uncover political enemies and anticipate political threats.

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