Lately, we all have heard about the “Bitcoin” phenomenon. “What is it?”, “Where did it come from?”, “How do I earn them all?” Unfortunately, this is not Pokemon Go. No need; as such thankfully, to capture and fight people for it; rather, we get to negotiate and trade like how civilized people do.
What is LocalBitcoins?
Let’s start with the basics. Founded in 2012, by Jeremias Kangas, the LocalBitcoins is a startup company in Helsinki, Finland. Their main purpose is to overview the direct trade of the bitcoins between the buyer and the seller that requires no supervision between themselves during the trade. Also known as the “Over-the-counter” trading. Or in simpler terms: An open outcry for the people.
Users over the network post advertisements on the website; where they state the exchange rates they are willing to sell their bitcoins at. Users being intrigued will meet the person selling the bitcoins or perform the transaction using online banking. The whole system comes under the concept of Escrow developed by Jeremias Kangas himself.
Along with this, LocalBitcoins also provide a reputation and feedback mechanism/program for users with an escrow and negotiation service. This is where LocalBitcoins initiate programs where users can rate each other in online communities in order to build a sense of trust through reputation.
As we have seen the introduction, let’s look into the pros and cons of LocalBitcoins:
- In terms of privacy, LocalBitcoins provide the most secure way to handle transactions i.e to purchase Bitcoins.
- In some countries, LocalBitcoins may seem the only way to sell/trade bitcoins.
- Not only is privacy provided but a different variety of options (payment methods) are available to purchase Bitcoins.
- No need for a verification ID.
- No political conflicts and third-party interventions.
- Users will need to be aware of scams, therefore, precaution and care must be taken to avoid being looted.
- When using cash as a payment method, it tends to be slightly expensive since many people are willing to spend extra on receiving LocalBitCoin privacy offers.
- Not usually suitable for buyers who invest in a lot of Bitcoins.
- Due to the point above, sellers will ask or inquire about the verification ID.
- Having a quick transaction usually depends on the payment method.
- Some payment methods such as Paypal have reversible payment features, which is in fact; risky.
As a general viewpoint, LocalBitcoins do no impose any such limits on the users rather, users are free to deal with how much bitcoins they want to sell or purchase including the limits as well. This is a remarkable experience for the users due to the no limitations provided along with the privacy offers. It may seem the users are reaching a level of fair negotiations but how much is it actually reliable in? Moreover, do all countries promote such a trading exchange?
In relation to countries, LocalBitcoins are available in mostly all companies except Germany and the State of New York. This is because LocalBitcoins have decluded New York due to the BitLicense. Currently as denoted, 248 countries and 15971 cities have exchangers for providing bitcoins between buyers and sellers.
So what makes LocalBitcoins different from other trading exchanges?
- Dealing with humans: As previously mentioned, there is no third party or any political intervention as such that may disrupt the transaction taking place. Unlike other centralized Bitcoin sites, there is no corporate head, therefore, the process is lean and fast and Bitcoins are received instantly. Thus, the main focus is not towards one country with another but rather between one user and the online community.
- Supporting payment methods: LocalBitcoins can support every payment method the user community is engaged with.
- Privacy: Again, as mentioned, privacy is one of its prominent features where it offers a P2P trading exchange.
LocalBitcoins vs other cash exchanges:
Apart from LocalBitcoins, there are other options for P2P trading where people are still discovering different exchanges that highlight the important feature towards not facing economic crisis and issues which a central currency exchange often faces.
From a fiat exchange to an altcoin to bitcoin, BitSquare is a fully decentralized package consisting of these three types of currencies. Moreover, it is hosted on a server that is not centralized itself, therefore, taking the definition of decentralizing to a literal meaning. This puts BitSquare to an advantageous situation as it runs on nodes therefore invulnerable to hacking, malware, and censorship. Using Tor hidden services and ciphering all private data over the wire enables a secure experience for the user.
However, compared to LocalBitcoins there is a moderator who can step in and settle charges on a fee or a disciplinary fine to the person who misbehaves during the trade or to two or more users. The buyer, seller, and the moderator hold ‘private codes’ to release the funds.
In fact, it has a low liquidity but that is slowly increasing over time. As mentioned, it is able to support exchanges such as altcoins and fiat exchanges without the need of proxy tokens .i.e (authentication verification).
Bitkan is an application available for iOS and Android that provides P2P bitcoin trader matchmaking. Using the OTC market where traders are added into the users’ area with their buy and sell quotations. Users have the flexibility to choose a trader they would like to make a deal with, contact them through the app and arrange the transaction/trade to take place.
Bitkan uses a traditional escrow method where they feel users can be protected thus is considered by many people to be a more convenient service provided than LocalBitcoins. Example: China – it’s a main focal point where a trading volume of Bitcoins as soared twelvefold over the previous months.
Users are being given the freedom to trade and purchase coins but ordering large amounts/volume i.e. more than 5 BTC per day can lead to the user to adhere to KYC and ADL procedures resulting in sharing personal information.
Working in a similar manner to LocalBitcoins, users can trade or pay for Bitcoins for fiat currencies through the use of out of band paying mechanism i.e data that is transferred using an independent stream rather than the main-in band stream of data.
Exchange moderators control the bitcoins through a centralized escrow mechanism. It is, however, behind LocalBitcoins but slowly showing an increasing incline in trend.
As comparison states, LocalBitcoins and Paxful are similar in terms of the trading process. Each seller found in Paxful, as well as LocalBitcoins, have a well-known reputation regarding the past trades along with the Bitcoin exchange rate. But as the sellers provide sufficient or a variety of different payment methods, they would tend to charge higher.
The process of buying Bitcoins with Paxful:
- The user decides the number of Bitcoins to buy/purchase.
- The user chooses the currency in which the exchange rate will be calculated upon.
- Payment method selection – a variety of options.
- Different sellers would be shown.
- Live chats online on discussing the transactions.
LocalBitcoins have a more digital experience compared to Paxful as they have operated for a long time in the field. But, in the end, it all depends on the sellers.
Wall of Coins
Wall of Coins provides a beginner experience to the users who will find it easy to buy and sell Bitcoin using cash. It has an extraordinary SMS system where it takes the user to a comfortable experience on buying and purchasing bitcoins with cash.
This platform is available in 13 countries including Germany, United Kingdom, and the United States. There are no official limits as such but it all depends on the available offers from the sellers. One drawback would be that most sellers are not willing to sell a large number of Bitcoins, due to the fact that they don’t have any large amounts of Bitcoin themselves.
In terms of privacy, the user would need to submit their phone numbers for verification. WOC may ask for the users’ location but only to find out nearby bank branches.
At the last step, it would take 15 minutes to receive the Bitcoins after the confirmation from the buyers however, it would all depend on the seller’s time to confirm with the payment (standard time would be 15 minutes).
For the buyers, the fees are not displayed to the public but in the quoted price of Bitcoin, but it adds an advantage to the user since the fees are only 1-2%, so it is pretty low. LocalBitcoins only charges up to 1%, therefore, the WOC may seem expensive on a comparison basis but not too costly.
Coming back to the LocalBitcoins review
Users who wish to purchase Bitcoins through cash deposit will have to generally wait for an hour to receive the bitcoins. Although, if a face to face or in-person cash trade occurs, it would be less time-consuming and much easier to organize. Unfortunately, as mentioned, the speed of delivery will take around 15 minutes so it can be time-consuming.
Regarding the fees, as mentioned, only 1% has been charged on all sorts of trades but the price will differ due to inflation based on the payment method.
The real question asked is:
Can you trust LocalBitcoins?
- Referring to its history, it is one of the well-established platforms for exchanging Bitcoin.
- However, it is advised that users should not store their bitcoins in the wallet as it can be risky due to fraud or sudden unexpected reasons.
- Overall, the reputation is good but each and every user’s reputation must be checked to prevent fraud on the exchange.