LocalBitcoins: A Decentralized Bitcoin Exchange

Bitcoin is Back

Slowly but surely, Bitcoin (BTC) is making mainstream news again. With its recent surge past $13,000, it has been igniting rounds of conversations on social media. Many crypto-analysts have predicted it will continue its upward trend to obliterate the losses many have incurred from the recent bear market. This has sparked interest among the public to buy more BTC, and for many other reasons too. In this article, we’ll look at where and how people can buy BTC, and their significance.

Decentralizing BTC exchanges

The torch that brings decentralization to increasing popularity and acceptance is its capacity to move financial inclusion initiatives forward. The vision that inspired today’s wave of ‘decentralization’ initiatives is encompassing, too. The goal that fuels it is the collective aspiration of many to make financial services accessible and affordable. It is expected to eventually tip the scales of financial freedom and sovereignty in favor of the common public, instead of the status quo’s set-up where wealth and financial opportunity is concentrated only amongst the few.

We can take a quick stroll at Venezuela to put more context in this discussion. Venezuela’s Bolivar, their local currency, is going through an episode of hyperinflation. Labeling the situation as a crisis is an understatement. 800% inflation of their local currency means that everyone’s money is essentially bereft of value. Just by mid-2018, 250,000 bolívares converted to just 1 US Dollar (USD). It was so bad that Venezuelans believed it was more prudent to use their cash as a toilet paper than to actually buy a toilet paper.

Today, many Venezuelans are seeking refuge in BTC and cryptos as an alternative to their valueless local currency. Many who needed to send money to their relatives abroad turned to BTCs and crypto because it lets them settle financial transactions at a lower cost and a quicker rate than traditional remittance centers that charge exorbitant fees per transaction. BTC was also a more viable store of value than holding their local currencies. Because of this, many have turned to cryptos in order to insulate themselves from the worsening economic crisis that has punished their local currencies since the past few years.

BTC has been considered a “lifesaving” currency in Venezuela. As of this writing, Venezuelans remain at the top of the LocalBitcoins exchange platform in terms of volume. But what is LocalBitcoins?

About LocalBitcoins

LocalBitcoins is a decentralized peer-to-peer exchange platform for BTC trading, established in June 2012. Its platform also has a structure that connects individuals and allows them to trade directly. LocalBitcoins work by connecting buyers and sellers while offering different methods of payment. Users advertise their sell orders for their BTCs, including preferred mode and medium of payment.

Users can buy and sell Bitcoin using:

  • Cash deposits
  • Altcoins
  • PayPal
  • Remittance
  • International wire
  • …and a host of other options listed on the LocalBitcoins home page

Users should note that as of June 2019, LocalBitcoins has disabled the option of in-person cash payment for Bitcoin, and this was confirmed by LocalBitcoins on Twitter.

Registration is free but for sellers posting an advertisement on LocalBitcoins, they are charged a 1% fee for every completed trade. Nevertheless, LocalBitcoins does not charge corresponding fees for the transfer of funds to and from different wallets within the server. The only cost users may incur is from miners that charge fees for BTC transactions that require users to transfer funds to and from other wallets outside the network of the platform.

Users have the option to remain anonymous when trading since it does not require ID verification or other personal information. However, there are some details published among the public regarding their reputation as a user of the platform. These details cover information like their activity, trade history, and the feedback ratings they were given. This ensures that each user has some of the basic information about other users they could potentially interact within the network.

Today, LocalBitcoins has exchangers from 248 countries and 7,614 cities. According to data from the Coin.Market, LocalBitcoins has 52 trading market pairs, with BTC/RUB (Russian Ruble), BTC/VES (Venezuelan Bolívar), and BTC/USD (US Dollars) at the top three based on trading volumes. As of this writing, it records 761 BTC in trading volume, with 31,885 successful trades, from the last 24 hours.

How do I buy BTC from LocalBitcoins?

Users have to be first registered before they are allowed to buy BTC in the platform. Upon registration, users are provided free BTC wallets. When buying BTC, users are given the option to look for sell advertisements on the platform. When searching, a user specifies their currency of choice, current location, and preferred method of payment. LocalBitcoins uses the data given to filter all online offers based on the information given by the prospective buyer.

The list of advertisements fit with the details set by each buyer is presented to them. Buyers can then sift through the advertisements and look at the information available about the seller as their own, initial assessment. The information available about each seller include the number of trades the seller has made, feedback ratings, payment methods accepted, and their asking price for each BTC.

As soon as the prospective buyer selects a seller, and agrees to the terms of the trade, the seller’s BTC is marked ready for release from escrow. The buyer sends a trade request to the seller and is asked to pay within the time window set by the seller. The transaction automatically cancels if the buyer does not make it within the payment window. If the buyer has already made the payment, they will be asked to notify the trader that the payment has been, before the BTC is finally released from escrow.

How do I sell my BTC on LocalBitcoins?

Like buyers, sellers have to be registered on LocalBitcoins, which will then let them own a free BTC wallet. Then, sellers will be asked to list the amount they want to sell, and preferred payment method. LocalBitcoins will then provide a list of all offers with all the basic information available about the buyers listed.

As soon as the seller has selected from the list of buyers, they will be asked to send a trade request. Thereafter, the seller’s BTC will be transferred to the trade escrow. When the buyer notifies that the payment has already been made, the seller can then release the BTC from the escrow to complete the trade.

After each transaction, a trader’s activity and history is updated and ranked, including the feedback ratings other users give them. All of this information will remain publicly available for everyone’s viewing.

How does escrow work?

LocalBitcoins administers escrow accounts for users wherein every BTC up for selling is reserved for interested traders. If the seller confirms that a trade has been successfully done — which means that the buyer has made the payments — the BTC kept from the trade escrow accounts can be released to the seller.

If a user faces an issue during any transaction, LocalBitcoins has a customer support team that users can get in touch with via email. For users seeking advice from the LocalBitcoin community, there is a special forum for it created and hosted by LocalBitcoins.

What is the future for LocalBitcoins?

Like all other cryptos, LocalBitcoins and other crypto exchange platforms sometimes face difficulties because of local regulatory agencies. For example, there are reports that say LocalBitcoins will have to be supervised by the Financial Supervisory Authority of Finland, where LocalBitcoins is located. It’s hard to speculate how significant its impact would be but it would surely affect the way transactions are settled and set-up in the platform.

Traders can also participate in local, off-chain trades. This is an alternative from the online trade that is done completely through the LocalBitcoins platform. In local trades, users meet face-to-face to complete each trade where they physically exchange cash and BTC in a meet-up place with Wi-Fi access. However on June 1, they removed in-person cash trading to “adapt to the current regulatory environment,” LocalBitcoins said in a tweet announcement. The cash option was removed from the options in the platform and they can now only trade through online payments or cash transfers.

Where else could people buy BTC?

There are a number of options for users to trade BTC locally.

M-Pesa

M-Pesa is a digital finance service provides focused on money transfers, financing, and microfinancing services. Currently, M-Pesa services areas like Kenya, Tanzania, Afghanistan, South Africa, India, Romania, and Albania. The project began from the recognition that many families, especially the underserved and unbanked, use airtime for money transfers and remittances. This means that most of them use mobile phones to participate in financial transactions with their relatives or friends. From this finding, M-Pesa was conceptualized to provide microfinancing services to these groups of people in a way that is more accessible and affordable to them. Until it later evolved into a different service offering focused on remittances and payments. As of 2018, the recorded number of active users of M-Pesa total to 33.4 million.

Their service offering covers:

  • Deposit-taking and withdrawals
  • Money transfers and remittances
  • Bills payment
  • Microfinance

It its key markets like Afghanistan, M-Pesa is used to pay the salary of policemen efficiently so they do not defect to the Taliban. This has also helped in their transparency efforts since M-Pesa’s use revealed rampant corruption in their previous practices. Before, many police officers were underpaid, and ghost police officers who are paid salaries.

M-Pesa can be used to buy BTC. Users only have to create an account on M-Pesa and fund the digital wallet provided to users and accessible through the platform via bank transfer. Then, the user has to look for BTC exchanges, like LocalBitcoins, to find sellers that accept M-Pesa as a method of payment. To complete transactions made in BTC exchanges, users can transfer the money from their M-Pesa digital wallets to sellers. Other BTC exchange platforms to consider are Paxful and BitPesa.

Coins.ph

Coins.ph is a digital financial service platform that began 2014 to support the country’s strive towards greater financial inclusion. Coins.ph is one of the few crypto-exchange initiatives around the world to be authorized by a country’s central bank. Its recorded growth has prompted an adoption in Thailand, giving birth to coins.co.th.

Every user of the platform is given a wallet to store their Philippine Peso (PHP), BTC, Bitcoin Cash (BCH), Ethereum (ETH), and Ripple (XRP). A pro-version of the platform is expected to cover more altcoins.

Coins’ primary use case is focused on transfer and remittance services. In the Philippines, it is mainly used to make it easier for every mobile phone owner to settle their bills. Some also use coins.ph to buy BTC.

Coins has allowed many workers in the world to receive global remittances and payments in a way that is more accessible, cost-efficient, and quicker, without having to pay exorbitant amount of fees. It does not require anyone to own a bank account and has no minimum amount set for each transaction made on the platform.

Abra

Abra is a cryptocurrency and fiat currency wallet and exchange mobile platform. With Abra, anyone can easily have access to 28 different cryptocurrencies and 50 fiat currencies. Through the platform, users can buy and sell digital assets safely. They just have to fund the digital wallet that Abra provides through bank transfers, credit or debit cards, BTC, Bitcoin Cash (BCH), and Litecoin (LTC) transfers, or Abra tellers. Abra tellers, however, are only available in the Philippines. It is because these tellers are pawnshops in the Philippines that Abra has partnered with. Abra tellers charge a small fee for every transaction, which starts at a rate of 1.15%. Adding funds via BTC, BCH, or LTC is free.

To buy BTC with Abra, users have to first download the platform and register an account. After doing so, they only need to add money to their wallet so they can start on the exchanges. It has a non-custodial wallet, which means users are fully-responsible for their funds inside the wallet. Users can easily cash out through bank transfers, BTC, BCH, and LTC transfers, or through Abra tellers.

Here is a list of cryptos supported by Abra:

  • Cardano (ADA)
  • Tron (TRX)
  • Basic Attention Token (BAT)
  • Bitcoin (BTC)
  • Ether (ETH)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
  • Ripple (XRP)
  • Dash (DASH)
  • Ethereum Classic (ETC)
  • Dogecoin (DOGE)
  • Zcash (ZEC)
  • OmiseGO (OMG)
  • Golem (GNT)
  • Vertcoin (VTC)
  • Quantum (QAU)
  • Monero (XMR)
  • Lisk (LSK)
  • Verge (XVG)
  • NEO (NEO)
  • NEM (XEM)
  • Bitcoin Gold (BTG)
  • Stellar (XLM)
  • Augur (REP)
  • DigiByte (DGB)
  • Stratis (STRAT)
  • 0x (ZRX)
  • Status (SNT)

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