In the world of cryptocurrency exchanges, just like forms of currencies, there is no one size fits all. Each buyer will consider specifically unique criteria when buying cryptocurrency. This review will focus on LocalBitcoins, which is the largest peer-to-peer marketplace where Bitcoin buyers and sellers can trade Bitcoins and many more.
LocalBitcoins allows buyers and sellers to directly communicate and trade Bitcoins. The platform also provides an escrow service, which is a service meant to create an assurance by preventing fraudulent transactions among users of the platform.
As one of the oldest exchanges, founded in 2012 by entrepreneur Nikolaus Kangas, the Helsinki-based exchange operates in 248 counties around the world. LocalBitcoins has grown organically since it was founded without any known external investment like venture capital funds.
While other exchanges match buyers and sellers manually, LocalBitcoins allows users to communicate directly. It can be described as the Craigslist of buying and selling Bitcoin.
This review will focus on the payment methods it supports, supported countries, privacy, buying limits, fees, customer support and reviews, security, and reputation among others.
LocalBitcoins was designed to aid the buying and selling Bitcoins only, although it has inspired the creation of other clones, including LocalEthereum and LocalMonero. LocalBitcoins supports many payment methods across many countries. However, the popular Bitcoin Exchange has no official fiat currency it supports because it does not hold any fiat deposits.
As an escrow, LocalBitcoins exchanges the payments made in any currency into Bitcoin crypto. Some of the common payment options available at LocalBitcoins are PayPal, Skrill, Wire Transfer, SEPA, MoneyGram, Neteller, Payza, WeChat, and many more. The user you will be buying from or selling to will determine the payment methods.
Because you’re buying and selling to individuals, you can’t use a credit card. The only way to use a credit card as a payment option is through PayPal, which allows you to pay with your credit card in situations where your PayPal balance is insufficient.
It is important to note, however, that each payment method has different exchange rates, depending on the risks involved. If it is much riskier, the buyer/seller will need some form of insurance against possible fraud through higher exchange rates. For example, irreversible transactions such as wire transfer will attract higher exchange fees, while paying via PayPal will attract lower fees.
Concerning fiat currencies, users have the freedom to trade in any currency. The implication is that if a trader is willing to accept your local fiat currency, then you can buy Bitcoin for it. However, note that LocalBitcoins only allows trading of fiat currency for Bitcoin, which means you can only buy Bitcoin with fiat currency as a one-way transaction.
LocalBitcoins is available in almost all countries, with seller listings from 248 countries. This makes LocalBitcoins the most popular exchanges for trading Bitcoins, with the biggest global appeal. The liquidity of the number of Bitcoins for sale is dependent on the number of buyers and sellers in your locality.
LocalBitcoins did not require users to submit their personal information, which supported the customer anonymity practice with Bitcoin itself. It means that there was no mandatory requirement for personal identification verification among other personal details. The only requirement was an email address to sign up. Even though the exchange did not require personal information, some sellers and buyers would request for such information before they could conduct any business with you on the platform.
Not requiring personal information when making trades had set apart LocalBitcoins from other exchanges, until new legislation came in to disrupt the anonymity factor. The anonymity feature is almost becoming a thing of the past as new legislations come into play. As such, today LocalBitcoins verify the identity of users of its platform with the traditional “Know Your Customer” (KYC) processes. The exchange also no longer supports Cash Payments as an option for buying Bitcoins.
This requirement has, however, affected its business, as it was recently reported that the exchange has registered the record lowest number of Bitcoins traded since 2013.
At LocalBitcoins, you will come across different buying limits depending on your verification level. The levels are:
This level requires you to provide your name, country, email address, and phone number. Traders on this tier are limited to trade up to €1,000/year.
Traders on this tier are required everything that Tier 0 group is required to provide, plus physical address, ID verification, and ‘Know-Your-Customer’ (KYC) information. Traders are allowed to trade up to €20,000/year.
Traders on this tier are expected to fulfil every requirement on Tier 1, plus proof of residence. Traders are allowed to trade up to €200,000/year.
Traders here are required to provide every Tier 2 requirements, plus extra ID verification. Traders have no limit to the amount of trade.
LocalBitcoins have tended to keep things simple between sellers and buyers, choosing to make registration, buying and selling of Bitcoins on the platform completely free. Users of the platform are charged a flat fee of 1% for creating advertisements once their trade is completed. This fee is paid by the seller. What this means is that only those who have their services actively promoted pay the fee. Transactions to wallets of other LocalBitcoins users also carry no charge.
However, the standard Bitcoin network fees apply for all transactions, including when you send your coins outside of your LocalBitcoins. The standard network fees will vary depending on the level at which the network is crowded. The sellers are free to form their own Bitcoin price, which usually allows them to ask for a higher exchange rate to cover the transaction fee.
It is recommended that you move your Bitcoin to your own secure Bitcoin wallet after purchase, and not let it lie in LocalBitcoins’ wallet.
LocalBitcoins is considered highly secure because of the many security measurements that has put in place on the platform. The exchange’s strong security measures start with the two-factor authentication, HTTPS encryption, and the Login Guard. The two-factor authentication (2FA) is an optional feature that will require you to log into your account to enter an additional PIN code sent to your registered mobile phone. This means that the option is not enabled by default, but is a feature you set by yourself during registration. Login guard is another feature at LocalBitcoins, which will verify whether you have been logging into your account via the same device and browser. Log in from a different browser or device will send an email alert to you, which you must verify.
The second security measure of the exchange is the trader reputation feature, which ranks and displays each trader’s public records of their activities such as successful trading is done and completed successfully. From this feature, a person interested in buying or selling their coins will choose those they believe have a better reputation to reduce fraud.
The third feature is its Escrow, which protects traders’ transactions. When you request a trade, the traded Bitcoins will be held on LocalBitcoin’s escrow service until the seller confirms that the trade has been accomplished. Once the seller confirms that the trade has been completed, the coins are released to the buyer who may decide to move them to their own secure wallet.
The last security measure is the support and conflict resolution measures. LocalBitcoins has built a strong support system with teams always ready to respond to users’ queries. The team also aids in conflict resolution between buyers and sellers in case of disagreements on any trading activity.
LocalBitcoins has one of the best features that allow members to distinguish between legit traders and fraudsters. Ordinarily, the exchange does not follow a typical brokerage model but instead focuses on a peer-to-peer network connecting sellers and buyers in a local area. As such, when a trader posts advertisements on the platform, they state their exchange rates and accept payment methods for selling or buying Bitcoins. Interested members will respond to the ad, hence arrange for either online or offline meetings with the seller to make a transaction.
The reputation is further cemented through its escrow service, which helps traders establish trust by assuring trading parties, and helps the support resolve emerging conflicts or misunderstandings between trading partners.
While LocalBitcoins is hailed as one of the most widely used Bitcoin exchanges, and the only cryptocurrency it supports is Bitcoin. It is a great platform, but this limitation can be problematic, especially with the growing popularity of other cryptocurrencies such as Ethereum, Ripple, and Litecoin among others.
Sign up to LocalBitcoins with your credentials, i.e. name, email address, and password;
Complete the verification process. A registration code will be sent to your email to confirm;
Clicking on “Buy Bitcoins”;
Insert search parameter and click on “Search” to look for sellers from your area;
Choose a seller and enter trade details Click on “Send trade request”
Once the seller okays your request, proceed and pay with their preferred payment method;
The seller will release the Bitcoins, which will be moved into your exchange’s wallet. Your next move should be to move your Bitcoins into your external secure wallet.
Create a sell Bitcoin online advertisement known as an online sell advertisement. Once you create an account, you select a payment method, set your pricing, your limits, and specify your terms of trade as a free form message;
The next stage is to fund your LocalBitcoins wallet with Bitcoins. The Coins in your exchange wallet is what you will use to open trade requests from your advertisements;
When a potential buyer sends their interest, they open a trade process. The buyer will receive the Bitcoin for the full amount of the trade, which is automatically taken from your wallet into escrow. All you need to do is give the buyer payment instructions and guide them through the process of paying for the trade. As a seller, you will receive notifications both in your email and SMS whenever someone replies to your advertisement;
The moment the buyer completes the payment process by pressing the “I have paid” button, you as the seller will receive a notification in your email, SMS, and on the website;
Once you have confirmed receipt of payment, the next step is for you to release the Bitcoins. This confirmation will move the Bitcoins from the neutral ground, escrow, to the buyer’s Local Bitcoin wallet;
The last stage is to leave feedback for the buyer, and encourage them to do the same for you on the platform. Feedback is what builds members’ reputation, which will boost a trader’s ability to make trades.
LocalBitcoins has one of the most vibrant and responsive customer services. They are praised for their organization and competence. They also have Frequently Asked Questions (FAQ) section, which explains the most frequently asked questions.
LocalBitcoins has received a fair share of negative reviews, just like other platforms. But you will realize that all these negative reviews come from people who got scammed by sellers and entirely about the platform itself. As a user one needs to take the precaution of the person pausing as a seller to avoid being scammed, because LocalBitcoins is just an exchange platform, hence it is your responsibility to practice safety precautions when trading on the platform. As one Redditor puts it, “Trades are as truthful as the people you’re making the transaction with!”
When you send a message to a seller requesting a trade, do not agree to trade with the seller outside the platform because that would increase your chances of being scammed. Using the platform to complete your transaction protects both the seller and the buyer, through an elaborate escrow platform LocalBitcoins provide. In other words, ensure you strictly communicate through the platform, which can be evidence enough when a dispute arises.
LocalBitcoins is a good place to buy and sell Bitcoins, as long as you take precautions about the many scammers out to get free money. Its stability, availability, privacy, security, and usability are indisputable. The exchange made a name for its anonymity features that protect traders’ privacy and being the most used crypto exchange platform with the widest payment options available. But the decision to buy or sell on LocalBitcoins is an individual decision that is dependent on individual preferences or needs.
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