This review explores LocalBitcoins – the global exchange site that allows Bitcoin (BTC) investors to buy and sell the world’s leading cryptocurrency in a peer-to-peer manner (be it locally or online) – and has been written to share with you both the good and bad aspects of LocalBitcoins.
Table of Contents
Buy and sell Bitcoin on LocalBitcoins
Prior to being able to trade on LocalBitcoins, users are required to register an account on LocalBitcoins. Once registered, the user receives a free and secure online Bitcoin wallet.
The advertisements feature is the lifeblood of LocalBitcoins. For those wishing to buy Bitcoin, they go to the site’s main page where, in the search box titled ‘QUICK BUY’, they input the amount of fiat currency (e.g. GBP, USD) they’re wanting to spend on Bitcoin, along with their location and desired payment method (discussed later).
For those wanting to sell Bitcoin on LocalBitcoins, the above process is basically the same. There is one extra step for sellers, however. To sell Bitcoin, they first need to send the amount to the LocalBitcoins wallet they received upon registration.
Both buyers and sellers browse through the LocalBitcoins’ advertisements until they choose an offer they like. The asking price isn’t the only thing that should matter. In fact, LocalBitcoins recommends choosing a trader who has a good reputation and a long history of completed trades.
Once communication is established and payment information is exchanged (which is highly recommended to be done through the LocalBitcoins messaging service), the buyer pays for the Bitcoins.
Once payment is confirmed, the seller releases the Bitcoins from escrow where they are instantly made available in the buyer’s LocalBitcoins wallet.
LocalBitcoins: Easy to use, but is it safe?
Like any platform that relies on peer-to-peer interaction, there’s a very real possibility that scamming will occur. Now, when you consider that LocalBitcoins is tied to the unregulated, scam-ridden world of cryptocurrencies, you’d like to be sure it’s safe to buy or sell Bitcoin.
Luckily, LocalBitcoins – which has been operating since 2012 – has amassed a strong reputation for being reliable and safe to use.
Putting aside their security-enhancing features like two-factor authentication (2FA), Login Guard, support staff, and a feedback-driven reputation system, the fact that all online trades are protected by escrow does wanders for LocalBitcoins’ security. In short, the seller cannot receive your money and then proceed to cancel the release of their Bitcoins to your LocalBitcoins wallet.
Why Is LocalBitcoins.com So Popular?
Being a peer-to-peer Bitcoin exchange is the main reason that LocalBitcoins has exploded in user adoption over the years.
Why does being P2P matter? Because users can avoid buying and selling BTC through centralized cryptocurrency exchanges (e.g. Binance, Huobi); a space closely monitored by regulators all over the world, or in some cases, is outlawed altogether – meaning LocalBitcoins is one of the only ways for individuals to buy and sell Bitcoin.
LocalBitcoins Thrives When Gov’t & Banks Go Anti-Crypto (e.g. Latin America, Canada)
LocalBitcoins supports a slew of payment methods for Bitcoin buyers/sellers, including:
- Bank wire transfer
- Western Union
- Cash (by mail)
- Cash (in person)
Generally, buyers can access the best Bitcoin prices if they commit to using a hard-to-reverse payment method (e.g., cash deposits, wire transfers). This is because sellers will charge a higher Bitcoin price for easier-to-reverse payment methods, so as to protect themselves from having their newly-received money taken out of their account (i.e., a chargeback).
LocalBitcoins transaction fees
For sellers who create advertisements, LocalBitcoins will charge them a 1% fee for every completed trade. Also, when using the merchant invoicing services provided by LocalBitcoins, a fee of 0.5% will be deducted from the paid invoice amount of each invoice.
If the invoice is paid with an external transaction, then a Bitcoin network deposit fee is deducted from the invoice amount.
Otherwise, basically everything else is free of any fees. This includes account registration, the buying and selling of Bitcoins, and transactions to wallets of other LocalBitcoins users.
Of course, transactions involving other Bitcoin wallets are subject to whatever transaction fee is being charged by the Bitcoin network at the time. Note, transactions sent from your LocalBitcoins wallet are sent with a high priority fee so as to ensure quicker confirmation.
KYC Now Being Enforced
Specifically, Section 2.4 outlines how LocalBitcoins may process your identity documents (“ID data”). Here, it’s stated that “verifying account with an ID is currently mandatory to all advertisers and users whose trading volume exceeds [a] certain limit.” This, LocalBitcoins explains, was enforced so as to protect users from fraud and to be better equipped to prevent, detect and investigate incidents of fraud, money laundering, criminal activities, and so on.
Pros and cons
+ Wide range of payment options
+ Minimal fees charged by LocalBitcoins
+ Strong reputation built over six years
+ Inherent security features
+ Accessible in over 250 countries
+ Buy/sell volumes aren’t capped for verified users
+ Sources of help (email support, LocalBitcoins forum, FAQ, guides)
-KYC requirements remove true anonymity
-Vigilance is required to ensure you are dealing with reliable providers
-Dependency on seller to confirm payment (i.e., unreliable speed of BTC transferral)
-May be stuck with paying above BTC spot price