Looking for a way to buy bitcoins on your terms?
Localbitcoins is a peer-to-peer Bitcoin exchange that may be for you. On Localbitcoins you can trade cryptocurrency with individual buyers and sellers directly, rather than through a third party like with many other Bitcoin exchanges. The site reads your location and automatically displays lists of buyers and sellers in your local area that you can make deals with.
Localbitcoins provides a measure of protection for its users by providing escrow and transaction services for trades made on the website. You can also set up transactions with users in person rather than online, which we’ll explain a little later in this Localbitcoins review.
The site also boasts that it can support transactions from any local currency or payment method supported by its community. It also implements a number of security measures to prevent fraud among its users, such as two-factor authentication. All of this adds up to a less formal but more private way to buy and sell Bitcoins than traditional exchanges.
Is Localbitcoins Easy to Use?
This exchange site is very simple to use because it only handles the transfer of Bitcoins from one account to another. It also provides reputation tracking and the confirmation of ID verifications, but these are done between traders like payments. Once you learn the process of initiating a trade, confirming payment, and sending and receiving Bitcoins, using Localbitcoins is straightforward.
What’s the catch?
It’s that trading Bitcoin on Localbitcoins is not always simple. Depending on the trader on the other side of a deal, trading may be more or less complex.
You may have to set up a meeting place if they insist on cash, or you may need to wire payment to their bank account. It all depends on the trade and what you are willing to do.
- You set your price and terms. Want cash for your Bitcoins? You can do that.
- Bitcoins are held in escrow until you confirm payment and release them to the buyer.
- Account security is watertight.
- There are plenty of ways for scams to take place since payment is handled off the marketplace. Be aware and do your homework.
- Customer support is not always able to get back to you right away.
How to Register Accounts
Registering an account with Localbitcoins is no different from any other website with two-factor authentication. A new user provides an email address and chooses a username and password. You then verify that you aren’t a robot and agree to the Terms of Service. That’s all that’s needed to create an account.
Isn’t there more you should do?
Yes. Bitcoin wallets are notoriously a favorite target for online theft by hackers. An account that simply has a password and an email account associated with it can be hijacked and drained of Bitcoins. For this reason, anyone who plans to use Localbitcoins for transactions or store Bitcoins in the account’s wallet should go to the security page and set up measures to protect their account.
How to Verify Accounts
Who are you, anyway?
Other traders will want to know too. Verifying your ID isn’t required to buy or sell Bitcoins on Localbitcoins, but you’ll quickly discover that there aren’t many other traders who’ll be willing to trade with you. This is to protect themselves from getting involved in things like money laundering. By the same token, trading with the buyers and sellers who haven’t verified their IDs or require you to do the same exposes you to the same legal risks.
So, how do you verify your ID?
Verifying your identity isn’t handled by Localbitcoins, but it does record your real name. When you buy or sell with another trader, you verify your ID with that trader. If the trader is satisfied with the ID you give them, they then can confirm with Localbitcoins that you are who you say you. Localbitcoins tracks that you’ve been confirmed by other traders, which serves as a confidence booster for traders who will consider trading with you in the future.
Exactly what proof of your ID you use for verification is up to you and the trader who is confirming your ID. Typically, some sort of government-issued photo ID is used.
Payment Methods Accepted
Some transactions occur off Localbitcoins, with buyers and sellers simply finding each other and agreeing to terms through the site’s ad postings. In these types of deals, payment methods are handled between you and the person you are buying or selling Bitcoins with. In the cases when the transactions are done online, Localbitcoins only involves itself in the transfer of Bitcoins from one wallet to the next.
This is how Localbitcoins can say that it accepts virtually any payment method supported by its community. The community handles the payments in local currencies between themselves. A trader might require a face-to-face meeting to accept cash or provide a Paypal account to receive payments. It’s up to you and them to agree upon.
How to Purchase Bitcoin on Localbitcoins
So you’re ready to buy some Bitcoin?
Buying Bitcoin is a matter of setting up your account and finding a deal that has the price and terms that you can agree with. You click the buy button, and you get to the official ad screen for the seller.
Next, you enter the amount of Bitcoin that you would like to buy and a message is sent to the seller announcing that you’ll be sending payment if you’re paying online. If not, you can communicate with the seller to arrange to meet and made the deal. Also, the seller may require that you send proof of ID.
What’s next after that?
At this point, the Bitcoins that you are buying are held in escrow until the seller is satisfied that you’ve made your payment and verified your ID. Then the seller confirms that payment is made and releases the Bitcoins that were held in escrow during the transaction time.
Localbitcoins takes 1% of each Bitcoin transaction from the creators of trading advertisements. That is, Localbitcoins’ fees are paid in Bitcoin.
The limits of any transaction are based on the amount of Bitcoin a seller has to offer. If you want to buy a larger amount, then you will need to buy from more than one seller. This is one of the biggest limitations of peer-to-peer marketplaces. Large transactions become more difficult to manage because each transaction is manual between two people.
The speed of a trade on Localbitcoins depends on how fast the traders respond to each other. The typical response times for individual traders is indicated when you browse for a trading partner. This is the only clue you have as to how much time will be required to complete a trade.
Each account on Localbitcoins has a reputation score based on problems reported by other traders. You can use a trader’s reputation to judge whether they are likely to be trustworthy.
Is Localbitcoins Safe?
In this Localbitcoins review, we’ve tried to discover the risks to a trader, since cryptocurrencies are notorious for scams and fraud.
There is a risk that a trader who sells Bitcoin to you will keep your money and never confirm payment. Because Localbitcoins doesn’t process payments, it isn’t able to reverse payment transactions. Localbitcoins’ reputation tracking, however, has a good chance of tipping you off on how reliable a trader has been in the past, which mitigates this risk somewhat.
If you avoid new accounts and those with low reputation scores, you’ll be safer. Just remember that the platform can’t recoup a payment that is lost.
What’s the upside, you might ask?
In terms of your Bitcoins, they will be secure in your account’s wallet as long as your account is secure. Unlike other Bitcoin exchanges that act as market makers, there’s no central reserve of Bitcoins for hackers to steal in one big heist. With Localbitcoins, they’ll need to hack individual accounts and transfer them from their wallets.
When you enter a transaction to buy or sell Bitcoins, the coins are held in an escrow account until both parties confirm that payment has been made. Once the seller is satisfied that payment is made, they confirm it and the Bitcoins are sent to the buyer’s wallet. This prevents a fraudulent payment being used to trick a seller into transferring Bitcoins to the buyer.
Overall, while the risk of fraud can’t be completely avoided, Localbitcoins does a good job of minimizing it as much as possible.
What About Localbitcoin’s Customer Support?
Customer support leaves something to be desired when the site has a problem. As of this writing, the reply delay for support tickets was posted as 7 days, which can be a long wait if you have a problem that stops you from trading.
This, however, appears to be a temporary issue. The typical response time is 24 hours when things are operating smoother.
You can also reach the headquarters directly.
Security & Customer Support
But what about your account security?
Localbitcoins provides a couple different security measures that will keep the risk of having your account hacked low. First, the site encourages you to set up two-factor authentication that will make hijacking the account while you sleep more difficult.
There’s also a feature called Login Guard that is highly recommended. What this feature does is register your browser with the website so that attempts to login from another location will be rejected.
This could be inconvenient if you want to use multiple devices to log in to your account, so Localbitcoins gives you control over whether this feature is active or not. It does, however, make breaking into your account impossible unless the person doing it is in your household or steals your device.
Localbitcoins is based in Sweden, but the trading exchange serves the entire world. If a trader has an Internet connection and can create an account, they can trade on Localbitcoins, potentially with anyone else in the world.
When you use the country filter to search for buyer or seller ads, you’ll see that every country is listed. Whether traders have ads posted for those countries or not is another thing. It’s easy! If no one in Angola is available, then trading there won’t be possible.
In terms of both peer-to-peer marketplaces and more traditional currency exchanges, there are many others that you can try that compete with Localbitcoins.
Three peer-to-peer competitors you can find today:
Formerly known as Bitsquare, Bisq was founded in 2014. Like other peer-to-peer marketplaces, it connects buyers and sellers of Bitcoin and helps them transfer Bitcoins between each other securely, leaving the financial transactions to be sorted out between the traders.
Unlike many other peer-to-peer markets, Bisq doesn’t go so far as to hold Bitcoins in an escrow account during a transaction. Instead, the website uses software that connects the wallets of the buyer and seller outside the website.
This peer-to-peer cryptocurrency market is based in Canada. Like other peer-to-peer markets, Cancoin allows users to exchange Bitcoin with each other and arrange payments, but the market doesn’t hold cash accounts.
Cancoin offers a real-time, market-based pricing script that allows its users to automate the pricing of their offers to buy and sell Bitcoins.
This marketplace gets its name from a combination of “coin” and “portal.” It’s the first peer-to-peer cryptocurrency marketplace to offer trading in less popular currencies like Ethereum and Ripple.
Like other peer-to-peer markets, the aim of Cointal is to make buying and selling these new currencies easy with an incredible range of payment methods.
What Do Reddit Users Think About Localbitcoins?
Reddit users who’ve used Localbitcoins often trade advice about how to avoid getting defrauded. Because Localbitcoins doesn’t take responsibility for local currency payments, there are situations in which a seller can be defrauded with a payment scam.
What kind of payment scams are there?
One that is well documented is the PayPal payment reversal scam. The buyer reverses the PayPal payment the moment the seller confirms the payment was received. The Bitcoins that were sold are transferred to the buyer, but the buyer then backs out of the transaction in PayPal.
The buyer transfers the Bitcoins received on Localbitcoins to a safe place and the theft is complete. Often the buyer account is a sock puppet that is deleted after the scam succeeds.
What do Reddit users think of Localbitcoins as a marketplace, though?
They think it’s as good as the next peer-to-peer marketplace. Like most of them, it has its risks, and it’s best to keep abreast of the various ways scammers manage to defraud traders, even though it is rare. A seller is in more risk than a buyer because of the way Localbitcoins operates.
So, what’s the bottom line, you ask?
If you are a seller of Bitcoins, Localbitcoins is a secure and confidential peer-to-peer marketplace to trade Bitcoin. The security measures in place, if set up completely, will keep you out of most trouble that is possible. The escrow account that holds Bitcoins during a transaction ensures that the buyer isn’t able to receive the Bitcoin they're purchasing until you confirm that you’ve got their payment.
On the other side of the trade, however, trading requires more trust, and this is where the reputation tracking comes in handy, as it highlights accounts that traders have had problems with. Trading activity is shown as well, so you know if an account was just recently created and has no history yet.
But here’s the thing:
The flexibility that peer-to-peer marketplaces give honest buyers and sellers is their greatest selling point, and Localbitcoins is no different in this regard. You can go so far as trade in person with cash if you choose, or you can make payments with any other method that you and your trading partner agree to. This removes the risk of losing funds deposited on the website.
The beauty of these cryptocurrency markets is that at the end of the day they are a way for buyers and sellers to post ads for deals and then arrange them between each other. Localbitcoins takes a small 1% fee in return for this service, and nothing more.
In this Localbitcoins review, we’ve shown how this peer-to-peer marketplace can be a great way to buy and sell Bitcoins at the price and terms that you set. You’re not at the mercy of a market maker’s exchange and price spreads. Their account security is good enough to keep out hackers if you put it to use.
Overall, we’d recommend using Localbitcoins if you want to get away from the inconveniences and risks of other exchanges.