LocalBitcoins is not a typical exchange but rather a platform where you can trade bitcoins “peer to peer” in person. That means that you have to meet somene in person and trade cash for bitcoin. This is the orginal idea of bitcoin and it is a great feature, however please use caution when dealing with large amounts of money and people that you do not know. Always meet in a public place like a cafe, more on this later.
A site which facilitates P2P Bitcoin sales by allowing users to list their own buy/sell advertisements. It makes it very easy to run your own bitcoin-cash exchange. It also allows online transactions and offers escrow and other security services, as well as a reputation system for buyers/sellers.
The site boasts exchangers from 142 countries and 1733 cities.
- Founded in Finland in 2012
- Good entrance point into the ecosystem
- Run a series of ATMs, which will show up when searching
- No venture funding–run by Jeremias Kangas (LinkedIn, Twitter) from the ground up
- Not designed for trading, generally speaking
Ease of Use
The site is easy to use. You can put in the name of your city and zip code and look for buying or selling offers in your area. (There are also offers for buying and selling online via bank transfer but we are not going to get into that now and we are going to concentrate on the “local” aspect of localbitcoins) If you don´t see an offer in your area or do not like any of the offers you can place a buy or sell ad yourself. The prices are based on Bitstamp and you can add a + or – “premium”. This means that you are willing to buy or sell a % above or below the Bitstamp price. IF I want to sell maybe I am willing to offer Bitstamp -1% to attract buyers.
Allthough you do not have to have a mobile phone number connected to your account. It does make things eaiser. Some people only accept offers from users that have varified a telephone number.
So how does it work?
There are two basics ways to do “peer to peer” local bitcoin trades.
Method 1: Buyer and Seller agree on a price and ammount on the website. Escrow is activied (this is done by checking a check box). Then the seller sends the bitcoin to an address given to them by localbitcoins. Then the buyer gets a code that is generated by the website that only they know (dont show this code to anyone). When the buyer and seller meet the buyer does not need a phone or computer, only this code. When the seller sends the bitcoins to the buyers localbitcoins account (non refundable) then they get the code that you have, they simply show you this code and you know that the bitcoins are safely on your localbitcoins account and you are ok to pay the cash. You are using localbitcoins as an escrow in this case.
Method 2: This is more advanced. Basicly you are using localbitcoins as a platform to meet someone, then when you meet you work out how to send the coins ect. For example you could say “please bring a QR code of your public address” and then you bring some kind of smart phone or laptop that you can scan the QR code with and send the coins.
- Excellent potential for arbitrage, but it is time-intensive
- The most anonymous method of purchasing bitcoin available to most consumers
- No fee if you’re not the person who created the ad