LocalBitcoins Review: What You Need to Know
LocalBitcoins has been around since 2012, connecting Bitcoin buyers and sellers on an open, peer-to-peer marketplace. There are plenty of reasons to recommend Local Bitcoins as a secure and easy-to-use trading platform. In this Local Bitcoins Review, I’ll explain what I like about Local Bitcoins and how you can benefit from using the platform.
Local Bitcoins Key Information
|Site Type||Peer-to-peer Bitcoin exchange|
|Company Location||Helsinki, Finland|
|Company Launch||June 2012|
|Deposit Methods||Cash, wire transfer, PayPal or 50+ other methods|
|Withdrawal Methods||Cash, wire transfer, PayPal or 50+ other methods|
|Fees||None to buy, Low fees to sell|
Before we dive into the review, the most important point about using Local Bitcoins is to use good judgment. Local Bitcoins is not an exchange in the traditional sense. You don’t enter your bank account information and buy Bitcoin. Instead, Local Bitcoins is a place where you can meet other people interested in buying and selling Bitcoins. As such, you should use caution when selecting traders to conduct a transaction with. While Local Bitcoins has measures in place to make sure you’re not ripped off, filing a complaint can be frustrating and time-consuming.
What Makes Local Bitcoins Different from Other Exchanges
As I hinted above, Local Bitcoins is different from other exchanges because it’s not a trading exchange. When you set up an account at the major exchanges like Coinbase, Kraken, or Bitstamp, you link your bank account directly to their trading platform to fund your buy and sell commands. In exchange for facilitating your trades, these exchanges charge transaction fees.
Local Bitcoins is different. Let’s say you want to buy some Bitcoins on Local Bitcoins. First, you create an account and a wallet on Local Bitcoins, but you don’t connect your bank account information to Local Bitcoins directly. Instead, you search for other users who have Bitcoins and want to sell them to you.
When you find a user offering to sell Bitcoins at an exchange rate and terms that you like, you message them to negotiate the transaction. Then, you find a way to pay the person. For online trades, you can use a cash deposit via a bank, PayPal (fees apply), or other means of cash transfer. Or in some cases, you can meet up in-person and give the person cash in exchange for Bitcoin, hence the name Local Bitcoins.
After you’ve paid, the Bitcoins are released to your Local Bitcoins wallet, and from there you can move them to your own personal wallet.
How to Avoid Scams on Local Bitcoins
Since Local Bitcoins is a peer-to-peer exchange, your transactions are only as trustworthy as the person on the other side of the deal. Local Bitcoins does hold all Bitcoins in escrow when you pay online, so if you can prove that you paid for them the Bitcoins will get released to you. However, it’s fairly easy to avoid having to file a complaint if you follow a few simple precautions when vetting the traders you do deals with.
When you’re thinking about conducting a trade, click on the trader’s username to see more information about their trading history…
I like to look for the following criteria when I evaluate a trader:
- Have they traded more than 50 BTC?
- Have they completed more than 100 trades?
- Do they have a feedback score of 97% or higher?
- Have they been on Local Bitcoins for more than a year?
- Have they verified their information with Local Bitcoins?
- Do 20 or more users “trust” this trader?
If the answers to those six questions are “yes,” then you’ve probably got a good trade. As you can see in the example screenshot above, user CeruleanShine meets all my criteria for a trustworthy trader. I would feel comfortable conducting a transaction with this person.
Of course, as a new user on Local Bitcoins, you also have to build your reputation. Sometimes, this might mean doing smaller transactions with less reputable traders to build up your trade count and feedback scores. I recommend keeping these first trades below $200, so if something goes wrong you’re not on the hook for too much money.
For all online trades, Local Bitcoins provides escrow protection. The seller places the Bitcoins into a Local Bitcoins escrow account (plus the seller has to add 1% as a Local Bitcoins transaction fee). You’ll then send the payment to the seller and mark the transaction as “paid.” Once the seller receives the payment, they’ll release the escrow amount. If the seller tries to run away with your money, you can submit a complaint to Local Bitcoins, along with proof of payment, and they’ll release the escrow to you.
Where Can You Use Local Bitcoins?
As a peer-to-peer exchange, Local Bitcoins is designed to be decentralized and usable from anywhere. Since you can pay in cash and don’t need to use banks, as long as there are other users in your area, you can buy and sell using Local Bitcoins almost anywhere in the world. There are two major exceptions; Local Bitcoins is not available in Germany or the state of New York due to regulations.
How Much Can You Buy and How Do You Pay?
Local Bitcoin doesn’t impose limits on transactions. You’re free to decide how much you’re willing to trade. If you’re selling, you can also set your own prices. Generally, reputable sellers will be able to command a few more dollars in the exchange rate than less experienced ones.
Local Bitcoins offers 50+ methods of possible payment for its traders. Users can agree to buy Bitcoin using anything from iTunes gift cards to cash sent via mail. As long as you and the trader agree on the cash transfer method, you can pay however you like.
If you’re selling Bitcoins for cash on Local Bitcoins, it makes sense to require a type of transaction that’s difficult to reverse. Cash deposits, money orders, and wire transfers are popular for this reason. If you allow someone to pay using a credit card via Paypal, that person can buy Bitcoin from you and then dispute the transaction with their credit card company, leaving you with no money. Since many Local Bitcoins users are anonymous, it can be difficult or even impossible to track down someone who pulls such a scheme.
Fees for Trading on Local Bitcoins
Local Bitcoins doesn’t charge any fees to buyers on the platform. In fact, Local Bitcoins doesn’t handle any of the cash transactions, as all deals are routed directly peer to peer. For sellers, Local Bitcoins takes a 1% fee for every transaction. This fee is added to the amount the seller places in escrow with Local Bitcoins as part of the deal-making process. Some sellers will pass this 1% fee on the buyer in the form of a markup on the Bitcoin exchange rate.
Local Bitcoins Security and Privacy
Many traders in the United States and other countries with anti-money laundering laws will require you to send them proof of identity before they’ll agree to a deal. This is part of a practice called Know Your Customer (KYC), and it’s required by law in the United States for traders selling securities. If you want to maintain your anonymity, you can usually find other traders who are willing to execute trades without the identity verification.
Overall Review of Local Bitcoins Trading Platform
I hope you enjoyed this Local Bitcoins review and found it helpful. Overall, Local Bitcoins is an established platform, and for the most part, it’s a safe and low-fee way to trade Bitcoin. As long as you exercise good judgment when selecting who to do deals with, Local Bitcoins can be a great platform for all your trading needs. I recommend it as an easy way to get started in Bitcoin investing.
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