LocalBitcoins in Brief
LocalBitcoins is one of the largest peer-to-peer cryptocurrency exchanges. Because its original design hasn’t changed much since its launch, LocalBitcoins lacks basic features that you’d expect it to have, like search functionality and the ability to sort listings by price. On the other hand, this exchange’s escrow service and rating system seem to do an efficient job of discouraging bad actors from abusing the system.
Bitcoin is the only cryptocurrency that LocalBitcoins supports. For a short period of time, LocalBitcoins accepted Bitcoin Cash. However, problems caused by user error led the exchange to abandon Bitcoin Cash and go back to offering support for Bitcoin Core alone.
- Peer-to-peer transactions.
- Available worldwide.
- Low fees.
- Escrow and rating system prevents fraud.
- You can’t sort the search results by price.
- Both the support site and the exchange itself has limited search functionality.
- Many sellers in the LocalBitcoins marketplace are likely money launderers.
- Bitcoin is the only supported cryptocurrency.
What is LocalBitcoins?
In an interview with Juan Galt Crypto TV, LocalBitcoins founder and CEO Jeremias Kangas explained that his motivation for starting LocalBitcoins in 2012 was that he didn’t like the other decentralized exchanges that existed at the time.
“All the websites that I was looking at, they were quite bad.”
In a lecture published by AssemblyTV titled “How to Run a Bitcoin Startup Without Constantly Shitting Your Pants,” Kangas revealed that LocalBitcoins grew from a one-man side project to a fully functioning company with 10 employees in just two years.
In the beginning of 2014, LocalBitcoins announced its first production batch of LocalBitcoins ATM machines. In 2016, LocalBitcoins teamed up with Cointter to bring Bitcoin ATM machines to two Helsinki-area businesses.
Leadership and investors
There is not much information available regarding the leadership structure at LocalBitcoins. Though the website lists Jeremias Kangas as the founder and CEO, there aren’t any pictures or descriptions of the other people involved with the exchange.
- Jeremias Kangas – Founder / CEO. Before starting LocalBitcoins, Jermias Kangas and his brother Nikolaus started a software development company called Kangas Bros. Innovations.
- Nikolaus Kangas – Chief Operating Officer. Nikolaus Kangas heads up LocalBItcoins’ customer support team.
- Joonas Ilmasti – Chief Compliance Officer. According to his LinkedIn, Ilmasti left Nordic Law Ltd. in 2017 and joined LocalBitcoins. He received a Master of Laws from the University of Turku in 2014.
Protecting customers’ coins
Legal and regulatory compliance
Rather than attempt to impose restrictions on who can and who can’t join LocalBitcoins, this exchange puts the burden of figuring out whether or not it is legal on its individual users. LocalBitcoins customers must do their own due diligence to ensure that they don’t violate local commerce laws and regulations.
Coin listing policies
LocalBitcoins only supports one digital coin: Bitcoin.
For a brief period of time LocalBitcoins supported Bitcoin Cash. But after running into customer support issues involving user error, the exchange decided to convert all of its customers’ Bitcoin Cash into Bitcoin.
“Instead of providing support for Bcash, we have decide to compensate customers who held Bitcoin on their LocalBitcoins account at the time of the air-drop on August 1st. The Bcash that LocalBitcoins held has been sold and credited to customers at its corresponding value.”
LocalBitcoins has not published many details about its security system. Like almost all digital exchanges, LocalBitcoins has a two-factor authentication system. There’s also a “login guard” feature that sends you an email if someone logs into your account with an unrecognized browser.
Early on, LocalBitcoins had some security issues. In April of 2014, a malware attack allowed hackers to break into a handful of LocalBitcoins accounts. At first, LocalBitcoins said that only users that had not enabled two-factor authentication were affected. Later, the company did some investigation and found out that its two-factor authentication system had failed to prevent a wallet breach. Since then, however, there haven’t been any high profile security incidents.
LocalBitcoins relies on a ticket system to address customer service issues. There isn’t a knowledge base, but there are a handful of guides that explain how the site works and how to use it. In addition, the site contains a help forum that you can use to seek assistance on issues not covered by the guides.
Various LocalBitcoins users have been targeted by authorities. In May of 2017, LocalBitcoins user Michael Lord was given a nine-year prison sentence for for running an unlicensed money transmission business. In the same month, Jason Klein and Richard Petix plead guilty to the same charge.
The fact that many LocalBitcoins users use gift cards and credit cards to pay well over the going price for Bitcoin makes one wonder whether or not they are not laundering money. However, when it comes to quality-of-service and security, LocalBitcoins has a good reputation.
In 2017, the price of Bitcoin skyrocketed. As a result, many top centralized digital currency exchanges experienced slowdowns and customer service issues. According to data compiled by Coin Dance, a large percentage of their users flocked to LocalBitcoins.
How to Join LocalBitcoins
Who can join?
As mentioned above, anyone in the world can use LocalBitcoins. However, LocalBitcoins is not legal everywhere. The exchange charges its users with the responsibility of figuring out local laws.
All LocalBitcoin users must confirm that they are not a resident of Federal Republic of Germany, New York state or Washington state when they accept the terms of service.
Anyone can buy and sell Bitcoins on LocalBitcoins without going through any type of identity verification process. However, users that want to list buy or sell advertisements on LocalBitcoins do have to provide a photo ID.
All LocalBitcoins accounts are the same. Institutions or high volume traders can’t get special LocalBitcoins accounts.
What Can You Trade on LocalBitcoins?
Currently, LocalBitcoins only supports Bitcoin. According to the LocalBitcoins blog, LocalBitcoins management decided against adding other cryptocurrencies because doing so would “create confusion.”
“We believe supporting Bcash would create confusion and complicated situations e.g. due to the possibilty of sending Bitcoins to Bcash addresses, which would result in extra hassle and possibly loss of funds for our customers.”
Every fiat currency is supported. As is the case on all peer-to-peer digital exchanges, LocalBitcoin buyers and sellers negotiate all Bitcoin trades on an individual basis.
LocalBitcoin users can exchange Bitcoin for whatever fiat or digital currency is available. The Quick Sell / Quick Buy currency dropdown button brings up hundreds of different fiat and digital currencies.
Because LocalBitcoins is a peer-to-peer exchange, it doesn’t support the usual type of features that you find on advanced centralized digital currency exchanges. There’s no way to buy Bitcoins on margin, for example.
On the other hand, developers can hook LocalBitcoins into various e-commerce platforms. Using the LocalBitcoins API, you can write programs that query LocalBitcoins’ public trade data and advertisements, set up automated trading and more.
Trading Tools and Fees
LocalBitcoins has a very stripped down, minimalistic interface.
To buy Bitcoins, all you have to do is click the Buy Bitcoins button. Then, pick a country, type in the amount you want to buy and click Search. The results page will display a list of traders that are selling Bitcoin in the country you selected.
On the left side of the results page, you’ll see the trader’s username listed under Trader as well as information about his or her reputation. The first number indicates how many trades they’ve completed. The second number indicates the trader’s reputation score. The colored circle indicates the trader’s message response time. If the color of the circle is green, that means that the trader typically responds within minutes. A yellow circle indicates that the trader usually takes around 30 minutes to respond. A grey circle means that the trader takes longer than 30 minutes to reply to a message.
Under Payment method, you’ll see how the seller wants to be paid. Limits indicate the minimum and maximum amount of Bitcoin the user is willing to sell.
Though the results page is easy enough to navigate, there’s no search functionality. In addition, there’s no way to sort the results by price.
Click the Quick Sell button, type in an amount and click Search to bring up a list of Bitcoin vendors.
The search results page for Quick Sell follows the same format as the Quick Buy results page. On the left under Buyer, you can view each buyer’s name and reputation. Payment method indicates how they intend to pay. The Limits column indicates the minimum and maximum amount of Bitcoin they are willing to buy.
Mobile app support
LocalBitcoins does not have an official app.
Deposits and withdrawals
Because LocalBitcoins is a peer-to-peer exchange, payments are negotiated on an individual basis.
LocalBitcoin buyers and sellers offer many fiat payment types, including: credit cards, cash (in person and by mail), direct deposit, Western Union, pre-paid debit cards and many others. Individual sellers must absorb all the fees or risks involved with whatever fiat currency payment system they choose to support.
There is no fee for sending Bitcoins to other LocalBitcoins users. If you want to transfer Bitcoins from your wallet to an external wallet, you have to pay a small network fee. The current fee is 0.00005 BTC (approximately 0.33 USD), but it changes depending on network traffic.
Once a LocalBitcoins trade is initiated, the full amount of Bitcoin that the vendor wants to sell goes into escrow. If the seller refuses to release the funds after payment, the buyer can contact LocalBitcoins and provide proof that the payment was made.
There is no base fee for buying or selling Bitcoins on LocalBitcoins. However, there is a 1% fee if you use an advertisement to find a buyer or seller.
If you set up merchant services, you have to pay an additional 0.5% fee for each invoice. If you don’t know how to set up merchant services yourself or run into technical issues, LocalBitcoins will provide assistance for 200 EUR per hour.
Despite the fact that its interface is in need of a refresh, LocalBitcoins still offers a dependable way to sell and buy Bitcoin without a centralized exchange. Unlike many decentralized exchanges that have limited appeal because few people use them, there always seems to be plenty of buyers and sellers in the LocalBitcoins market.
For new traders
There are good deals to be had on LocalBitcoins. However, even though the escrow and rating systems are effective at deterring scams, there’s still a chance that you may not get what you pay for– especially if you make your purchase using a risky payment method. On the other hand, if you stick to safer payment methods, you may be able to find some good deals.
For advanced traders
Though the core LocalBitcoins interface is extremely basic and seems to be designed with ease of use in mind, LocalBitcoins does have one feature that may appeal to advanced traders: API accessibility. The LocalBitcoins API has excellent documentation and can be used to create advanced automated trading systems.