Home » We analyze LocalCryptos, the custodian P2P exchange platform

We analyze LocalCryptos, the custodian P2P exchange platform


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LocalCryptos -formerly known as LocalEthereum- is a house of change of Bitcoin i Ether specialized in P2P exchanges, but with the particularity that communications (chat) are made with end-to-end encryption, transactions with security deposits (escrow) Without custodians and the private keys of the LocalCryptos web wallet we keep them under our control.

The user experience and its feedback reference system reminds us of LocalBitcoins, but its interface is simpler and more intuitive and under the hood there is something completely different. And is that LocalCryptos, unlike LocalBitcoins, does not guard the funds to guarantee the transaction in an internal account of the platform, but through a smart contract of the blockchain Ethereum, which eliminates the risks of hacking and flight of owners of the platform with the funds under guarantee. In addition, it operates with two digital currencies, BTC and ETH, instead of just BTC as LocalBitcoins operates.

Guardless warranty

If you have used other digital currency exchange services, you may have noticed that the funds are managed in the platform’s own portfolios and that we do not have access to the respective private keys. This means that we are exposed to being affected in the event of a possible hacking. inside LocalCryptos this does not happen.

Your keys, your coins.

From the previous LocalEthereum exchanges are made directly from person to person with no-deposit collateral. This means that, instead of keeping the Ether under guarantee in a portfolio on your server, LocalEthereum uses an Ethereum smart contract that immutably and in advance sets the rules of custody, by which the Ether (ETH) will flow. from the seller to the smart contract and from the smart contract to the buyer.

When using a smart contract instead of a custodian, custody has no intermediaries. But things have changed, alongside the name change to LocalCryptos bitcoin has been added to be traded.

In order for bitcoin to be traded under the same form of security deposit without a custodian – since Ethereum’s smart contracts cannot be used – LocalCryptos made use of the directions P2WSH (Pay to Witness Script Hash) Which are a variation of the P2SH addresses of SegWit, Starting with a 3.

Safeguard without bitcoin

Without going into technicalities, P2WSH addresses allow you to configure scripts (a list of instructions included with each transaction that describes how the next person who wants to spend the transferred bitcoins can access them) to execute collateral deposits that require the approval of both parties and release the funds, without resorting to centralized entities and without the need for multifirm addresses.

Why not use multi-signature addresses for Bitcoin? LocalCryptos points out that it gives the impression that multi-signature addresses are used, but this is not the case, because they require both parties to be necessary when moving the funds deposited in the Escrow as two signatures are required., Which would limit the interaction of mediators in dispute resolution.

When the warranty contract is anchored in LocalCryptos no change happens within the Bitcoin blockchain; this is due to the fact that il escrow receives from the seller of BTC 1 UTXO, an unspent transaction output, which, after the transaction is successful, is released to the buyer and registered and propagated in the blockchain, giving him new ownership of the coins he will be able to spend at the time he decide.

In a blockchain payment system like Bitcoin, only unspent outflows can be used as inputs for a transaction. When a transaction is performed, the inputs are removed and the outputs are created as new UTXOs that can then be consumed in future transactions. One UTXO would be the payment made and another the change or return of the payment made, in the event that the entry exceeds the amount paid.

End-to-end encryption

The ability to encrypt in the browser opened up a whole new universe of web applications. All modern web browsers since 2018 include Web Crypto API, a standard that provides interfaces to be able to perform cryptographic operations such as hashing, symmetric and asymmetric encryption and verify digital signatures.

End-to-end encrypted chat.

the platform LocalCryptos uses these cryptographic operations in a variety of ways to protect information and enable end-to-end secret messaging. The goal is to allow the user to retain complete control over the most important aspects of their account, while revealing only a minimal amount of metadata to LocalCryptos servers (or anyone else who may be listening).

This end-to-end encryption is what protects messaging chats between parties involved in an exchange, preventing the leakage of our bank details usually registered there to facilitate the transfer of fiat money.

Portfolios without custody

Some wallets that LocalCryptos supports.

In LocalCryptos you have your own portfolio, both for Ether and Bitcoin; however, each private key is generated locally, making us the true owners of our funds, in addition to being able to export them.

A feature you can find from LocalCryptos is the integration of Ethereum portfolios such as MetaMask, MyCrypto, Ledger and Trust Wallet, among others.

The interesting thing here is that LocalCryptos allows you to create an account from an external wallet. This method will not require the use of a password as a transaction will be signed from the external wallet with which our data is encrypted. That is, whenever you want to access LocalCryptos, you will need to have access to this portfolio with which you originally created the account.

This portfolio will also allow you to manage funds outside of LocalCryptos, but of course you are alone for Ethereum; in the case of Bitcoin, if you will have an internal portfolio despite creating the account from a portfolio.

Creating an account in this way limits the portability of LocalCryptos, as not more we will be able to log in through this wallet.


An important part in P2P exchange houses are the arbitrators or mediators, the task is to fight disputes between users when no agreement has been reached for the release or cancellation of a security deposit.

When opening a dispute in LocalCryptos, the arbitrator may chat individually with each disputing party for a dispute chat and may request the relevant documentation to discern which of the two parties is right and release the funds from the escrow. The smart contract, or its bitcoin equivalent, allows the arbitrator only limited intervention to release the funds to the party that belongs to him according to his assessment.


Within LocalCryptos, only a 1% commission rate is applied to transactions made through published ads. This commission is divided into a Maker commission of 0.25% for those who publish the notice (whether to buy or sell) and a Taker commission of 0.75% for those who choose a notice to trade, whether to buy or sell . Both commissions are deducted from the sums to be received by each of the parties.

There is no other type of commission for other operations that can be performed on the platform, other than the one paid for mining concepts when depositing or withdrawing funds from the escrow.

decentralized centralization

Something worth noting and that can be confusing when talking about custodial exchanges, is that LocalCryptos is a decentralized exchange house (DEX for the acronym in English) but with the intervention of an arbitrator or mediator who is responsible for dealing with disputes.

Decentralization, so to speak, takes place within LocalCryptos directly in transactions, as the escrowAs we explain, they do not have custodians, either in Ether exchanges through Ethereum smart contracts, or through P2WSH addresses in Bitcoin.

Payment methods

When exchanging with LocalCryptos you will be able to count on more than 40 different forms of payments, which include local and international bank transfers, PayPal, Mercat Pagament, Western Union, among others. You can check out the full catalog of payment methods here.

It’s worth remembering the risks you run with the payment method you choose. For example, with online payment processors, such as PayPal, the risk of being scammed is quite high due to how easy it is to reverse a transaction on this platform.

more digital currency

Including Bitcoin within the old LocalEtherum was a big step towards massifying the service, as we are talking about the mother digital currency that has the largest market capitalization and highest trading volume. Ara, LocalCryptos it is proposed to include other digital currencies such as EOS, Dash and Litecoin, under the same exchange format, with no-deposit collateral.

Other features of LocalCryptos

Transfer your reputation

One of the most interesting options that helps the adoption of LocalCryptos is that we can import the business reputation we have in LocalBitcoins, since its feedback system is very similar, allowing you to start with this reputation and not build it from from scratch.

This strategy of LocalCryptos seeks to increase the number of traders on its platform at the expense of the market leader, LocalBitcoins, recognizing that the important thing in the business is the number of reputable traders who generate volume of transactions and not its amount.

No AML-KYC verification

A peculiarity within LocalCryptos is that you do not need to provide personal data at the time of registration, as these are not required. This makes a clear difference with other portals that have made clear their strict AML-KYC policies, such as LocalBitcoins.

Unlimited ads

In other portals, when posting an ad you must have a certain volume of trade along with funds within our account. Within LocalCryptos this does not happen, as as soon as we sign up we can start posting ads. Of course, if someone starts an exchange with us we will have to send the respective funds to the escrow, in the case of sale.


Beyond pointing out the clear similarities it has with portals like LocalBitcoins, using LocalCryptos is pretty straightforward, Since it is not a matter of trying a new form of exchange, but it is one to which we are probably already accustomed.

Also, if you are new to P2P exchanges with digital currency the LocalCryptos user experience is quite simple, without any complications or technical issues that may cause some fear.

In this article we limit ourselves to pointing out the features and advantages that we find within LocalCryptos. In a next installment, we will explore how to make exchanges using this interesting platform.

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