It allows us to exchange our bitcoins in different currencies of the world depending on the offer.
LocalBitcoins is a peer-to-peer exchange platform with a bitcoin security deposit.
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Content updated to January 2020
This is the first article in a series of three that will teach you how to use the P2P exchange platform LocalBitcoins. In this first installment we will do a general review of the platform, its operation, its commissions and how to register for it in order to conduct transactions of purchase and sale of Bitcoin.
Those who are familiar with the exchange of bitcoins for other currencies, find it easy to orient themselves to get good prices and a good buyer. But what if you’re new? How do you know who to trust so you don’t fall into a scam? Let’s take a simple example: Imagine we are traveling to Sweden; the national currency of this country is the Swedish Krona. For this trip the only funds available we have are our bitcoins. Now, how do we exchange our bitcoins for crowns?
As is popular knowledge in the digital currency ecosystem, bitcoin is accepted worldwide and is a decentralized entity not governed by any private or governmental institution. This absence of central authority makes it difficult for them to exchange in traditional exchange houses. That is why one of the most widely used alternatives is person-to-person exchange, where we take risks by completely not knowing the person with whom we will make the exchange.
The aforementioned difficulties are solved with LocalBitcoins. This is a platform that not only serves as an intermediary in the exchange, protecting our funds until the transaction takes place, but also allows us to exchange our bitcoins in different currencies of the world depending on the offer. And yes, the Swedish crowns in the example above can be found on this platform.
LocalBitcoins is an electronic marketplace for buying and selling bitcoins created in 2012 by the Kangas brothers: Jeremies and Nicholas, in Helsinki, Finland. The platform allows anyone to exchange bitcoins for local money with another person without any other intermediary than the platform.
Table of contents
How LocalBitcoins Works
Each person or operator operates as an exchange house by setting its own exchange rules, even its own exchange rate. Yes, each person can set the price at which they want to buy or sell bitcoins, and depending on certain key factors, reputation, transactions performed, minimum / maximum accepted exchange amount, that person can be chosen to perform the transaction.
What role does LocalBitcoins play in an exchange?
The platform acts as a guarantor of the exchange between the parties through a security deposit (escrow) Of the bitcoins to be traded, which are released and delivered to their new owner upon confirmation of receipt of the sum of fiat money exchanged.
Since the bitcoins to be exchanged, in the event that we are buying BTC, must be previously deposited on the platform – private keys are handled by LocalBitcoins – the amount to be bought is blocked from the seller’s portfolio, making it impossible run away with our BTC. Once the BTC seller confirms the transaction after receiving the agreed funds, it releases the bitcoins to the buyer, which will be reflected in the balance of their wallet.
Similarly, in the event that any of the parties is not satisfied, the LocalBitcoins dispute team will take action to resolve the dispute between the parties.
To improve trust between users of the platform, LocalBitcoins uses a reputation system that is based on individual feedback and ratings for each exchange conducted. Each time you make an operation the system will show you a list where you can assess the treatment and the way in which the transaction was carried out; in addition, you can add a comment specifying details about the other user’s behavior. However, keep in mind that the valuation is reciprocal; that is, the other user will also need to place a rating on you.
This system allows, and to some extent forces, users to behave not only honestly but also politely, as a low reputation translates into mistrust on the part of the LocalBitcoins community.
Means of payment
A rather striking feature that we will find when using LocalBitcoins are the means of payment available. Since they range from cash deposits or bank transfers, to gift cards from Amazon or other platforms and transfers by Mercat Pagament. This is due to the fact that, being exchanges between pairs, they are the ones who define the method to be used.
However, care must be taken here as this plays like a double-edged blade. By having a wide variety of means of payment, which vary depending on the country or local currency with which we decide to exchange, we will find unreliable means of payment as is the case of PayPal, in which reverse a transaction it is extremely simple and we could end up being victims of some fraud.
The commissions within LocalBitcoins are fairly basic and low compared to others Exchanges. For deposits from external wallets on the platform we currently charge 0.00015 BTC for each deposit. This commission may vary depending on the price of the bitcoin in the market.
The current commission for off-platform recesses is 0.00005 BTC, which can also vary depending on the market and network congestion. However, for withdrawals made to LocalBitcoins’ own addresses, no commission is charged.
When buying or selling from an ad posted by another user no commission is charged, however, if the ad is posted by us we are charged 1% of the total exchanged.
Advantages of using LocalBitcoins
- Ease of use.
- Basic AML-KYC verification.
- Accepted in more than 200 countries worldwide.
- Lots of means of payment.
- It allows the sending of remittances when exchanging bitcoins for different fiat currencies. If you want to know more, here is a tutorial.
- Low commissions
- Fast withdrawals and deposits, which only depend on network congestion.
What do you need to create an account?
To trade on the platform you will need to create a basic account which consists of registering a username, email and password, mainly. However, complying with International Money Laundering (AML) and Know Your Customer (KYC) regulations is a minimum requirement to be able to negotiate a maximum volume of € 200,000 per year, as you can see in the table below.
|DATA TO BE VERIFIED||Level1||Level2||level3||Level4|
|Country of residence||√||√||√||√|
|Proof of residence||√||√|
|Extra ID verification||√|
|Annual limit amount||€ 1,000||€ 2,000||€ 20,000||–|
Have a real phone number to be verified via SMS and a photo of an identity document (ID, ID, passport), it is necessary to comply with these regulations. With all this in hand, the first thing you need to do is go to the LocalBitcoins homepage.
Registering an account at LocalBitcoins
Tip: Always remember to verify that the link you are entering is LocalBitcoins.com
What we see above is the home page of LocalBitcoins. Upon entering we will find the various ads for buying and selling bitcoins. But for now, we’ll focus on registering, so the next step is to click on Register o Sign Up Free, Highlighted in the red box.
Initially it will be necessary to create and register our username, which It cannot be changed subsequently, the email and a secure password that uses a combination of uppercase, lowercase, numbers, and special characters.
This password must be repeated and ticked the box I am not a robot to complete the registration, leaving only to press Register for a new screen to emerge, where we will be shown two legal documents about the Terms of Service, First and then the Privacy Policies of the company.
You have to read both documents carefully and agree, click the button accept which you will find at the end of the document.
Now it’s time to confirm our email. To do this we must go to the inbox, find the email sent by the LocalBitcoins team and click on the verification link in it.
After verifying your e-mail, the next step is to provide some personal data such as your name and surname, as it appears in the bank account you use, telephone number with the code of your country, which will be verified below by LocalBitcoins using a validation code that will be sent via SMS and your country of residence.
We will receive a verification code on our phone or, alternatively, a phone call where an electronic operator must dictate the verification code. We enter this code on the screen shown on the platform and click on it To send to complete this first stage of registration.
As you can see, at this time you already have an account on the LocalBitcoins platform, however, this is disabled for any type of transaction until you have level 1 verification. To do this, click on the option Proceed to verify your identity that you see on screen.
A screen will be presented with the list of Level 0 requirements already verified and then the Level 1 requirements that we must meet. As Level 1 is the minimum required to operate within LocalBitcoins, we will proceed to select the option Move on to the next level.
The first part of the level 1 verification is to answer a socio-economic survey where we will give information about what we do and why we will use LocalBitcoins. In these options we will mark all that we consider correct. Finally, they ask us if we are a politically exposed person where we will simply mark yes or no.
To go to the next step we need to click on To send.
We will then provide the details regarding our residence address. However, although at this level of verification we will not send any document confirming the veracity of this address, when opting for level 2, it will be mandatory that both the address entered here and that of the document sent , match.
The last step to complete in Level 1 verification is to provide an identity document that allows us to validate our identification. Depending on the selected document, you will be asked for either a photo of the front and back of the document or just the front.
The identity document required by LocalBitcoins may vary depending on the country of residence you choose, from the passport, the national identity document (DNI) or the driving license. can you consult the complete list here.
As for the photos in the document, keep in mind that they are sharp photos with a weight of no more than 5 MB and that their four edges are clearly visible.
The maximum waiting period for verification is 72 hours, but if all the documents are correct, in less than 24 hours you will have your account ready to buy and sell bitcoin at LocalBitcoins.
Read the second part of this tutorial here, Learn how to deposit and withdraw bitcoins from LocalBitcoins, or the third part here, Learn how to buy and sell bitcoin with LocalBitcoins.