As the market for digital currencies grows, so does the industry of companies that support their buying and selling. Coin Pursuit likes to take a good's look at these businesses—and to pass on what we learn to our loyal readers. In that spirit, today we'll take a look at one of the more dynamic support platforms for Bitcoin trading, LocalBitcoins.com.
Local Bitcoins was founded in 2012, less than three years after the cryptocurrency industry began. Headquartered in Helsinki, Finland, this Bitcoin trade site has built a solid investor reputation in a very short period of time, and is now considered one of the top international alternative currency businesses in the world. Most people refer to them as an exchange, but their features and methods make them an exchange with a twist or two.
Local Bitcoins isn't so much a traditional exchange as it is a platform upon which investors can trade Bitcoins; among their selling points is the fact that trades are made between actual people, in contrast to other automated exchanges. Individual investors create accounts on Local Bitcoins, and from there they can post whether they're buying or selling. Other investors can then peruse the postings on Local Bitcoins, and decide which ones they'd like to pursue. For providing the arena in which these trades can take place easily and safely, Local Bitcoins charges a small transaction fee.
In addition, should they be so inclined, individuals have the option of creating their own Bitcoin exchanges within the confines of the Local Bitcoins site. They accept advertising from exchanges right on their web page, thus creating another layer of trading possibilities. In effect, this makes Local Bitcoins not only an exchange in their own right, but by providing exposure to other exchanges, they become an exchange exchange!
Though there are many other methods you can use to trade on Local Bitcoins, one of their most popular features is their escrow transaction method. Escrow simply means having a third party hold onto funds until a transaction can be agreed upon and completed by the two active parties involved. Therefore, in this scenario Local Bitcoins puts the Bitcoins in question into an escrow account until both investors have mutually worked out the details. The escrow system helps guard against scams and other shady practices, and helps to protect both the buyer and the seller. Local Bitcoins has a detailed page devoted to the escrow process here.
As an open-market model, anyone can sign onto Local Bitcoins and trade there; as a result, the possibility exists that people of less-than-reputable intentions can get an account. However, there are methods in place that help make the untrustworthy types feel unwelcome. For one, the escrow process above thwarts shady deals. Traders can rate the people they do business with on Local Bitcoins; if you've ever bought or sold on eBay, you're familiar with that type of feedback system. Finally, investors and exchanges that build a good reputation are put on the “Trusted” list, and their accounts are signified by a star and their reputation score (listed as a percentage). Good trade practices are rewarded here, as they should be.
There's a small pitfall in the reputation-based account system, in that brand new traders have 0% ratings. In such cases, Local Bitcoins advises that you verify your phone number and send messages to prospective buyers, letting them know you're a new user. Once you've completed a successful trade, your reputation score will improve.
Upon signup, Local Bitcoins members have the option of creating a wallet there. Though these are secure, they're web-based, and as of this writing, they don't have a mobile version. As such, Local Bitcoins recommends to its investors to seek out third-party wallets, which they can then synchronize with their Local Bitcoins account. The wallets available from this service are focused chiefly on investment, so finding an independent wallet that allows for merchant interaction is a good idea.
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