Peer-to-Peer Exchange Explanation
The exchanges mentioned above (LocalBitcoins, Wall of Coins, and Bitquick) all work in almost the same way.
This section aims to provide more clarity on how a trade might work using one of these exchanges.
Buying Bitcoins at Peer-to-Peer Exchanges
Peer-to-peer (P2P) Bitcoin exchanges are a great way to get bitcoins with cash. A P2P trade usually works something like this:
A buyer and seller use a site like LocalBitcoins or Wall of Coins and agree on a price.
The seller’s bitcoins are held by the site and only released to the buyer upon confirmation of payment.
The buyer deposits cash into the seller’s bank account.
The seller confirms payment. Usually, the buyer sends the seller a receipt to prove that cash was deposited into the seller’s account.
The site (LocalBitcoins or Wall of Coins) releases the bitcoins to the buyer.
The seller got cash, and the buyer got bitcoins. The trade is complete!
The above was just an example!
Through sites like LocalBitcoins you are free to agree on other payment methods besides cash deposit.
You could arrange to meet in person and exchange cash for Bitcoin.
Yes, using LocalBitcoins you can even exchange that Starbucks gift card from Christmas a few years ago for bitcoins 😉
Why Are Peer-to-Peer Exchanges Good?
No verification is required. You don’t need to submit any personal details and there is no verification process that takes up time.
Cash payments are irreversible. Once cash is in someone’s bank account, the buyer of bitcoin has no way to reverse the transaction. So the seller can feel confident that he received payment for bitcoins, and release the bitcoins to the buyer.
A Note on Exchange Rates
Peer-to-peer Bitcoin exchanges offer a fast way to buy bitcoins.
Peer-to-peer exchange rates may be a bit higher than the global average Bitcoin exchange rate.
People are willing to pay more to buy bitcoins both more privately and faster. The markup is usually somewhere around 5-10% on LocalBitcoins. Wall of Coins generally has rates close to market.
Check the against a Bitcoin price index like Bitcoin Average or the CoinDesk BPI.
Best Practices for In-Person Cash Trading
If you decide to meet up with another person then make sure to take some precautions.
Meet in a public area. Most trades will go through fine but a search on Google shows people getting robbed or scammed at in-person trades.
Bring a friend. If possible, try to bring along a friend or family member just so you’re not alone.
These tips are not meant to scare you and there is nothing wrong with trading bitcoins. But when dealing with any amount of money or trade it’s best to be safe.