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Review: LocalBitcoins

LocalBitcoins holds a peculiar spot on this list. It’s an overwhelmingly popular website used by people who want to buy Bitcoin (although its services are no longer available in New York state, thanks to the recent BitLicense). Aside from Coinbase, LocalBitcoins is absolutely the most common recommendation to new members of the community.

But?

It’s not an exchange. LocalBitcoins is essentially Craigslist for buyers and sellers of bitcoin. It’s not a real exchange. Like Coinbase, it’s a broker, but where Coinbase is a single-party broker, LocalBitcoins is a distributed peer-to-peer brokerage. That doesn’t mean it’s a bad choice if you’re looking to pick up a small or medium-sized amount of bitcoin. If you need to buy more than about $2,000 worth of bitcoin, I’d recommend using another service, but if your goal is to get a little bit, and to do it relatively anonymously, LocalBitcoins is an excellent choice.

Details:

  • Founded in Finland in 2012
  • Good entrance point into the ecosystem
  • Run a series of ATMs, which will show up when searching
  • No venture funding–run by Jeremias Kangas (LinkedIn, Twitter) from the ground up
  • Not designed for trading, generally speaking

Pros:

  • Excellent potential for arbitrage, but it is time-intensive
  • The most anonymous method of purchasing bitcoin available to most consumers
  • No fee if you’re not the person who created the ad

Cons:

  • A little slow for most people–you may need to meet someone in person in order to complete your transaction, and there may be a waiting period
  • 1% fee if you’re the person who posted the advertisement to buy or sell bitcoins
  • Prices may be slightly over market (~1.5-2%), but this varies by region
  • You have to protect yourself from scams by correctly using the various security features they provide, like escrow

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