I recently had my first experience in buying bitcoin on a "decentralized" exchange, Bisq, and it was fantastic! As you may know from my introduction post, I hate everything centralized so I have been refusing to use traditional exchanges like CoinBase or Kraken. I do not like the ideas of having my driver license number, social security number, and all kind of private identity information on those exchange for verification purposes. It beats the whole purpose of blockchain technology and I don't trust their security system to have my precious identity sitting there in the hands of god-know-who.
A couple weeks back I found Bisq (formerly named BitSquare) via a crypto currency forum and decided to test it out. In short, Bisq is a true decentralized exchange where everything is operating from your desktop/laptop. You download and install a desktop client (just like a desktop wallet) to your machine. It allows you to connect to a network of peers who also have their Bisq client running from their desktop. There's no single person or entity in the middle to facilitate the buying or selling; it's all automated.
Bisq vs. Centralized Exchanges:
Bisq would just blow all of the current centralized exchanges out of water on every front:
a. No verification is needed: Bisq doesn't ask you for your driver license or bank account number.
b. Support any currency: Bisq allows you to buy or sell bitcoin (and any other altcoin) using your fiat currency (usd, euro, yen, etc...). It can work as a desktop wallet for any of your alt coin.
c. You own your private keys and store them on your desktop/laptop. You also keep your wallet's backup seeds.
d. No hold or limit your funds and withdrawals - it's decentralized!
e. No middle man fees, only transactional fees similar to how you send bitcoin from one wallet to another
The only down side is that the number of peers on the network is relatively small as Bisq is not yet known to many. Currently, there is about 12 - 15 people connected to the network at any given time.
How Does It Work?
In a nutshell, a Bisq transaction involves 5 steps:
1. You post a buy/sell offer on the network based on the cryptocurrency and fiat money that you wish. I'll use BTC/USD as an example.
2. The buyer initiated the transaction on the seller's offer. Bisq will ask buyer and seller each send a small amount of bitcoin (about 0.03 btc) to a security fund.
3. Seller will have to send their bitcoin amount that they want to sell to an escrow account.
4. When 1 confirmation of the seller's bitcoin have cleared, the buyer will then send the payment in USD to the seller as instructed by Bisq with the seller's email / phone number along with an unique transaction code for verification purpose. I've used Zelle payment method where you can directly transfer USD from any major bank (Chase, BOA, Wells Fargo, etc...) to any one's bank account using their email/phone number without costing a single penny.
5. When seller confirms receiving of USD payment along with the unique transaction code, the bitcoin amount will be released to the buyer from escrow. Security deposit (0.03 btc) will be returned to the buyer and seller at the same time.
Now, in case there's a dispute Bisq will randomly select a mediator on its network. The mediator will contact both buyer and seller to get their proof of payment and reasons for dispute. The outcome would be either go forward with the transaction as both parties agree or canceled the transaction altogether where seller gets back his BTC and buyer gets back his USD. In any case, the mediator will collect the security deposit as a fee for his service in resolving the issue.
How is it different than LocalBitcoin?
A lot better! LocalBitcoin is also a decentralized exchange but it comes with much more hassle. A LocalBitcoin transaction requires people to physically meet up and exchange hard cold cash or deposit cash into someone else' bank. It's a time consuming process and sometime a bit unsafe if you trade with someone that you never met before. In some cash transactions on LocalBitcoin, sometime the seller cancels the trade right before the meet up to force buyer in buying at a higher price. Buyers are stuck with either wasting their time for nothing or go ahead buying bitcoin at a higher price. On Bisq, if a party cancels the transaction in the middle of it, he'll lose his security deposit.
I hope with this steemit post, there will be more people starting to use Bisq, the real decentralized exchange for the decentralized world.
PS: I do not work for Bisq or have any interest/association with the software maker.
Thank you, after my miserable experience with Coinbase I'm going to check this out.
Thanks kryptonizer, I will give it try. I have been worried and don't like the fact CoinBase and other exchanges have my information. Like you said it defeats the whole purpose of blockchain technology.
yep, CoinBase is like Paypal who charges crazy amount of fee and want to limit your fund at the same time. Really looking for more people to join Bisq so that the number of offers will be more abundant. Thanks for reading.
What you do with coinbase is transfer moneydirectly from yout bank account and then buy coins from gdax. This way you dont pay a fee
For new users that recently signed up, Coinbase doesn't even allow transfer fiat money from bank account to coinbase account unless you submit driver license id to them for verification purpose. They're making it very difficult nowadays.
damn that blows
Could have saved myself a S%$t tonne of cash on this advice - :) live and learn
Bisq is an amazing concept, and I really hope more people start using it. It's not yet as convenient as big exchanges, but the benefits are huge. I'm going to start throwing some trades up soon to try to help feed network traffic, and I'm making a banner for my signature in Steemit posts as well. : )
PS. if you've not heard of it there's another project that works the same way, but it's for ecommerce! It's called Open Bazaar. It's pretty neat, but unfortunately has the same problem as Bisq - the network needs more users!
Yeah, stumbled across the Bisq blog somewhere online and was intrigued about the concept. Glad to see that its been tested and now gaining some traction. That being said, it does not yet provide support for Naira so it kinda limits some of us being able to participate. I do hope that they consider Naira pairs sometime in the nearest future as Nigeria remains a huge market to be tapped in terms of crypto-potential.
I installed the Bisq application and tried to deposit some xmr but as it looks there are just btc, ltc and dash as main currencies possible to deposit and withdraw? The others are just contracs? This would be useless
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STOPHey @kryotonizer I was wondering which payment methods they accept for purchasing bitcoin with EUR. Can you pay with credit card?
There are many options for EUR including: SEPA, Zelle, Bank Transfer, Cash Deposit, etc...
As for credit card, I haven't looked into it but my guess is that it's not allowed since the credit card's owner can dispute and revert the payment thru his credit card company a few days later. This will leave the seller with no money and lost bitcoin.
I am going to check on this. Thank you.
Looks interesting, thanks for sharing. I'll give it a try
Thanks for sharing this. As a newbie to cryptos I am using the big names for the obvious reasons- Coinbase is expensive and once I waited 8 days for my transfer and another time 24 hours.
I heard something different about how Bisq works!
I definitely wanna try this out.
I usually buy or sell with the same people I know around me. But I can see that Bisq has some benefits that I did not know of it. Is there any referral program or a link? By the way, talking about the different programs and getting to know what they ask and they do, it is something I am looking forward to do here. Some times, sharing experience make other people not to make the same mistakes. Like, I am right now in one of the mining places, and I do not see any payment in my son's account, although I am receiving in mine, litecoins, dash an bitcoins. My son decided to invest in Ether and Classic. He has been for over a month and no payment. Have you had any experience with mining company, mainly with the one that has a biblical name?
This sounds like great concept. I hope they can attract enough users to reach critical mass.
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STOPI've stumbled upon Bisq the other day and I am about to use it the first time. My question now is, how long does it take for the seller to confirm the bank transfer? Do you have to wait as long as a bank transfer typically takes for confirmation (4-7 days) or does Bisq use an accelerated/escrow based confirmation method?
Unfortunately, Bisq mostly has US-based traders that use proprietary systems that do not accommodate any payments from outside the US. This isn't Bisq's fault, of course. It has SEPA payments and other sorts. However, the exchange is still not populated by Europeans or people willing to accept forms of payments that outside buyers can use.