Thursday, August 9, 2012

LocalBitcoins Transactions via SMS - buy and sell bitcoins with cash, hassle-free and fast without internet connection

EDIT 16.8: Please note that we rebranded the service from "escrow" to "LocalBitcoins Transaction" or short "Transaction". This is because the service is not actually an escrow service. It is just a tool to make the exchange process easier.

Cash is a perfect method for buying and selling bitcoins. Paypal and credit cards have chargebacks, and are practically unusable for bitcoin transactions. Bank transfers are slow, and take away your privacy by enabling the bank to see all your transactions.

However there are lots of hurdles when trying to enable local bitcoin-to-cash transactions. What kind of devices you want to use, what kind of internet connection, how many confirmations should you wait, and so on. We try to remove all these hurdles with our SMS-based bitcoin escrow service. Only the seller needs sms-enabled phone, and the buyer doesn't need phone at all! So even internet connection isn't needed at the meeting point.

The process for the buyer is following:
  1. Make offer/receive offer
  2. Memorize or write down the escrow verify code
  3. Bring the cash to agreed location
  4. When seller shows you the escrow verify code, you can be sure that the funds have been transfered to you
For the seller the process is almost as easy:
  1. Receive offer/make offer
  2. Write down the escrow release code and phone number as a SMS message, don't send yet
  3. When the buyer brings you the cash, send the release code as SMS
  4. You should receive the verify code as a SMS, which you can show to the buyer
The SMS should work 99,99% of the time - we have two different backends, so that if one fails, we will use the other. Also we have enabled the SMS messages in 150 countries - you should be able to use this process practically anywhere in the world.

If there are some problems, you can always head to the nearest internet cafe, and check the situation online. However, we are pretty confident, that practically in all cases the SMS escrow process should work easily, and the transaction time could be less than a minute.

Also if the seller works for at example internet cafe, even the sms sending is not needed - you can just release the escrow online, and you will receive the code with you can prove that the escrow has been released.

Here are couple funny visualizations of the process (however note that since these, the process has been simplified):



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