2 Reasons and 3 Ways to Ditch Bitcoin Online Exchanges
Online exchanges scare away some users with privacy issues and slow transactions. Here are a few ways you can avoid the hassle when buying Bitcoin.
Cryptocurrency exchanges served an important role in the early days of Bitcoin, and continue to be widely used for buying and selling to this day. However, they are not without their drawbacks, and some users seek alternative methods of obtaining Bitcoin. Users seek to avoid exchanges for two primary reasons:
Centralized exchanges require users to disclose their identity and submit additional personal information. According to Josh Harvey, co-founder of Lamassu, this is enough to dissuade some users from trusting an exchange.
“Online exchanges are regulated and require a lengthy registration process involving lots of paperwork and the submission of sensitive private documents. Anybody using those services is trusting both the service and the government to keep that information safe.”
Transactions through online exchanges are not instant. In addition to the initial setup process, transactions take an additional amount of time to process. According to Eric Grill of CoinOutlet, an example of this can be “5-7 business days to wire to Bitstamp, plus the initial setup (AML/KYC).” BTM operator Luca Dordolo says this initial setup can be lengthy.
“Assuming that you are already registered and verified AML/KYC with an exchanger, which means at least a week/10 days to be operative with an exchanger.”
Three alternative methods of obtaining Bitcoin without the drawbacks of centralized exchanges:
According to Dordolo, using BTMs enables “the possibility of buying Bitcoins anonymously and in the fastest and safe way.” Grill considers the greatest draw of the BTM to be the instant nature of transactions.
“You don't have to wire money overseas or attach your bank account to an exchange, you simply put in cash and get your Bitcoins instantly.”
According to Grill, the major barrier to BTM use, locating a machine nearby, is quickly dissipating.
“Its getting easier and easier. Coinatmradar.com, Airbitz and other directories make it very easy to find, and as more and more machines are deployed, it will be easier for people to access them like they do their traditional ATM machines (which people would rather visit than their banks as well).”
Finding a buyer or seller for conducting a Bitcoin purchase in-person can be facilitated by attending a local meetup of cryptocurrency enthusiasts. According to Harvey, this eliminates the two primary concerns of using centralized online exchanges.
“I think it's a matter of privacy and convenience… This process is also time-consuming, and new users might have to wait days or weeks until they can actually buy any Bitcoin. With a meetup, you just show up with cash and get your Bitcoins on the spot.”
An alternative to centralized online exchanges is a peer-to-peer exchange, which works by facilitating the connection of buyers and sellers online in a simplified manner reminiscent of an in-person transaction at a local meetup. Robert Genito, CEO of Genitrust, this is an improvement over traditional exchanges, which can prove to be too complicated for the average casual user.
“As for the majority of customers that I have spoken with, they just cannot figure out how to use these institutional exchanges. Most of them are not day trading as a hobby, and these websites are completely different than how they expect to buy Bitcoin. People expect to simply tell you how much fiat currency they're looking to spend and then see their options--similar to how Travelocity and Expedia work.”
Genito adds that a decentralized exchange can expedite the process of buying Bitcoin online.
“The primary advantage of using a service like Wall of Coins is speed and cost. You get the Bitcoin you ordered immediately once payment is verified, and you also get cash for your Bitcoin immediately. With all exchanges, you have to wait at least hours to get the Bitcoin. With some exchanges, you have to wait days. With how quickly the price of Bitcoin moves, no one has time for that.”