Localethereum is a website for matching up peers wanting to sell and buy ether - usually locally, i.e. cash trades, domestic banks all over the world, etc.
I've been trading a bit on LE lately, as a market maker. It's sleek, I like it - but there are caveats ...
Security
When using Localethereum, most of the security is on the user:
- there is no money stored on the centralized servers, the private keys for the wallet is stored on the client side
- There is strong end-to-end-encryption on all communication, so your communication stays private.
- escrow is organized through contracts. Those contracts allows Localethereum staff to mediate on disputes, and also siphons fees to Localethereum.
- There is no "lost your password"-link - your password is part of the private key, so no password, no access.
There is one big concern with this - you need to take the full responsibility for the security.
- Forgot your password? Sorry For Your Loss ... (to be fair, they do encourage you to make a backup of your wallet seed - but it's a downloadable json file, would have been better to encourage people to write down 12 words on a piece of paper. Even with this seed, you still won't get access to the Localethereum account - only the wallet funds).
- Allowed some cracker to gain access on your computer or your browser? The Localethereum wallet can be emptied in no time. SFYL.
- Let some stranger access your browser for a minute? If he is a thief, if he knows about Localethereum and if he notice that you have it open in a browser tab ... SFYL.
- Let your kids play on your computer, leaving your Localethereum browser tab open? They could end up hitting the wrong buttons. SFYL.
- For cash trades, outright robbery is also a security risk of concern. I've had incidents with localbitcoins trading, and got back bitcoins by reporting the incident fast to Localbitcoin staff. This is not an option with Localethereum, since the buyer holds the private keys.
I'm assuming the password isn't sent to the Localethereum servers. I'm assuming it's not possible to go directly from a password to the wallet private keys without salting it with some secrets coming from the server. I'm assuming the escrow contracts are robust and not vulnerable neither to some TheDao-style hack nor Parity-style accident. I'm assuming there is strong, good and robust crypto used both for the chat and for generating the wallet addresses. I assume it's possible to verify those assumptions, but I'm not up to that task.
Fees
I think 1% fee to the site may be a bit high - I think it's OK in markets with high spread, but not so OK in well-working markets where the market makers takes only some few percent for themselves. In addition there are network fees for funding the contract. Those fees may be quite significant if you are doing small trades.
There is a competitor liberalcoins taking 0.5% fee. I still haven't looked into it, but I probably should ... though, I think I'm spread thinly enough already.
Escrow system
There are two kind of contracts, it's for cash trades and for online payments. I haven't studied the docs nor the code - this is based on my experiences.
Cash escrow
- One of the parties initiates the trade, eventually there is some communication
- The ether seller funds the contract if it seems likely that there will be a trade (seller pays ethereum transaction costs)
- The seller releases the funds once he meets up with the buyer.
- The buyer can cancel the contract at any point
- The seller can cancel the contract, but there is a two hour grace period. Should the buyer press the "dispute"-button, the funds will probably be locked.
Bank escrow
- One of the parties initiates the trade, eventually there is some communication
- The ether seller funds the contract if it seems likely that there will be a trade (seller pays ethereum transaction costs)
- The buyer has a two hours window where the seller can't cancel the trade, and is supposed to make the online payment and mark the payment as completed within this period.
- The buyer can cancel the contract at any point (I never tried cancelling after the transaction was marked with "paid" though, but there is a button there).
- When the escrow is funded, the buyer has a two hours window where its safe to make the online payment
- After the buyer has marked the payment as done, the only way the buyer can get back the funds is through the "dispute"-button.
Reputation system
Immediately after the trade is finished, one gets to rate the trade using three buttons. Giving feedback is super-simple. I most often skip giving feedback in Localbitcoins, it's not that much effort, but I do have quite high trade flow and quite little time, and it is significantly more effort than in Localethereum. There are some caveats though ...
No possibility to add comments. That's perfectly sane in 98% of the cases the trade is "completely on expectation, I got my money", and it should suffice to click on a thumbs-up-button. Perhaps some of the reason why I usually don't give feedback in LBC is that there may be an expectation that I should write something nice about the other part. At the other hand, when having a bad experience with someone it may be important to be able to flag the reason.
As far as I can see, there is no possibility to add feedback if there hasn't been a successful trade. If the other part is unexpectedly cancelling the trade, that may be a very good reason for giving bad feedback.
As far as I've understood, the number of cancelled trades is actually giving an impact on the ranking of sellers at the search page. This may be bad, as there are many legitimate reasons for cancelling a trade.
Rates
The market maker has two parameters for setting the rate - it is what reference rate to use (a long list of exchanges is presented) and what percentage to deviate from the reference rate. The percentage may be negative if one is in a rush to get the trades through. The last bullet point is "Average (coinmarketcap)".
I'm missing ...
- possibility to set a fixed rate (well, I have never done it, but I do have a vision to use fixed rate and adjust it frequently through the API).
- possibility to use an average of selected exchanges (on can never trust one source fully, and "coinmarketcap" is also just one source after all. Personally the EUR-markets are much more relevant than the USD-markets).
- possibility to use a "floating" rate. By now the price is set when the contract is initiated, this is usually no good in cash trades, and even with bank trades it may be a problem.
Other experiences
Communication efforts needed
I have my ads open 24/7.
On localbitcoins, if the buyer opens up an online buy request, the buyer can send money to the bank account at once - and the seller don't have to do anything until the funds arrive to the bank account. Not so at Localethereum, the buyer needs to wait for the seller to fund the contract - and I'm typically the seller and typically sleeping. If some time has passed I would typically need to verify that the customer is still alive.
Trade requests tend to get outdated
As said, there seems to be no "floating price"-option, all trades have the ethereum price fixed at the time the trade was initated - and often there is a time window until the trade is completed. This is also an issue with some bank trades at Localbitcoins - one may get a trade request on a friday afternoon (or worse - just before some period with banking holidays). The buyer marks that he has paid, but instead of paying immediately he waits until Sunday evening. If the bitcoin price is going down the contract is simply cancelled. At Localethereum it's worse, often time is lost due to communication, market maker being offline, market maker needing to fund the contract, etc.
I tend to think that an agreement is an agreement, if we have a contract going with a fixed price, then in my opinion the contract is to be honored - no matter which way the market price is going in the meanwhile. This of course puts me on a big disadvantage with people who thinks it's perfectly OK to cancel a trade contract if the price moves in the "wrong" direction.
For cash trades, "floating price" is important. There are many legitimate reasons for a cash trade to be cancelled, and it may be difficult for two parties to find an appropriate meeting point and meeting place. If the price falls and a buyer fails to meet up as his daughter needed medical attention, I don't want to speculate weather it's just a cover story for cancelling the trade. If the price increases and I can't meet up, I don't want my customer to believe it's a cover story for cancelling the trade. Fixed prices may be fine so one doesn't have to do the counting on the spot, especially if one needs a fixed amount of crypto currency it's nice not to be able to deliver an envelope with pre-counted money.
One solution to this may be to explicitly state in the terms of trade that the trade should be cancelled or recounted if the market moves with more than 1%.
Communication issues
With Localbitcoins I get an SMS on initiated trade requests, this often causes me to jump online. With Localethereum there is an email. I guess I theoretically should be able to set up my phone to give a bleep as soon as I receive Localethereum trades, but I haven't gone there yet. Emails tend to be slow and sometimes not coming at all - but that may be local issues at my side. In any case, my response time on Localethereum is not nearly as good as on Localbitcoins.
There is a counter indicating how many unread messages one have - but it's immediately nulled out when one clicks on the message button. There is no real tracking of what messages are read and what are not read. This may be a bit frustrating when having a lot of parallel communication and poor overview of if there still are unread chat messages or not.
I'm not quite sure about it, but today it seemed like I had severe delay issues with the encrypted chat on my mobile, as I was running through town while trying to arrange a spot meeting for a cash trade. Apparently I had to reload the page with the chat and press the chat button to get up the chat to see if there were new messages. Though, it may have been that the other party was slow to respond to my messages, and managed to send the messages just exactly when I was refreshing the page ... who knows.
Many junk trade requests
I'm selling locally for physical cash payments and domestic bank payments, and I think it's pretty clear from my ads - but still I do get quite many trade requests from non-local people wanting to do international payments, paypal, mobile payments, etc