The beta version of Bitsquare will be launched at Fab Lab Barcelona on 27 April. The new bitcoin exchange will work on a complete p2p basis, with minimum fees and without any middleman.
During the event, Manfred Karrer, founder and developer of Bitsquare, will explain why a bitcoin marketplace needs decentralisation and how to build it.
There is a great variety of bitcoin exchanges, says Bitsquare’s website, but they make users trust a centralised system with their funds and personal data, putting their money and privacy at great risk.
Bitsquare attempts to solve these problems. It is a p2p application running over Tor. It does not hold any user funds, be it crypto or fiat, nor any user data (since registration is not required). All private data is end-to-end encrypted and therefore not available to anyone but transaction participants. The project is self-funded, according to the website, meaning that “no individual persons have leverage over the developers.”
According to the company, “one may describe Bitsquare as a fully decentralized version of LocalBitcoins” but without a central place to collect user data, without servers to attract adversaries, with no trust needed in the service provider and without “a reputation system, which can be manipulated.” They consider Bitsquare to be similar to such projects as OpenBazaar or Bitmarkets but in a new field where nothing of the kind has appeared until now.
The platform allows exchange of bitcoins to any other currency, fiat or crypto. Bitsquare uses a decentralised arbitration system to settle disputes between traders. Arbitrators are chosen randomly from the pool of users who agreed to be considered for this role, at the start of every trade. They have to deposit 2 BTC as a warranty of their good service.
The fees are minimal. The typical charge for a transaction is 0.001 BTC for both the seller and the buyer paid to the arbitrator plus 0.0009 BTC paid to miners. A deposit fee of 0.1 BTC is returned to the trader if everything goes well or can be awarded to the arbitrator if the user has breached the trust. In the future, Bitsquare plans to adjust fees “as needed to make the arbitration system sustainable and to adjust to the level of observed fraud activity.”
The maximum trade amount is currently limited to 1 BTC but, according to the developers, “if real life experience allows us we will raise that limit over time.” There are other limitations as well. For instance, to use the platform, traders should already have some bitcoins because otherwise they would be unable to pay a security deposit and fees. The application must be always kept open during the trade because if the user goes offline, it makes finalising of the trade impossible.
The developers do not recommend using the platform in the countries where bitcoin is illegal because “undercover agents can act as peer traders.” They also advise opening a separate bank account for bitcoin trade to avoid blocking of the primary payment account if the bank is suspicious about bitcoin. Finally, they state that “while Bitsquare is developed to offer the right to privacy, it is not intended to facilitate criminal behaviour,” so, “in the event of disputes, arbitrators may need to verify the identity of the traders.”
Alexey Tereshchenko
