Bitsquare: Anonymous, Secure, Decentralized Bitcoin Exchange
Latest posts by Dean (see all)
- The Scarab Experiment: Creating A Decentralized Artistic Personae - March 16, 2017
- Lunyr: A peer reviewed alternative to Wikipedia - March 11, 2017
- Anonymous Bitcoin Wallets Explained - February 28, 2017
Bitsquare provides a peer-to-peer exchange between bitcoin and national currencies, as well as between bitcoin and a wide range of altcoins. The decentralized nature of Bitsquare offers its users a range of advantages over traditional exchange services.
Perhaps the most notable advantage is security. When using a regular exchange website, users send their coins to the exchange provider who holds onto them until a withdrawal request is made. The private keys for all of the coins deposited by everyone using the exchange are held on the company’s servers – which present a very attractive target for both external hackers and potential thieves within the exchange itself. There are numerous examples of such exchanges going under due to theft or even fraud by the operator themselves, taking their users’ bitcoins with them when they disappear. When using Bitsquare the exchange is conducted directly, with the coins going directly from the seller to the buyer without passing through a central exchange wallet. This effectively eliminates the usual risk of losing your coins that you take when you use a traditional exchange provider.
A second notable advantage is the enhanced privacy that this service is able to offer. You do not need to register an account and provide your details to a service provider in order to buy or sell coins. Your trade history and transaction details are not recorded and kept by a central service provider. All you need to do is to download the software and you are ready to make a private exchange, with only the minimum information needed to do this (where you want fiat money or coins sent to) shared only with the individual you are exchanging with. The developers of Bitsquare have even taken additional measures to ensure their users’ privacy, routing everything through the TOR privacy network to hide your computer’s IP address.
How Bitsquare Works
The Bitsquare application will automatically create a TOR node for you with your own .onion address to protect your privacy, and will automatically encrypt all of your communications.
Your payment information is only shared with the person you are making a trade with.
Bitcoin deposit addresses that you control are created for you when you install the software, but for additional privacy you can also choose to directly fund each trade from an external wallet.
A trade ID is automatically created and must be used as the reference ID for bank transfers, so your bank will not know that the any payments you receive are connected in any way to Bitcoin trading.
Bitsquare uses multi-signature address requiring two out of three signatures from the buy, seller and an arbitrator. If the buyer and seller agree that a payment as been made, the bitcoin payment is sent with no outside involvement. If there is a dispute then the arbitrator will investigate to find out what has happened for a small fee, and will then either release the payment or authorize a refund. The arbitrator cannot take the coins themselves. You can either allow the system to automatically select arbitrators for you when you post an offer, or you can select them yourself.
A security deposit paid by both parties in a trade, but refunded after the trade has taken place, offers additional protection against scammers.
How to Use Bitsquare to Buy or Sell Coins Anonymously
Bitsquare is actually surprisingly easy to use. Check out this video demo or read my introduction below:
Once you have installed the software you should start off by adding your account details for anywhere you want to receive payment. You don’t need to do this for bitcoin because the system will create btc wallets for you which you can then withdraw from to any address you choose, but if you want to sell bitcoin for your national currency or to buy an altcoin then you will need to do this. Just click the ‘account’ button in the top right and then select the account you want to add. These details are only held on your own computer, and are only shared when you actually enter into a trade with somebody.
If you want to make a bitcoin deposit right away you can go to the ‘Funds’ tab to do this, but you can also wait and fund each trade directly from your regular wallet.
On the ‘Market’ screen you can see all of the offers for your chosen currency, or you can also click the buy or sell tab to view all relevant offers. You can create your own offer from any of these tabs, or accept any offer you choose from the buy or sell tabs.
When you create an offer you can choose to set a fixed price or select a percentage difference from the market price – for example if you are buying bitcoin and select 1%, then you will place an offer to buy at 1% under the current market price. Market prices are taken from popular exchanges, using BitcoinAverage for fiat prices and Poloniex for altcoin prices.
Once you have set that information you just click to go to the next step, where you will be asked to fund your trade. You can fund it from one of your Bitsquare addresses or make a payment now from your regular wallet. The trade fee (0.0005 btc for placing an order and 0.001 for taking an offer) and refundable security deposit must be paid at this stage. You can then click to publish your offer and it will be broadcast through the P2P network!
When you place an offer you must keep the application running until the trade is made, because your trade partner needs to connect directly to you through the network to take your offer. You can see your open offers from the ‘Portfolio’ tab, and you will be notified when somebody accepts your offer and this will show on the ”Open Trades’ section of your portfolio.
Accepting an offer is just as easy: just click the offer you want to accept and once your system has verified that the other person is still online and ready to trade you can proceed to make the payment. If you do it this way you don’t need to leave your computer running while you wait for somebody to take your offer either – you should be able to make an exchange very quickly.
Learn more about the payment methods and arbitration system in this more in-depth video:
For more detailed information and to download the app visit https://bitsquare.io/