LocalBitcoins vs Coinbase: Which Platform is Better?
Ever since the inception of cryptocurrency exchanges there is an ongoing debate whether centralized or peer-to-peer platforms are the better way to exchange crypto assets. Both have advantages and major issues and there is no sign of one of the approaches ultimately winning over the competition. And what better way to illustrate this debate than to compare a stereotypical centralized exchange – Coinbase – with a stereotypical peer-to-peer platform – LocalBitcoins?
What is Coinbase?
Coinbase is one of the oldest and largest cryptocurrency exchanges in the world. It was founded in 2012 and initially exclusively supported Bitcoin. Today it is a huge platform with over 73 million users, more than a hundred currencies traded and a daily trading volume of over 3,5 billion dollars. So it evolved from a niche platform for cryptogeeks into a huge corporation.
It is a fully centralized platform and there are no elements of decentralization or trustless service: if you use Coinbase, you have to trust it with your money. Moreover, it is licensed in the US and therefore is regulated by the US government, which also may cause some issues.
It is worth mentioning that some advantages and disadvantages of Coinbase are caused by the nature of the platform – its centralized architecture and heavy regulation – and some are specifically Coinbase’s own shortcomings.
- Coinbase is beginner-friendly. Both the interface and transaction procedures are extremely clear and easy-to-use, so basically any person can use the platform without any difficulties.
- A convenient wallet is also provided by the exchange
- Availability of mobile Apps for iOS and Android
- Orders are processed virtually instantaneously
- Deposit insurance is available due to Coinbase being a regulated platform
- Coinbase operates only in countries, where crypto is not banned, so users won’t have any problems with the law
- A large list of coins and tokens available for trading
- Additional opportunities for getting income – an affiliate program, the ability to earn interest on eligible balances and so on.
As you can see, the list is quite substantial, so it is understandable why so many users chose this platform. However, not everything about Coinbase is sunshine and rainbows.
- As Coinbase is centralized, you totally depend on their honesty and good will
- As a licensed exchange, Coinbase provides all the clients’ data to US Revenue service and other government agencies
- Coinbase prevents users from certain activities, so you can’t use its wallet to send some transactions, like payments to adult and gambling sites, sending coins to some other exchanges, sending coins to wallets associated with Darknet and so on. Moreover, your activity may be reported
- Identity verification procedure may be difficult to pass in a lot of cases
- High transaction fees (can be reduced by using paid Coinbase Pro account)
- Poor customer support service. One of the most common complaints about Coinbase is their slow support service that is often unable to help users even with simple issues.
What is LocalBitcoins?
LocalBitcoins is a platform for peer-to-peer Bitcoin exchange. It was founded in 2012 by Jeremiah Kangas. Today it operates all over the world – in 248 countries.
It is not a fully decentralized platform – the site is managed by a company with the same name and it even has an escrow service making sure that trades will be completed. However, the platform never lays hands on your crypto or fiat money: all exchanges happen peer-to-peer, the platform only charges the seller a flat 1% fee.
The basic operating principle is rather simple: LocalBitcoins helps you to find a person willing to exchange fiat for Bitcoin and vice versa in the amount you need, using the currency you want and, probably, even in the location you want. That’s right – instead of conducting transactions online, you can meet your buyer or seller in person and exchange crypto face to face.
- All transactions happen peer-to-peer – there is no need to trust the platform.
- Full anonymity – the only thing required is an email address, there is no identity verification procedure
- The ability to arrange face to face meeting with the counterparty
- Huge selection of payment options – as long as the counterparty agrees with it, you can exchange Bitcoin for any currency and use any payment system.
- No limit on the transaction volume
- Well organized, trained and competent customer support service
- Slow transactions – while the site itself processes most transactions within 15 minutes, depending on the payment method it sometimes takes considerably longer. And transactions conducted in person can take all the time in the world.
- There is a risk of user fraud, so you should carefully approach the counterparty selection.
It is obvious that Coinbase and LocalBitcoins aren’t exactly direct competitors: they solve different purposes and their target audience is vastly different. If you value decentralization and privacy above all – you won’t ever use Coinbase. If you don’t care or prefer to rely on regulations – there is no real reason to use LocalBitcoins. So it is impossible to pick an objectively better option.
However, there is one distinction that is objective. Unlike Coinbase, LocalBitcoins are not suitable for actual trading. But if you just want to buy or sell some bitcoins once in a while- it is much easier to do it using LocalBitcoins.
No, not really. It is a peer-to-peer exchange service, connecting people, however, it lacks the capability of true DEXes: there are no professional trading tools, and it is not possible to conduct transactions fast enough to engage in trading.
Yes, for most major altcoins there are similar platforms. For example – LocalEthereum.
It is not recommended to use any exchange account for long-term storage of crypto currencies, as well as for storing large amounts of funds.