Crypto Academy / Season 3 / Week 1 - Homework Post for @sapwood

Introduction

A non-custodial marketplace is a decentralized exchange that grants total control and high security to users. Unlike a centralized exchange, a non-custodial market does not need the involvement of a third party for transactions and other activities unless a dispute arises.

Smart contracts perform the function of a third party in a non-custodial market. An on-chain escrow is used when a transaction takes place between two users so as to ensure integrity and compliance between the two parties.

How to set up an Exchange niche(non-custodial) in Localcryptos?

Localcryptos is a popular non-custodial market which grants 100% control to users on the platform. It has a very user-friendly interface which makes transaction processes very easy.

Localcryptos supports crypto-crypto transactions and crypto-fiat transactions. For crypto-fiat transactions, 40+ payment methods are accepted.

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The following are steps for setting up a Localcryptos account:

Step 1: Go to the Localcryptos' signup page. https://localcryptos.com/signup

Step 2: Select "Normal account" because it is recommended for easy access. Click "continue".

Step 3: Input username, email and password. Tick the given boxes and select "Create an account".

Step 4:: Complete verification and select "Continue".

Step 5: Confirm email.

Step 6: The account has been successfully created.

Non-custodial Wallets in Localcryptos

Localcryptos supports only four cryptocurrencies. As a result of this, non-custodial wallets are made available for these assets. The coins are:

• BTC
• ETC
• DASH
• LTC

Securing Keys of Wallets

In order to view the keys of a wallet;

Step 1: Select the wallet you want to access the keys. I chose DASH.

Step 2: Select the highlighted icon (arrow down icon).

Step 3: Section "Display private key".

Step 4: The private key would be displayed. You can copy the keys and store it elsewhere. Select "Done".

How to download key phrase

Step 1: Go back to "Wallets" and select "Backup your wallet".

Step 2: Select "Download wallet backup" and the download process would begin.

NOTE: The key phrases were downloaded in JSON format. For optimum security, it is advisability to store the keys using multiple media.

Can Localcryptos wallet be imported to other wallets?

Localcryptos wallet can be imported to other wallets using the key phrases of the Localcryptos wallets. The key phrases give total control of the wallet and this includes the ability to access the wallet using any supported online wallet.

Because the key phrases are this important, it is only sensible that they are kept very safe.

Available Fiat Options in Localcryptos

Localcryptos allows for crypto-fiat exchanges. The platform supports 40+ fiat currencies and a good number of payment methods.

For my location (Nigeria), local payment options include bank transfers, cash deposit and cash in person.

A number of international payment options are also available for my location. A few are Western Union, MoneyGram, TransferWire, MTN Mobile Money,etc. Some international payment methods have some restrictions imposed on their usage.

How Secure Localcryptos is as a P2P Non-custodial Market

Localcryptos is very safe as a P2P non-custodial market due to a number of reason. They are as follows:

• Localcryptos is a decentralized platform. This means that there is no high authority in the platform. Decentralization gives users total control of all activities that they perform on the platform. Keys are given to users for access to activities on the platform.

• The platform provides an escrow service. This is a link between the buyer and the seller that ensures that a transaction is properly processed.

• Chats between users are encrypted. This ensures that the parties involved can discuss their business without the fear of prying eyes.

• The dispute resolution system is very efficient in Localcryptos. In the case of any dispute, Localcryptos offers an arbitrator to settle it. This system helps in reducing scams on the platform.

How Escrow Protection Safeguards both Buyers and Sellers

Escrow is a medium where cryptocurrency is held and released after payment has been made. The escrow protection is set up on Localcryptos to ensure that both parties involved in a transaction would uphold their part of the bargain.

During a transaction,

• the seller locks the assets in the escrow while waiting for payment

• the buyer makes payment

• the seller confirms that payment has been made

• the escrow releases the assets to the buyer

After the assets have been locked in the escrow, the seller cannot cancel the transaction. Only the buyer is allowed to cancel the transaction.

The buyer should only make payments after the assets have been locked in the escrow, if not he faces a risk of not receiving the assets.

Experience with Non-custodial Market as a Market Taker

A Market Maker is someone who provides liquidity to a pool whereas a Market Taker is someone who removes liquidity from a pool. I would share my experience as a Market Taker on Localcryptos.

Step 1: Go to the Browse tab. Select cryptocurrency to be bought (DASH), location (Nigeria), native currency (Naira), amount, and payment method.

Step 2: Given the offers available, choose who you want to make a transaction with. Click "Buy".

Step 3: A page would be displayed. Information about the seller would be given. Input the amount you want to purchase and type a message for the seller. Select "Open Trade" when you're done.

Step 4: Wait for the seller to put the money in escrow before making transfer. In my situation, the buyer didn't come online. I canceled the transaction requested.

Note

I tried three other sellers and couldn't get any feedback after waiting for over an hour.

Conclusion

Non-custodial market has done a good job with securing the privacy of users. With decentralization and escrow, non-custodial market has gained a lot of good reputation. Although very reputable, Localcryptos has its fair shares of setbacks. It supports only four cryptocurrencies (which is too small for an exchange) and has low liquidity. The platform is very easy to operate nonetheless and I would recommend it to anyone.

Special thanks to @sapwood