Review of featured DAPP LocalEtherum listed in State of the DAPPS - An Oracle-D task
Before 2009, everything was centralized and the exchanges of money were being done after paying high exchange fees, with difficult exchange terms which was set by the different centralized facilities and also it was time consuming. After the invention of blockchain technology and cryptocurrency, the things became easy for the people. For the first time in the history, people realized that, absolute ownership of the fund can be possible, one does not have to be dependent upon a third party, further a third party can not dictate a term upon a user, heavy transaction fees can be challenged. So this new technology thrives to disrupt the existing centralized system. Now the owner of the fund can deal with his fund as per his liberty.
So after 2009, the crypto space start to expand slowly and steadily and as different requirement and scenario unfolds, the facilities within crypto space also unfolds and that results in many decentralized application. One of such a requirement was exchanging crypto assets either with fiat money or with another cryptocurrency. But exchanging a crypto asset with another crypto asset is relatively easy & there are many services available for that, where as exchanging a crypto asset with fiat currency is really difficult and not cost effective too. Even if some services are there, they also used to dictate with high exchange fees (10% or more), moreover such services are centralized. So that does not solve that problem for which cryptocurrency and blockchain was invented in 2009. So in order to facilitate buying and selling of cryptocurrency like ETH with other fiat currencies all across the globe a dapp called LocalEtherum was deployed on the top of Etherum chain in the year 2017.
This article will solely focus on the LocalEtherum as a dapp on Etherum chain and its decentralized solution for buying & selling ETH with other fiat currencies.
LocalEtherum is a peer to peer non-custodian end-to-end encrypted marketplace where one peer can make a deal of ETH with another counterpart, in an absolutely decentralized way with Escrow Smart Contract, which follows the logic of the trade terms set by the user and delivers the fund as per the logic.
Therefore it offers a marketplace without involvement of a third party and users can swap their ETH with many fiat currencies like Bank Transfer, Cash(in person), PayTM, Skrill, Payeer, MoneyGram, International Wire, Paypal and many other available options. The seller can choose which fiat he is willing to take from the buyer and can also discuss it over the chat interface in LocalEtherum and that conversation between the buyer and seller is protected with end-to-end protection.
Getting started with LocalEtherum
(1) Go to - https://localethereum.com
(2) Then you can create an account either by choosing Normal Account or by External Wallet Account.
In Normal Account, you are required to put your password and this is basically a password where as in External Wallet Account, you don't need any password and you can connect to your Metamask or imToken. However if the user is new and not so used to with crypto, then it is better to go with Normal Account where a password is required. In Normal Account, you are required to choose your Username, Email ID, Password etc and then you can click on Generate Keys & Sign up.
(3) I have chosen Metamask as I have been using this with so many other dApps. Here also I need to choose my Username, then I have put my Email ID and then I have to pick an External Wallet from the list showing in this page. Once I pick External Wallet account(I have selected Metamask) after filling all other details, it will redirect me to my Metamask where I need to click on Connect. After clicking connect, it asks me to Sign. I simply clicked on Sign and then it shows my ETH address in the account creation page of LocalEtherum. Then I clicked on Generate Keys & Sign up.
(4) Then it will once again redirect me to Metamask where I have to Sign again which is required to register my username in LocalEtherum account.
(5) The the Declaration and Service terms have to be ticked and then proceed with Continue.
(6) Check your Email inbox, where you can see an email from LocalEtherum saying to confirm your email address. After confirming it will straightaway take you to the dashboard of LocalEtehrum.
(7) In the Dashboard, you can see under "Browse"- Payment method, Location to choose and then you can select either to Buy ETH or to Sell ETH or both. The list will be sorted out accordingly and will be displayed in the page. There are so many payment methods like Cash Deposit, Bank Transfer, Paypal, Skrill, Payeer, Internation Wire, Moneygram and so many other options. Similarly as it available for all people across the globe, you can see the full list of all the countries. There is no doubt that one will be comfortable to choose an offer from his own country. However one cal also internationally make the deal.
(8) I have selected Buy ETH, chosen Payment method as Bank Transfer & Location as my country. Here you can see so many available offers. Here some of the offers require the counterpart to verify their mobile. It is because of the fact that the seller or the buyer in his offer has set that preference to make the deal. So mobile verification is not required for all the offer and it is required as per the preference set by the respective seller or buyer. One can still be able to trade just by connecting his Metamask wallet and by verifying Email ID.
(9) I have chosen one of the offer to buy ETH and after that it is required to put the amount and then click on Open Trade.
(10) Then comes the next page, where you can text your counterpart and on the right side you can see three important things: Seller puts ETH in escrow, Buyer pays seller directly, Escrow released to buyer. The timeline will also be displayed when these operations will happen one after the other.
(11) You can make a conversation with the seller as displayed in this page and you can ask the seller to put the ETH amount in escrow and then the seller will normally give his bank account details or UPI, whatever is mutually agreed upon between you and your counterpart and then once he puts the escrow that will be updated in this page, after having see the amount in escrow, make a payment to your counterpart and then after making the payment you can give the screenshot or any reference and can discuss with your counterpart. After the seller confirms the receipt of the money from you, escrow will be released to buyer. This way it ensures the transparent way of doing a p2p deal.
(12) You can also cancel the trade at this time, should you wish to do so. Cancelling the trade does not put seller's fund at risk as the trade is done through the escrow.
(13) Now if I want to sell my ETH, then I can go to Trades and under that I can see Find an Offer or Create a New offer. In Find an Offer it will take me to the same page as discussed above. If I create an offer, then I can customize an offer just like other people have done that & listed their offer in that page. So I will now go with Create A new Offer.
(14) Then I have to select Sell Ether for money.
(15) Then I have to choose the location which I want to display in that page, then the Currency I have to choose(of course it will be my local currency for me). Then I will click on Next.
(16) Then comes the important part of the Sell offer and what rate I would like to set. Here it displays two options. One is Dynamic Market Price and the other one is Custom Equation.
Dynamic Market Price is relatively easy, as one can choose a price with reference to a chosen exchange such as Binance exchange or Bitfinex or any other as displayed there and along with that a certain percentage margin I have to put above or below. Normally trader put 2% above the Exchange price. But a user is at the liberty to choose higher or lower percentage.
Custom Equation is relatively complex and it could be a rate by pulling the data from multiple exchanges such as highest bid of Coinbase or Binance or Kraken exchange etc.
I am comfortable with Dynamic Market Price and hence chosen that one.
(17) Here I have taken percentage of margin as 3% and I have taken the reference market as Binance. Then I can proceed with Review Price.
(18) Before confirming the price, it will show the price considering the percentage margin chosen by the seller and it will also show LocalEtherum's fees. Then I can proceed with Confirm Price.
(19) In the next step it is now required to put the minimum trade size and maximum trade size. The seller is free to set the minimum trade amount which he wish to do and the maximum as well. After that I can click on Next.
(20) Then I am asked to choose headline where the trader can write something that will better define his service. I have chosen my own. Then I can click on Next.
(21) Then it is required to fill the terms of the trade. Here a seller can brief about the terms of his trade he is willing to do with his counterpart and that can give more clarity for his counterpart. After that I can click on Next.
(22) After that you have to choose your local timezone and standard hours. Standard hours generally mean that during that time you are available for the deal and it can also be generalized that you will respond to the messages of your counterpart during that hour which is set by you. Responding quickly to the messages leaves better impression and good for long term perspective. After that we can proceed to the next page.
(23) Then in the next page it will ask you "Who can trade with you". Here there are two option available: Anybody and Only Users with a verified phone number.
The first option which is Anybody is normally suggested as not everyone is comfortable to share their phone numbers and we are dealing in decentralized way, so flexibility and censor free approach looks good.
After selecting the one, we can proceed with Confirm details.
(24) Now the offer is listed. At any point of time you can Pause it or Edit it as per your suitability. As long as the price remains within the set percentage of margin, then it will be shown as active offer in the list.
So from the above we understood that, in order to Sell ETH in LocalEtherum, either we can can check the list of offers and can sell to the most competitive rate out of the list displayed in that page or we can customize our own offer and set out rate as discussed in detailed steps above.
Now suppose I want to sell my ETH and if go by the displayed list of available offers and click on the one which offers good rate, then it will take me to the page where I can text with my counterpart and the conversation with my counterpart is end to end encrypted, so no one can see except me and my counterpart and that is the beauty of LocalEtherum. Further after having a conversation with the counterpart, I can fund the escrow and send the payment details over there and then the counterpart will make the payment. Once I confirm the receipt of payment, the escrow will be released to the buyer.
After clicking on Fund Escrow it will redirect me to the Metamask Wallet where I need to transfer ETH to Escrow and it will be done automatically by clicking on Fund Escrow as my Metamask wallet is integrated with LocalEtherum.
You can also notice a timeline When the trade was initiated, When the Escrow was funded, When it was finally released. If both the peers are prompt and proactive then a trade deal can be completed just within 3 to 5 mins.
After completion of the deal, each party can leave a feedback of their trading experience which will help either party in the long run. The best part is that one does not have to write a long trail of review. The ready-made button like Good, Neutral or Bad will be sufficient to mark your trading experience.
This escrow makes the thing happen in a decentralized way, in a trust-less way where there is no custodian while dealing with a trade. The logic is quite simple & straightforward. If the buyer sends the payment, the escrow will be released to the buyer and if not(in case the buyer cancels it or does not send the payment) then after locking period it will come back to the seller again. One is at the liberty to cancel the order at any point of time. Proper dealing also earn good reputation in this platform which has passive benefits in the long run.
Main components & features of LocalEtherum
LocalEtherum offers a web-based platform which works with all modern web browsers and it does not require any plugins or software device to use it. So basically it strives to offer a marketplace for users to trade their crypto asset(ETH) with fiat currencies in a peer to peer mode and this fiat currencies have so many multiple options. So any one across the world can definitely find an option out of the so many available.
There is a 0.25% fees on the maker side and 0.75% fees on taker side. Market maker is the one who creates an offer and Market taker is the who respond to the offer.
There is an end-to-end message encryption between you and your counterpart and in no way the messages exchanged between two parties are stored in the LocalEtherum Server. Further after seven days time those messages are destroyed forever. In case of dispute only when the arbitrator from LocalEtherum joins to solve the matter, then only he can read the messages and that to after giving the keys to decrypt the messages. In this way it, enhances the privacy of the individual and the two parties make the deal in a most secured way.
Therefore the security of the LocalEtherum platform is protected by end-to-end message encryption, messaging forward secrecy, financial forward secrecy, signature system etc.
There is no centralized server to store any of your data or any of your fund, so making it decentralized and the user is the only owner of his fund.
Escrow Smart Contract
Escrow Smart Contract is the main buying in LocalEtherum and it is the Escrow Smart contract which makes it a decentralized platform. It makes this system trustless and it only follows the logic of the deal between two parties and as per the logic only the locked fund is released to either of them.
The buyer and seller first agree to the terms of trade, then the seller locks his fund in the escrow smart contract and after the buyer send the payment outside LocalEtherum and confirms the same to the seller, the escrow fund is then released to the buyer. In case of a dispute, an arbitrator joins and decrypt those messages and verify the things and then the locked escrow is released to the rightful peer.
Pros of LocalEtherum
It has a very user-friendly interface and a non-crypto user can also find it easy.
One can even get started without a password using Metamaks wallet(those who are used to crypto should use this option) and the user only need to sign in the message from the Metamask wallet during registration. This makes the thing easy for users who deal with so many dapps in daily life.
The end-to-end message encryption is a boost to data privacy and users will definitely ride on this security feature to make a deal in this platform.
Escrow Smart Contract makes this platform decentralized and either party(buyer or seller) does not feel a risk of their asset. The escrow simply follow the logic of the trade terms and buyers and seller can make a deal in a decentralized peer to peer mode.
There is no third party and only in case of a dispute, an arbitrator joins and verify the messages (by decrypting the messages through keys which is volunteered) and then release the locked fund to the rightful peer.
It saves a lot of time and most the tradings are happening in a super-fast way.
Any user is free to trade on its own term, so it is fully democratic.
It helps to make people earn a living through LocalEtherum platform.
There is no legal obligation, no identity verification required in this platform, not even password is required if you have Metamask wallet.
It can help for mass adoption of cryptocurrency.
Cons of LocalEtherum
I think the fee is really on a higher side which is 1%(0.75%+0.25%). Considering we have so many available options(when we talk about it in 2019) to deal with exchange of our crypto asset like ETH for fiat money, a reasonable platform fee will look good. So in my opinion LocalEtherum must review the fees once again. The platform is really great but higher fees it a turn down for the effectiveness of a platform.
The cancelled trade does affect the reputation of a seller. It must also be understood that what the reasons behind the cancelled trade are and if the reasons are valid, then reputation should not be affected as that is a long term aspect for a seller to establish himself in exchange business. So LocalEtherum must also re-address those things.
Cash (in person) deal may not be an ideal one for all and it may even lead to cases like robbery and for an arbitrator it is also difficult to handle and solve a dispute like that.
Comparison of LocalEtherum with other Centralized exchanges
I am giving a rating of 4.5 star rating out of 5 star, considering all the features of LocalEtherum.
There are so many types of exchanges available to deal with ETH as on date, but being able to make an exchange in a decentralized way and as per own trade terms, is something can happen only LocalETherum. In fiat currency exchange, there are many types of centralized currency apart from bank transfer such as Paypal, Skrill, Payeer etc. So it can also cover a market to deal with such currencies and that also allows international transaction to happen with other form of fiat currencies such as Skrill, Paypal, Payeer, Moneygram & so many others. Local people in my opinion can make the most benefit out of it, as they can also make a face to face cash deal offer. So LocalEtherum has no doubt got all the attributes of a decentralized exchange platform and it has the potential to become a global leader in decentralized exchange where a user can make deal of his crypto asset like ETH with other fiat currencies at his own terms in a most secured way.
LocalEtherum & Stateofthedapps