A new peer-to-peer marketplace is set to change how Ethereum enthusiasts buy and sell Ether. LocalEthereum, a platform that adapts the LocalBitcoins model for the world’s second-largest cryptocurrency, has opened for registration — bringing smart contract-based escrow and end-to-end encryption to ETH trading ahead of its official launch on October 21, 2017.
TL;DR
- LocalEthereum launches as a peer-to-peer marketplace for buying and selling ETH with fiat currencies
- The platform uses smart contract escrow and client-side encrypted wallets for security
- All communications between buyers and sellers employ end-to-end encryption
- Operators plan to waive significant fees to bootstrap liquidity at launch
- Trading goes live October 21, following a development cycle that began in late 2016
Bridging Fiat and Ether Without Intermediaries
Converting between fiat currencies and Ether has historically been a cumbersome process, almost always requiring users to trust centralized exchanges with their funds and personal information. LocalEthereum aims to change that dynamic by creating a marketplace where buyers and sellers interact directly, using native Ethereum smart contracts to ensure neither party can cheat the other.
The platform has been in development since late 2016, reflecting the complexity of adapting the LocalBitcoins concept to Ethereum’s architecture. Unlike Bitcoin’s simpler scripting language, Ethereum’s smart contract capabilities allow LocalEthereum to build escrow mechanisms directly into the blockchain — eliminating the need for a trusted third party to hold funds during a transaction.
Security Through Client-Side Encryption
One of LocalEthereum’s most notable features is its approach to wallet security. When users deposit Ether on the platform, funds are moved to a client-side encrypted wallet that resides entirely in the user’s browser. The platform operators never have access to these funds, meaning users maintain full control of their cryptocurrency at all times.
All communication between buyers and sellers is protected by end-to-end encryption, ensuring that even the platform itself cannot read the contents of trading discussions. In the event of a dispute, both parties must voluntarily provide decrypted versions of their communications to an arbitrator — a design choice that preserves privacy under normal circumstances while still allowing for conflict resolution when necessary.
This security model stands in contrast to most centralized exchanges, where users surrender control of their private keys and accept the risk of exchange hacks or insolvencies. In a year that has already seen multiple high-profile exchange breaches, the appeal of maintaining custody of one’s own funds is considerable.
The Growing P2P Crypto Marketplace Ecosystem
LocalEthereum enters a growing ecosystem of peer-to-peer cryptocurrency marketplaces. LocalBitcoins has long served the Bitcoin community, while LocalMonero recently launched to provide similar functionality for privacy-focused XMR users. The emergence of these platforms reflects a broader trend: crypto users increasingly want trading options that don’t require surrendering control of their assets to centralized entities.
Ethereum, trading at approximately $287.44 on September 26, 2017, remains the largest smart contract platform by market capitalization, with a market cap of over $27 billion. The demand for decentralized trading solutions has grown alongside ETH’s price appreciation and expanding ecosystem of decentralized applications.
Bootstrapping Liquidity Through Fee Waivers
Perhaps the most aggressive aspect of LocalEthereum’s launch strategy is its plan to waive substantial fees in order to attract early adopters and build trading volume. The operators have committed to forgoing hundreds of thousands of dollars in potential revenue to ensure the marketplace has sufficient liquidity from day one — a common challenge for new trading platforms that often struggle with the chicken-and-egg problem of needing traders to attract traders.
Why This Matters
LocalEthereum represents an important step in the maturation of the cryptocurrency trading ecosystem. By combining peer-to-peer trading with smart contract escrow, the platform demonstrates how blockchain technology can replace traditional intermediaries without sacrificing security. As the crypto community continues to grapple with the risks of centralized exchanges — from regulatory crackdowns in China to security vulnerabilities worldwide — solutions like LocalEthereum offer a glimpse of a more decentralized future for digital asset trading.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry risk. Always conduct your own research before making investment decisions.