Bitcoin Forum

A coworker has decided they are all in and wants to buy $5000 of bitcoins from me instead of some online exchange. I've done a few transactions, but nothing this large. The goal is to protect both of us from stupidity. If it also covers bad intent, great.

0. We agree on a commission rate for this transaction. Currently at 10%.
1. Coworker hands me $5,500 in cash and their bitcoin address. (If check or money order, uhh, escrow I guess until it clears in 3-5 days)
2. I do basic checking to make sure the cash is real and not printed in the past hour with their laser printer.
3. I buy $5,500 of bitcoins from bitinstant via dwolla to my preferred address. I lose $219.45 to bitinstant commission.
4. I then use the bitcoin client to transfer $5,000 worth of btc from my preferred address in #3 to their address.
5. We wait for blockchain.info and 1 confirmation at least independently of one another.
6. I deposit the $5,500 in cash in my bank account to reimburse the expense.

I'm $280.55 btc of bitcoins richer, coworker has $5000 in btc.

Any problems or improvements to this cash transaction protocol?

I don't know where are you from, but maybe using service like localbitcoins.com will give you an opportunity to buy coins cheaper, safer and faster? Paying 4% commission is pretty painful for such big amount...

High fees. I would suggest
Bitcoins Direct - Private off exchange sales @ 1% below MtGox with no fees.
https://bitcointalk.org/index.php?topic=87094.0

I somehow expected everyone focusing on the 4% rather than the protocol itself.  Pretend I'm paying 0%, what would you change in the process?

The coworker is willing to pay for the trust at 10% commission. They know about localbitcoins and mtgox, and a million other places. The point is they trust me. Me paying 4% is fine because I've used bitinstant in the past just fine without issues. I make 6.01% for clicking some buttons and putting my reputation on the line (as little risk as it is).

There is nothing wrong with the process but calling it a protocol is kinda silly.  You are accepting cash and sending BTC.  There is really no way to get that wrong (baring doing something stupid).  If you know the guy well the risk is even less (robbery, counterfeits, etc).

I don't think BitInstant allows $5,000 tx though.  Not particularly cool to help your friend out to a 10% rip-off but as long as your friend has a secure wallet, he gives you the cash and you reasonably believe it to be safe/legit there isn't much that can go wrong.  For that kind of coin it would be a good idea to recommend that he make a backup first and send him a bitcent or two to make sure his wallet is working prior to the deal.

If you are looking to be thorough, make sure the person has a safe backup of their wallet and that they aren't exposing themselves to loss or theft.

Yes, the max per day is $500.  [Update: max per-trx is $1,000 and max per-day is $4,000, or less if using Moneygram.]   I'm still remembering the Dwolla limit as $500 for some reason.

So you would either need to make multiple transactions (cash deposit at multiple locations, presumably) and fees would be higher then.

+1

And they let you buy $5000 worth of bitcoins.

Yes, this is a valid flaw in the plan.