Bitcoin Forum

Hi,

I have a question.
Using places like LocalBitcoins, I see I have a particular rate that I will have to pay for BTC. Then, I sent this BTC to another country, and if the receiver also goes to LocalBitcoins and sells the BTC, he gets lower money (of course, depending on the seller).

Now, if I have Western Union, I send $200 and pay a fee of $9 (for example). The receiver in the other country receives the cash based on the foreign exchange of the currency that was locked in upon the time of sending.

What am I missing? I'm seeing everywhere that it says Bitcoin will remove fees, etc but the disparity in the selling/buying is so much that it's almost like paying fees similar to WU.

Thanks!

Right now you don't save. The infrastructure to buy and sell is still pretty creaky. If it takes off properly then perhaps that'll change.

The cost of exchanging fiat currency is generally 5% or higher, depending where you do the exchange, so let's say it's $10. Your total cost of sending $200 via WU is $19.


In the Bitcoin case, let's say you buy $200 worth of bitcoins from Coinbase. That will cost you 1% plus $.15, or $2.15. Buying through Localbitcoins is probably more expensive, but why pay more? Sending the BTC will cost less than a penny. Let's assume that the person you are sending to uses Localbitcoins to sell the BTC. It might cost him 5% or $10.00. The total is $12.15.


Lets compare: WU costs $19. Bitcoin costs $12.15.

Instead of responding to someone else's ad on local bitcoins, create your own ad.

Now you get to pay less than the current market rate for the bitcoins (since others are selling to you at your advertised price).

Your receiver can then create a listing on localbitcoins to sell the bitcoins.

He gets to receive more than market rate for the bitcoins.

If you get your bitcoins for 5% below market rate, and your receiver sells them for 5% over market rate:

$200 gets you $210 worth of bitcoins.
$210 worth of bitcoins gets your receiver $220.50

$200 out of your pocket gets your receiver $220.50.  That's a fee of -$20.50 (or a bonus of $20.50).  Try and do that with Western Union.

Great idea!

But I still have to figure out the actual way of converting cash to BTC, right?

And that's the part of the big Bitcoin plan that isn't in place yet:

Ideally you wouldn't need to convert anything as it would have been an option that your boss paid you in bitcoin, because his business get's paid in bitcoin and the receiver of the money in turn also wouldn't need to convert because most things are buyable with bitcoins. When such a state is reached then the only fee to transfering money is the fee for miners which will be minor.

Thanks so much guys, really appreciate it.
But I ran into this again and this time I got more questions.

I wanted to send CAD $500 to someone in the Philippines. Had I gone to WU, I would pay about $515 to send that to PH.
So here's what I did, I bought CAD $500 worth of BTC on LocalBitcoins and received 0.84180000 at an exchange rate of CAD 593.97.
Then I sent over all that BTC to my BlockChain wallet that I would want to send from. Here's the transaction list:

http://s9.postimg.org/5v4esog8f/Screen_Shot_2014_09_02_at_11_48_32_AM_5.png (http://postimg.org/image/xv8icyjor/full/)

In this, as you can see. Even though I paid CAD $500 for those BTC, by the time it arrived in BlockChain wallet, it shows up as $440.84. My BlockChain currency display is set to CAD. But hypothetically, if there was system issue and it was displaying in USD.. it is still around $480 when converted to CAD. So where is the $20-$60 CAD gone (those are the only transactions I showed above btw)

Now my account balance in Blockchain shows:
$ 162.51 (0.31031076 BTC)
I know the $162 is in CAD.

Am I wrong in thinking that I just kind of "lost" some dollars? or am I confusing the currency exchange?

It is confusing when you display dollars because the value is constantly changing. You bought 0.8418 BTC and sent it to your blockchain.info wallet, right? Why doesn't your blockchain.info wallet have 0.8418 BTC?

My apologies. Here's the information you requested:

I checked LocalBitcoins, and it sent 0.8417833 (after deducting their fee of 0.00003333)
I checked Blockchain, and it received 0.8417833

And your question is why does the dollar amount change? The answer is that Bitcoin is a currency that is independent of other currencies. Its value changes just like the values of other currencies change. It is more volatile, though.

Yeah and I totally understand that. However, on the 29th of August the BTC fluctuations were minute - and by no means something that can create such a high amount of disparity.

Its confusing because the fees your are talking about are outside of the bitcoin protocol. Exchanges can charge whatever they want for whatever they want.  The only fee in bitcoin is the Tx fee. It is optional, but to ensure processing it is worth a few pennies. PayPal or Western Union can't touch that price.

Imagine trying to send $1 million dollars. This simply couldn't be done with Western Union. You might have to do several bank wires, likely with intermediaries in between. Every step takes time, every bank takes a cut along the way. With bitcoin, you can send $1 million dollars for pennies, instantly, for just a basic miner's fee.

It looks to me like you chose a bitcoin seller on localbitcoins that was charging a 12% fee.  That's a rather high fee.  I wouldn't have bought from them.  I'd have looked for someone that was willing to sell cheaper.

If you aren't in a hurry, you're better off putting up your own ad on localbitcoins.  Then you get to charge the fee on someone else that is in a hurry to sell their bitcoins. As an example, you might have put up an ad to buy 500 CAD worth of bitcoins and charge a 5% fee.  This would have resulted in you receiving 520 CAD worth of bitcoins for your 500 CAD.

Eeek. 12% premium is very, very high. It's not unheard of for a reputable seller on localbitcoins.... though I see more like 4-6% regularly. +1 for DannyHamilton's comment -- best to find a better offer or better yet, put up your own ad and don't pay a vig.

bitcoin doesn't remove fees, that was said in the beginning when fees were cheaper or didnt need to have a fee. now you basically need a mandatory fee of .0001 btc or usually .00005 btc for a transaction to go through, about 5 cents or 2.5 cents is what that works out to.

if you are sending 10 bucks its still not a big deal, think of sending 100 bucks or a few thousand bucks that way, using your western union is 9 bucks, using btc is 5 cents.

also right now newegg is giving 30% off if you pay in bitcoins :)

localbitcoins take a huge chunk, so try on this forum and build some rep.

Its well worth it. And when I mean by rep, its the "trusted feedback" that counts with green + marks.

Localbitcoins doesn't necessarily take anything. If you do in-person cash deals, there is no reason to use escrow, so no 1% fee. So if you don't agree to pay a premium to a seller, you can buy at exchange rate or even buy at a discount if you are willing to wait for the right seller.

the goal is not to "sell and buy" btcs.. the project is aimed to use bitcoin like money, so if you send 1 bitcoin to your friend on another country, he will receive that bitcoin at almost cero fees and he will spend that bitcoin buying goods, not selling it for fiat.

Try using western union, money gram, paypal or any other money transfer services and you will understand why we need bitcoin to succeed. Just this morning I sent 100 dollars to a relative in the Philippines and it cost me just 5 cents.

It doesn't have to be limited to using BTC as "a currency." Ideally, BTC could be used to transfer great amounts of value -- even if that means directly cashing out to fiat on the other end.

If you're based in Canada, why don't you just buy from one of the Canadian exchanges, withdraw BTCs to Blockchain.info wallet, then send to the other party in the Philippines Blockchain.info wallet for pennies?

http://howtobuybitcoins.info/ca.html

If you buy direct from an exchange, depending on the fees, it should potentially be much lower than that premium you paid to that seller on LocalBitcoins.

Thanks again Danny!
Could you please let me know how I can figure out what his fees were and how you were able to deduce that he charged 12%? Sorry, I'm not just a BTC newb, but also a birdbrain in math.

This ad thing makes so much sense, I should have done it this time around just like you recommended the first time!

Fees only apply when trading Bitcoin for FIAT or using some service. If everyone was using Bitcoin to begin with, there would be no need to exchange it for FIAT, and therefore it could be transferred from person to person without additional fees. That's the beauty!

I didn't even know this existed!!
I went to LocalBitcoins because Canadian banks have something called "Email Money Transfer" where I can simply email the money to the "seller". If I can find an exchange in Toronto who has Email Money Transfer, I'm doing that moving forward and putting an ad on LocalBitcoins!!

Thanks soo much ChuckBuck!

You paid 500 and received 440.84 worth.

500 - 440.84 = 59.16

That means that he collected 59.16 on a 500 transaction.

59.16 / 500 = 0.11832

Multiply by 100 to get from a decimal to a percent:

0.11832 = 11.832%

Round off since localbitcoin advertisers typically set their costs to something a bit less specific than .832 and a small amount of the variation could have been due to changes in exchange rates.

11.832% rounds off to 12%

Thanks so much for the clarification Danny!
Is there someplace where the advertiser shows how much his fees are going to be? I mean how could I have known before I got into the trade?

Some advertisers will list their costs in their advertisement.  Many don't.  Especially those that have excessively high costs.


Use Google search to determine what the current exchange rate is at the time that you want to make the exchange.
https://www.google.com/?gws_rd=ssl#q=1+BTC+in+CAD

Then see what the ad says the seller is charging per bitcoin.

Subtract the two prices to figure out how much profit the seller is getting if he sells 1 BTC.

Divide the Google indicated exchange rate by the 1 BTC calculated profit to determine what percent the seller is charging.

Here's an example:

• If I look at Google (https://www.google.com/?gws_rd=ssl#q=1+BTC+in+CAD) right now, I see that the current exchange rate is 523.58 CAD per BTC
• Looking at localbitcoins, I see a user (https://localbitcoins.com/accounts/profile/bullionxpress/) with the ID bullionxpress an advertiser in Toronto (https://localbitcoins.com/ad/44174/buy-bitcoins-with-cash-toronto-on-canada) advertising 554.38 CAD / BTC right now.
• 554.38 - 523.58 = 30.80, so for each bitcoin sold, he is taking a profit of 30.80 CAD
• 30.80 / 523.58 = 0.0588, so it looks like he is getting a profit somewhere around 5.5% or 6% for the bitcoins

Wow thanks so much again Danny! Much much much appreciated.

• Is Google accurate with it though? I just checked another website called preev.com and their price is 525.6CAD and Google's is 516.00CAD
• Also, if I buy BTC from an exchange like Vaultofsatoshi.com, would I be looking at pricing similar to 525CAD or 516CAD?

Thanks again! This is invaluable to me.

There is no single exchange rate. It is different on every exchange. I use the Bitstamp rate as a reference. The sellers on LocalBitcoins  can base their rates off of any of the exchanges or even a combination of exchanges. In the end it doesn't matter. Look at the rate they are quoting and compare it to Preev or Bitstamp to get an idea of the premium.

Google uses the real-time price feed from Coinbase https://www.google.com/intl/en/googlefinance/disclaimer/, while Preev uses the 24-hour trade volume weighted average price data from multiple markets.

So, the prices shown can/should be different.

Does anyone know where blockchain.info gets their CAD prices?  Since the OP is using a blockchain.info wallet, that's the exchange rate he's most interested in.

Not all countries have good and nice banking system that allows you to send money easily and with low fee. In some countries, it might take too long, or you might pay too many taxes, at the point of it being unpracticable.

Example: Countries under economic sanctions(Iran, etc), some african countries(ex: Ghana), I guess China maybe and other countries with too much state influence over economy.

If you buy on a Canadian exchange you don't necessarily need to transfer to your own wallet. Have the receiver open an account on one of the Philippines exchanges and send directly there from the Canadian exchange. Then you convert there.

The Pilipinas is helpful: https://bitcointalk.org/index.php?topic=27736.0

And what was posted earlier http://howtobuybitcoins.info/ph.html



To me it looks like they use the price from their markets page and use an forex API; something like https://openexchangerates.org/documentation

It's what bitcoinaverage.com does for the currencies that have no exchanges.

Thanks so much guys!
I gotta say, this has to be one of the most helpful forums I have been to in forever!

I'll go with the Blockchain rates. I'm just hoping that I can buy bitcoins for less at the Vault than at LocalBitcoins. Didn't see how I got ripped off there!

To the user who mentioned exchange to exchange, I wouldn't mind it... but the receivers are a lot more clueless than I am, and I've been able to get them on board with blockchain with "frequent training calls", lol

To the user who kindly provided the Philippines thread - I'm not filipino so I can't really understand the conversation there :( But thanks so much!