Buying cryptocurrencies without signing up and without having your identity checked? This is exactly what you can do on Bisq, which is one of the most well-known decentralized exchanges for Bitcoin trading. Let’s find out how the Bisq platform for trading works if it pays off, and if it really is anonymous. More in our review of Bisq!
Bisq review in a nutshell
Bisq, which used to be called Bitsquare, is a computer program that works as both a Bitcoin wallet and an exchange.
The Bisq exchange is peer-to-peer, which means that users trade with each other. Bisq does not get involved in the shops. Instead, he tells the people in the shop how to do the transaction.
Before a trade can begin, both the seller and the buyer must put up 15 to 40% of the trade’s value in a multi-sig bitcoin address. The deposit will be given back to the merchants, but only if the trade goes well. If the deal doesn’t go as planned, the disagreement will be settled by a neutral arbitrator.
All payments are entered by hand by trade participants, which has two major drawbacks: it takes longer to process (1 hour to several days) and it costs more (usually 4% to 6% more). Trades on centralized exchanges, on the other hand, are matched automatically, so they don’t take even a second and usually don’t cost more than 0.5%.
- Decentralized exchange and wallet
- Transparent protocol (open source)
- Dozens of payment methods
- Buy and sell BTC without registration
- Czech translation
- More complex
- Higher fees
- Merchants need BTC to pay the deposit
- Slow transactions (everything is entered manually)
Bisque – Basic Information
Bisque is a decentralized protocol operator founded in 2014 by Manfred Karrer. It supports fiat currencies such as EUR, USD, CZK, GBP, and one cryptocurrency, Bitcoin (BTC), and allows for payment methods such as bank transfer, SEPA, e-wallets, payment in person, and altcoins. Bisque also provides cryptocurrency storage and supports features such as a decentralized marketplace and decentralized wallet. Users can make purchases without registration, and the platform has a minimum order of 0.0001 BTC and trading limits (with a maximum trade of 0.25 BTC). The exchange fee ranges from 0.12% to 0.88%, and there are additional charges, although discounted fees are available.
What is Bisq?
Bisq is a computer program that can be used as both a bitcoin wallet and an exchange without a central server.
Users of the Bisq exchange can either make their own offer or choose one of the offers that are already there. The person who makes the order sets the terms of the trade, including the price. The person who makes the bitcoins also says how the buyer will pay for them, such as by bank transfer, SEPA payment, or cash in person.
Bisq shows merchants how to move forward, but it doesn’t take part in the transactions themselves. Because of this, it also doesn’t need to be registered or checked with a national ID.
If you want to trade through Bisq, you will need less BTC. Before the transaction starts, both the buyer and the seller put up these bitcoins as a security deposit. Once the trade is done successfully, the merchants get their deposit back.
Does decentralization make sense?
Major cryptocurrency exchanges make trading fast and cheap, but there is one big problem. Most exchanges go against the basic idea behind cryptocurrencies, which is that payments should be anonymous and decentralized, which means they shouldn’t involve a middleman. But cryptocurrency exchanges are centralized and keep a lot of information about their customers and the transactions they make.
Most exchanges also let you store cryptocurrencies you buy in a wallet called an exchange wallet. But users don’t have access to the private keys for these wallets, so the exchange is the real owner of the coins. So, they do not have full control over the cryptocurrencies until they send them to their own wallet.
And that’s not good.
There have been many times when user information got out or coins that were stored were stolen. Also, centralized systems can be controlled and censored, and they can freeze merchant accounts and do other things like that.
Decentralized exchanges are based on the idea behind cryptocurrencies, so they don’t collect any information and don’t do any transactions.
ANONYMOUS AS MUCH AS POSSIBLE
Bisq only needs the information it needs to complete the transaction. If you choose to pay by bank transfer, for example, you will need to give the name and number of your bank account. Without it, it really won’t work. But you don’t have to send a copy of your ID card or give your address, which is usually how centralized exchanges work.
If the bank transfer doesn’t feel like enough of a secret way to pay, you can use another method, like paying in person. In this case, all you need to do to talk to the other person in the store is enter an email address or phone number.
Bisq guides and organizes the people in the shop, but he doesn’t do anything in the shop itself. Participants in the trade enter all payment orders by hand.
Before the trade begins, both the seller and the buyer must put down a deposit that is usually between 15% and 40% of the amount being traded. This is done to stop fraud.
The deposit is sent to a multisig address with two private keys (so-called 2-of-2 address). The seller gets one key, and the buyer gets the other key. If both parties agree that the deal went well, the deposit will be returned to them.
If the transaction doesn’t go as planned or within the agreed-upon time, both the buyer and the seller can call a third-party mediator to look into the problem and, ideally, solve it. If the mediator can’t figure out how to solve the problem, it will be sent to an arbitrator.
The arbitrator will decide who is right by looking at the evidence from both sides. After a certain amount of time, the deposit from the multisig address is automatically sent to the address of the arbitrator. The arbitrator then sends the money to the wallet of the person who won the dispute.
Another security feature is that users with no reputation have strict limits on how much they can do. So, orders from new users can be no bigger than 0.01 BTC.
After the first trade goes well, the account is “signed,” which is the first step to getting a better reputation. After 30 days, the limit on a signed-up account will go up to 0.125 BTC, and after another 30 days, it will go up to 0.250 BTC.
How shops work on Bisq
There are two sides to every trade: the seller and the buyer. The person who put the offer on the market is called the macro (offer maker). Takers are traders who accept an offer that has already been made.
BUSINESS PROGRESS ON THE BISQ EXCHANGE
- The maker makes an offer and sets all the parameters, such as the size of the trade, the exchange rate, the method of payment, and the amount of the deposit.
- If one of the users accepts the offer, both users in the trade will send the deposit to the multisig address of the user who accepted the offer. The coins the seller wants to sell are also sent to the multisig address.
- It is now waiting for the blockchain to confirm that the transactions have been made. After both payments are sent to the multisig address, the buyer will see the necessary payment information, such as a bank account number.
- The buyer follows the instructions for making the payment and then clicks the button that says the payment has been sent.
- Once the seller confirms the credit, the bitcoins are moved from the multisig address to the buyer’s wallet and the deposit is returned to both parties.
So, there are 4 transactions on the blockchain for each trade, so there are also 4 mining fees:
- Transfer of deposit and BTC sold to multisig address (seller)
- The deposit was sent to a multisig address (buyer)
- Transfer of buyer’s deposit and the BTC they bought from a multisig address
- The deposit is sent from the multisig address to the seller’s address.
Fees at Bisq
When you buy or sell through Bisq, you have to pay a lot of fees. When you buy or sell, you usually pay 2% to 8% of the amount that was traded. But the final price will depend on many things:
- Loss from different exchange rates: The difference between the price to buy or sell and the current exchange rate is set by the person making the offer. For each offer, the size of the difference is shown as a percentage. Most values are between 1 and 7%.
- Trade fee: When a trade is finished, Bisq charges a fee of 1% of the trade, or 0.4% if you pay in BSQ. The fee is paid by both the buyer and the seller, but the person who made the offer pays a lot less.
- Mining fee: This fee is not charged by Bisq; it is part of the cryptocurrency network. The fee is paid to the miner as a reward for processing the transaction. It is paid not only when choosing a cryptocurrency, but also for each transaction.
Even before the order is confirmed, the difference from the current price, the trade mediation fee, and the mining fee are all shown. So you always know how much the store will cost.
INSTRUCTIONS From installation to first trade
Even though trading in Bisq isn’t hard, it does require a few steps that regular exchanges don’t. So let’s see how trading works.
INSTALLING BISQ AND BACKING UP YOUR WALLET
- Download Bisq to your computer and set it up. You can get it for Windows, Linux, or macOS. Bisq will automatically connect to the Bitcoin network after its first launch.
- You will now see the basic settings for your account. First, go to the Account tab and click on Wallet password.
- Then click on Account, then Account Seed, and write down the seed, which is a group of words, and the date. With this information, you can get to the cryptocurrencies you have stored in your Bisq wallet.
- User data should also be backed up (transaction history, account reputation, set payment methods, etc.). The information is only kept on the user’s computer and is not shared with anyone else. By going to Account > Backup > Open directory, you can find the folder where the user’s data is saved.
Now you need to choose how orders will be paid for. You can use more than one way to pay at the same time, but each one needs its own settings.
PAYMENT METHOD SETTINGS
- Click the Account tab and choose “Add new account.”
- Choose the method you want from the list of methods that are available.
- Fill in the necessary fields. For example, the account holder’s name, IBAN, and BIC are filled in for a SEPA payment. Then, all you have to do is confirm the information, and you’re done.
There are more than 20 different ways to pay, such as through SEPA, a transfer in crowns, paying in person, or using Revolut. In the table below, we list the chosen methods. You can find a full list on bisq.wiki.
TRADING BUY BTC USING SEPA PAYMENT
- Open the list of offers by clicking on the BUY BTC or SELL BTC tabs.
- Click on TAKE OFFER TO BUY BTC if you want to buy BTC from any of the offers. You will see information about the transaction, such as fees and the purchase rate.
- If you agree to the trade terms, send the BTC deposit to the address given. If you don’t have any bitcoins in your Bisq wallet, go to the tab FUNDS RECEIVE FUNDS and make a deposit.
- Once both your payment and the seller’s payment have been sent to the address given, you will be given the information you need to send the SEPA payment. Follow the instructions for making the payment, and use the button “PAYMENT STARTED” to confirm that the payment has been sent.
- Once the seller gets your payment, you’ll get the bitcoins you bought and your deposit will be returned. You can keep the coins in the Bisq wallet or take them out and put them in another wallet.
- Under the tab PORTFOLIO, you can see all of your current offers, transactions that are still going on, and the history of all transactions that have been completed.
If you don’t like any of the offers, you can put your own on the marketplace. The person who makes the offer is in a better position because he decides the exchange rate, the size of the trade, the payment method, and the size of the deposit. The person who buys the offer has to change, and they also have to pay a higher fee.
Only when the macro is linked to the Bisq app does the offer show up in the marketplace? If the macro disconnects from the Internet or closes the Bisq app, its offer will be taken off the marketplace.
Experience with Bisq
The main benefit of Bisq is that you can be anonymous. Users don’t have to sign up or go through KYC verification. They only have to give the information that is needed to complete the transaction.
But there are also bad things about being anonymous.
First, these are pretty expensive fees. Large, centralized exchanges have lower fees and more liquidity, which means that their rates are also better. When you do a transaction on Bisq, you usually pay in units of percent. On Binance, however, the costs are shown in decimals.
Another problem is that you don’t know where the coins you buy came from (which centralized exchanges detect). In short, on a decentralized exchange, you don’t know if the coins you buy are from the dark web or if they have been changed so you can’t tell where they came from. Some centralized exchanges don’t let these coins through, which can make it hard to sell them later. On the other hand, sales won’t be a problem at Bisq.
Lastly, we should remember the risk that the other trader won’t be fair, which we’ve already talked about.
And how fast is it?
How long the transaction takes will depend on the payment method chosen as well as how both merchants act. If you choose a fast way to pay and don’t wait to send the money, the transaction can happen in 30 minutes. But if you choose a standard transfer or SEPA payment, it will take between 2 and 3 business days.
What clients value:
- Transparent fees
- Dozens of payment methods
- Without registration and identity verification
What clients criticize:
- Higher fees
- Less liquid market (especially for CZK)
- Transactions are more complex and take longer
WHAT TO WATCH OUT FOR?
- The mining fee is the same no matter how big or small the order is. Since the value is set (usually in dollars), it doesn’t make much sense to place small orders.
- Since each trade requires 4 transactions in the blockchain, the mining fee will be increased by a factor of four. The person who made the offer pays one fee, and the customer pays three fees.
- When selling BTC, the risk is higher than when buying it. Once the bitcoins are sent to the buyer’s wallet, the transaction can’t be undone. On the other hand, a bank transfer lets you get the money and send it back. So, it’s best to sell BTC in small amounts and do business with people who have a good reputation.
Bisq review summary
Decentralized exchanges are a great choice if you want to trade cryptocurrencies without having to sign up and have your identity checked.
But there are other things you could do.
Some Czech exchanges, like Simplecoin and Anycoin, also let you buy bitcoin without having to sign up. You could also use Bitcoin machines. In both cases, though, the low trading limits are a bad thing, because transactions over 25,000 crowns need to be verified. Also, fees will be higher. Buying Bitcoin through an exchange costs 2-5%, while buying Bitcoin through Bitcoinmat costs 6-8%.
If you care most about keeping costs low, you’ll like centralized exchanges. As an example, we can talk about the Czech exchange Coinmate, where buying Bitcoin costs about 0.8%. The Chinese exchange Binance has even better conditions, but it doesn’t accept payments in crowns.
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