LocalCoinSwap AMA June 2019

. 9 min read

Our apologies for the delay in publishing the AMA this month. We originally had some technical issues and then due to the low number of questions we decided to publish this month's AMA as a blog post so that there was no further delay. We hope that if you do have any questions in the future, you take advantage of the AMA to ask the team any questions that you may have.

Both Nathan (CTO) and Taylor (Blockchain Developer) will be available for a LIVE Telegram AMA in the coming weeks to discuss LocalCoinSwap from a technical point of view. If you do have any questions that you would like to ask, please do come and join us in the AMA. Thank you for your support.

Q: The weekly volume on LocalBitcoins has more or less averaged over $50m for the last two years, with just Bitcoin. People are clearly using services such as this and yet LocalCoinSwap is still a new platform despite offering more superior service. I would like to know exactly how the team aims to muscle in on this LocalBitcoins weekly volume?

We are working on a comprehensive project plan which extends across product development, marketing, sales and operations. Our plans extend into many different regions and across various languages and contain numerous activities that cover the entire marketing funnel in order to ensure that we are targeting different users at different levels of their customer journey.

In regards to the marketplace itself, our primary objective is to increase trading volume through brand recognition, engagement and retention activities. We also have a number of very important features that will be launching in the coming months which we are very excited about.

With all that said, it is important to note that LocalBitcoins has been providing access to buy/sell cryptocurrency for many years now and we have much respect for their business and strategies. They have very strong brand recognition and trust amongst their audience and many of the largest competitors have found it hard to “muscle in” on their weekly volume. Our mission at LocalCoinSwap is to continue to create the best platform for buying and selling bitcoin and all cryptocurrencies so that we can be competitive on a global scale. It is also important to note that we also have very different business challenges to LocalBitcoins (and other P2P competitors), specifically related to managing LCS token holder expectations and community involvement which we are continuing to improve upon.

The good news is that with an ongoing increase in signups, logins, traffic to the site and brand awareness within the cryptocurrency community, we feel that we are absolutely progressing in the right direction.

Q: Can LCS in the interim (1year??) also operate as a "supply chain" (meaning get stocks and buy/sell)? I.e. LCS will go through BUY and SELL ads that are 5 days or older, and transact with buyers to close the ads within a reasonable price to market spreads. And vice versa on the selling ads. The purpose is to close ads with reasonably near market price creating liquidity and encourage users to platform. I see this is as a short term to facilitate successful transactions so that new users brought onto platform won't get disappointed and leave after multiple failed attempts. Personally, I have ads buying at or slightly above market prices sitting for months and just no sellers. We need sellers to fill the gap, can LCS support that and whether this is a viable solution?

It is important to note that it is not possible to do this on a peer-to-peer marketplace. Buy and sell advertisements don’t ‘close’, and having the company/project transacting with advertisements at poor prices themselves, will only result in a significant loss of money.

Q: When can we expect the integration of Lightning Network for Bitcoin? If it is integrated, will we see Lightning Network Bitcoin as a new coin to be traded? How will that work? I don't think it will be possible to trade on-chain BTC and Lightning BTC through the same ticker on the platform, right? And is it possible to withdraw from a Lightning wallet directly to an on-chain BTC wallet? If the on-chain and Lightning versions of BTC would have to be completely separated from each other, I don't think it will catch the attention of P2P traders. So my question is: what can you do to accept 0-conf BTC deposits? That's the best way to go about it in my opinion. Don't expect P2P traders to bother dealing with Lightning. I already gave you a suggestion on how to accept 0-conf deposits, but I heard no response from you, so I thought I'd ask the same thing in this AMA. I think it is totally possible for the platform to lock up 750 TUSD from my wallet in order to accept the 0-conf deposit of 500 TUSD worth of BTC. So I will be able to use my 0-conf BTC deposit to fund escrow as soon as it hits the blockchain. And this vastly improves the user experience! When the Bitcoin deposit eventually receives 3 confirmations, then my 750 TUSD can be unlocked once again, so that I can use it to speed up the next BTC deposit. Please implement something like this as this is very much needed! I've had to let down so many trades because it was too slow for me to send BTC.

The lightning network is something we want to integrate in the future. Also, you are absolutely correct that LBTC and BTC cannot be traded under the same ticker. Luckily there are some workarounds though, for example we could treat all BTC on the platform the same but allow deposits and withdrawals using both LBTC and BTC.

However, on your last point - now that we have added the freestyle trading feature (starting trading without pre-funding escrow) you can get into trades faster without having your ability to accept/reject a trade affected.

The following questions were taken from the Telegram channel to provide further Q&A on this month's AMA and assist with some feedback on community questions...

Q: Why don’t you send out all of the underlying tokens to investors rather than sending the dividend tokens that need to be redeemed?

This was considered in the beginning and we had a few ideas to achieve this. However, having the dividends represented with a token allows secondary trading of that token, giving people the ability to trade the token out for say one cryptocurrency. Having multiple currencies traded that are not on the Ethereum blockchain also is a roadblock to this, as we have no way of knowing LCS holders other wallet addresses (for example where to send investor’s Bitcoin). Having the dividends represented with a token redeemed on the platform allows for easy redemption with no confusion as to where to send investor funds.

Q: Why do we have a community venture fund? We already sacrifice up to 40% of dividends to the referral program.

The community venture fund was created to provide the community with an avenue to directly make decisions regarding company funds (in the form of the profit from the community venture fund) for purposes of developing the company. Once the community venture fund has accumulated a reasonable amount of profit the community can vote on how to use it and which direction to take community handled assets. The options for the referral program were clearly stated at the time of the community vote and the outcome of the vote was the result of a democratic process.

Q: If now the funds are not locked in escrow how can I make sure the guy isn't a fraud before I transfer money?

Funds are always locked in escrow at the stage of the trade where the payment is made (fiat currency transferred from buyer to seller). The new feature only allows trades to be initiated and accepted without the funds in escrow. For the trade to be continued, the escrow must be funded.

The main benefit of this feature is that it allows users to post trade advertisements for larger amounts of cryptocurrency that they want to keep on the platform. If someone has the ability to sell 100,000 USD of BTC, they can now advertise this with their BTC  kept elsewhere. This also makes it easier for traders to come from other P2P platforms and try out LocalCoinSwap without having to deposit money until a trade is actually initiated!.

Q: When is the vote on the expiration of dividends? We were told there was going to be one and then second divs got pushed through without the vote.

On a project ethos level, we would much prefer a system whereas the dividends do not ever expire. This was actually the original plan for the project. However, when we further explored the different processes, aspects, and issues surrounding this, it quickly became apparent that this was not a practical solution.

There are a few reasons for this. The first and most important one being the number of wallets that people lose access to. It is not uncommon in the crypto world for someone to lose the private key to their wallet. And as we all know, funds in wallets that no one holds the private key to can never be accessed. If we look at BTC alone, studies have suggested that there are around 4 million Bitcoins that are lost. This accounts for over 30-50% of the current circulating supply (at the time the study was written). Reference: http://fortune.com/2017/11/25/lost-bitcoins/

If the same proportion of LCS tokens are lost for the same (or any other) reason, there would be 30-50% of LocalCoinSwap’s profits required to be held on the platform, that could never be distributed. It is impossible to tell using traditional blockchain analysis which addresses are actually lost, and it is also not possible to tell who actually owns any address so we can not follow up on anyone individually.

There are several other issues to this too:

  • The messiness of redemptions - This would be confusing to users having lots of different dividend tokens at once.
  • The messiness of the wallet page - in 10 years, there would have to be an additional 40 currencies in the wallet pages alone.
  • The ever-increasing amount of currencies we have to support - server costs, chain watchers we have to have live etc.
  • The risks associated with us having to hold an ever increasing amount of crypto that is not generating revenue (i.e. not being traded) but still needs to be accessible to users who may redeem at any time.

We realize that there are users that want to be able to “set and forget” their LCS and still receive their dividends. For this reason, we have set up a system whereas users that hold their LCS on the platform (and thus dividends are distributed to the platform), will have their dividends automatically redeem on the dividend expiry date. This ensures that people who do not want to have to have to send their dividends for redemption each quarter can still have a way to not miss out on any profit. And people that want to store their LCS off the platform, may still do so and receive their profits as they have around 3 months to manually redeem.

Q: Can you make showing market rates on the ads the next big priority to be worked on? It’s not easy to find good ads right now. I can’t calculate the rate of every ad against CoinMarketCap! I just end up wasting a lot of my time. Advance trading?

That is a feature that we think has good utility and we may potentially implement in the future. However, this needs to be considered in the grander scheme of all requirements for the business. Bugs and existing features that are currently under development still need to take priority and our list of development tasks is a dynamic document. In the meantime, users can still easily compare posted trades in terms of USD price. To do this, select a specific cryptocurrency and sort by price (low to high). Regardless of the fiat currency that the ads are paired with, they will be ordered in relation to their USD value.

Q: When you advertise a trade and you have to set location, why can't you set worldwide or any? Some methods are independent on location, and for me, it doesn't make sense to set a specific location especially when you want to place ads in multiple locations as it means that you need to do hundreds of advertisements.

When creating advertisements, users are forced to input a location because the location is referencing where the trader is selling from. This may be their physical location or the location of their bank etc.

This doesn’t really present an issue as users who are looking through trade advertisements can search for trades "worldwide". This is a common way to search when using international payment methods like SWIFT, Skrill, Paypal, Transferwise etc. So even if your ad is posted in a specific location, if it has a location independant payment method, it will easily be found by people from all locations as they will search “worldwide”.

It is also important to have an advertisement location as some banks are restricted from sending to or from specific countries. So for bank transfer trades, it saves time and minimizes disputes for everyone to know the general location of advertisements.

Q: Why can't I fit the token name in the new version of MEW and are you going to change it in future to comply with the naming size restrictions?

Different wallet software providers have different ways of handling how ERC20 token symbols are displayed. There is no limitation on how long ERC20 token symbols can be. In the case of MEW the LCSD2019Q2 symbol is too long for their user interface. In the future, we do plan to shorten the length of symbols to fit within the user interface for MEW. However, for the current dividend period, LCSD2019Q2 holders can still use vintage MEW which does not have this issue.

Here is a list of Ask Me Anything (AMA) events to read in your spare time:

Thank you to everyone for submitting their AMA questions this month. We look forward to the next Live Telegram AMA at the end of July.