People on forums and chat groups sometimes ask how they can exchange Bitcoins (a decentralized digital electronic currency) for Euros, and vice versa. I had the occasions to do such trades during the last months, and I will relate my experience with various exchanges.

Bitcoin Central

Bitcoin Central is an exchange owned and operated by the French Paymium company, also the owners of Paytunia and InstaWallet. You can send Euros onto your Bitcoin Central account using a SEPA credit transfer, and buy Bitcoins from the order book. You can also place an order which may be filled later by a seller if you are unsatisfied with the current offerings. If you want to sell Bitcoins instead, you can send them to your account, and sell them to someone willing to buy. You can then cash out your Euros for a 0.99€ fee. There are no trading fees.

So far, this service worked flawlessly for me in both directions. However, cashing out Euros can take a few days because Paymium must manually approve the transfers and they may take up to 48 hours to do so. Also, the liquidity in the exchange is low, possibly because of the lack of an API that would allow trading bots to engage in arbitrage. The spread between buying and selling prices can sometimes be as high as 1.5€.

It is hard to say that the current web site has an attractive design. Fortunately, Paymium is working on it and a new version should be available soon.

Bitcoin-24

Bitcoin-24 is very similar to Bitcoin Central, but offers a better user interface. According to the site notice, it is owned and operated by Simon Hausdorf in Bremen (Germany). SEPA credit transfers through their Polish bank account are free in both directions, and there are no trading fees. They make money out of alternate means of depositing or withdrawing (for example through OKPAY or Mt.Gox redeem codes labelled in United States Dollars).

I have had a good experience with this site.

Bitmarket

Bitmarket is a peer-to-peer exchange where users can put their Bitcoins into an escrow and publish a sell order. If another user wants to buy the Bitcoins, he accepts the sell order, and both users receive each other contact information. The buyer also automatically receives the seller bank account information so that it can start the SEPA credit transfer without delay. Once the money has been received by the seller, he can ask the site to release the Bitcoins stored in the escrow, and the buyer can withdraw them.

This is the site where I placed most of my buy orders. All the mail exchanges with the sellers have been very courteous and efficient.

When you register, the site asks for some references to assert if you are trustworthy enough to participate. If the buyer pretends to have done the SEPA credit transfer, and the seller tells he never received it, the site would have to judge whether the Bitcoins placed in the escrow must be released to the buyer or sent back to the seller, so they are trying to limit the probability of those messy situations happening.

Instawire

Instawire is a new service by Paymium that lets you buy bitcoins using SEPA credit transfer. As soon as they receive the euros on their bank account, you can either validate the transaction immediately to get the advertised rate, or you can wait up to 24 hours in case you feel the price of a bitcoin is going down. You can also cancel your transaction during those 24 hours, in which case Instawire sends the money back to your account (I haven’t tested cancelling a transaction myself).

All in all, I was very satisfied with this service. It is fast, it is easy to use, and you get a fair market price.

#bitcoin-otc

#bitcoin-otc is the name of an IRC channel on the freenode network backed by a read-only web site. Users are authenticated using PGP, and rate each others through a web of trust system. Trades are proposed through the gribble bot, and users contact each other and agree to trade.

This system, which is both low tech (as no automatic order matching is attempted) and high tech (users must know how to use software such as GnuPG in order to trade), works remarkably well. However, many scammers attempt to take the identity of trusted users, and some victims who forget to check that their pal is properly authenticated end up sending money or Bitcoins to complete strangers who disappear immediately after.

Localbitcoins.com

Localbitcoins.com is a new free peer-to-peer exchange. They list users willing to buy or to sell Bitcoins along with the proposed price (which can be a formula based on other exchanges rates), as well as the minimum and maximum amount of Euros acceptable for one transaction. Other users will be able to list the offers sorted by geographical proximity. Once you find an offer you like, Localbitcoins.com will let you and your peer exchange information through the site. If you agree to the deal, you can then setup a meeting and exchange cash for Bitcoins.

However, Bitcoins may take some time to transfer from one address to another. To allow for quick transactions, Localbitcoins.com lets you (if you wish) put the Bitcoins into an escrow, and gives the buyer a secret verification code. At the same time, the seller receives a secret release code. When both meet and Euros change hands, the seller activates the escrow release by entering his secret release code on the web site, or send it via SMS. Right away, the Bitcoins are sent from the escrow to the buyer, and both users receive a confirmation bearing the secret verification code.

This clever way of doing things allows the buyer to check the release code even if he does not have a mobile phone or an internet connection handy: the seller will be able to show him the secret verification code previously only known by the buyer. Also, the seller instead may not to have a mobile phone or an internet connection: he can give the secret release code to the buyer so that the buyer sends it via SMS, and the buyer will receive the confirmation containing the secret verification code.

I used Localbitcoins.com once just after they set up the escrow mechanism in order to test it. I bought some Bitcoins near a subway entrance in Paris, and met a nice guy and had a pleasant conversation. The site has the potential to go viral, and to become one of the preferred way to exchange Bitcoins for cash in well populated areas. This free service is developed by Kangas Bros. Innovations, from Finland.

As you can see, there are many easy ways to exchange Bitcoins for Euros and vice versa, from completely centralized systems to peer-to-peer ones.

Edit 2012-10-15: add Instawire

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