In the world of Bitcoin, the fastest way to get the electronic currency is still face to face. But such meetings can bring serious risks of their own. My own experience went very well, and I was able to learn about some potential red flags when doing in-person Bitcoin transactions.
When I went out to buy Bitcoin in person, I asked my husband to come along for safety. A savvy source urged me to bring pepper spray, too. Others encouraged me not to go at all.
But sitting face to face with Richard Weston, I felt silly about all my precautions. A middle-aged man with a good haircut, a wedding band and a nice watch, his picture could have been next to “trustworthy” in the dictionary. We met outside a trendy restaurant in downtown DC like we were preparing to transact the world’s most yuppie drug deal.
There are several other ways to obtain Bitcoin, such trading for it over the Internet through an exchange. But right now, face-to-face Bitcoin transactions are the fastest way to obtain the currency. There’s no two-week waiting period for your bank account to connect and verify, as there are with Bitcoin exchanges like Coinbase or Mt. Gox.
I found Weston on LocalBitcoins, a Finnish company that connects Bitcoin buyers and sellers around the globe. With buyers in 190 countries and 3,317 cities, it's the widest reaching peer-to-peer Bitcoin exchange. There are 100+ active sellers in Washington, DC alone. Richard had a "reputation score" of a perfect 100, which certainly endeared me to him.
Buying Bitcoin Face-To-Face
Since it was happy hour at the crowded bar and I wanted to do an interview, Weston suggested we move to the nearby hospital’s quiet cafeteria. (The exchange itself, which takes minutes, could have been done anywhere we could get a smartphone signal.)
“There’s plenty of security inside the hospital, and the transit police are patrolling the Metro station outside,” he said.
The secure location is as much for his own safety as for mine. Local Bitcoin transactions often involve large amounts of cash changing hands in public places, and Bitcoin robberies do occur. While I figured I had more to lose being the one with the cash, I was well-aware of the story one Reddit user wrote about being “robbed blind” by a buyer.
After we sat down in the well-lit hospital cafeteria, Weston told me he’d been conducting Bitcoin transactions in person for over two years with hundreds of people.
“I’ve sold Bitcoin to people of all ages, men and women, people of all races, including Native American,” he said.
Some of those transactions took place online, but many more in person. Weston has many regular buyers, some of whom live off the grid and depend on Bitcoin as their only form of currency. “Libertarians,” he said wryly.
See also: What's Bitcoin Worth In The Real World?
For my transaction, Weston took out an almost exhausted miniature legal pad, and carefully pens in my first name, the amount of the transaction in dollars ($20), and in Bitcoin (0.11912563).
He obtains the up-to-the-second price of Bitcoin on bitcoin.clarkmoody.com, a tracker that uses data from Mt. Gox. While there’s controversy around this particular Bitcoin exchange, which has twice had assets seized by the Feds, Weston swears by it. It was the first exchange he ever used, from back when he first discovered Bitcoin through a Washington Post article in May, 2011.
“I’ve always been a fan of cryptography,” Weston said. “I saw this article and said, ‘This is the perfect use of public cryptography.’ I spent all weekend studying Bitcoin. That weekend when I tried to buy it, the price was $6. But by the time I got my money into Mt. Gox, it was $15.”
Meanwhile, our in-person transaction was concluded in minutes.
As he looks up the price, I have to be quiet so he can focus. Bitcoin transactions are irreversible. If he sends me too little, he can just send a second transfer to make it up. But if he sends me too much, he can’t just call his credit card company to reverse it. There’d be no way to fix that except for me to give him more cash.
The next step is to confirm my Bitcoin wallet address, a 34-digit gibberish username. I set up my wallet with Blockchain.info at Weston's recommendation. After he confirms mine, he logs into his own Blockchain wallet with two-step authentication on his smartphone. Finally, Weston inputs the amount of money he wants to send to from his wallet to mine.
I pass the money across the table and watch the bitcoins appear in my wallet in the same instant.
Risks And Benefits
Every week, Weston trades between $0 and $4,000 in Bitcoin. He makes a slight profit on the fee, but certainly not enough to quit his job. (Disclosure: Since I bought a very small amount of Bitcoin, Weston waived his usual fee for me.)
Most transactions go smoothly, but not all of them. Weston estimates he’s lost $1,000 due to scams. Once a client sent him counterfeit money through the mail. Another time a bank error on the customer’s part resulted in the Bitcoin buyer never paying Richard back.
But he takes it in stride. “Anybody in this exchange business has been scammed once or twice.”
However, face-to-face exchanges become riskier the more popular Bitcoin becomes. In the early days, Richard used to invite people to his house to conduct transactions. Today, people are warier, “they worry they’ll get mugged when they walk in the door.” So instead he picks neutral, high-traffic spaces like the hospital cafeteria.
And as the price as Bitcoin has risen, Weston has stopped trading the actual, physical Bitcoins. They're worth way too much now to be carrying around. Plus, setting up a Bitcoin wallet takes a minimum amount of knowledge about crypto-currency, ensuring customers have done some research on their own first. "I don't want to spoon-feed people," he said.
He also limits seedy transactions by refusing to interact with anyone he suspects of using Bitcoin for illegal activities, like buying drugs on the former black market site Silk Road.
“If somebody approaches me and says, ‘I need $300 for Silk Road,’ I tell them, ‘Sorry, go find somebody else,’” Weston said. In one instance, he couldn’t prove the buyer was going to buy drugs, but since he gave Weston a bad vibe he decided not to do business with him on that feeling alone.
If it’s not very profitable and it’s not always safe, why do it? For Weston, who is the co-organizer of the DC Bitcoin Users’ Group, the appeal is in initiating newbies into the world of Bitcoin. He’s currently seeing a spike in new users post-Silk Road, probably due to Bitcoin’s latest publicity spike. He’s certainly seen a lot of new faces at the DC Bitcoin Users’ Group.
“The membership probably has a mathematical correlation between the number of attendees and the price of Bitcoin,” he said with a laugh.
Weston deals with a lot of Bitcoin newbies, so he tends to hear the same questions over and over. How do I get Bitcoin? What do I buy with it? Where do I store them? And, from entrepreneurs, How do I use it in my business?
Either way, he’s used to interviews like mine. Not just from reporters, (he’s already spoken to Al Jazeera and NBC local, as well as a handful of DC’s omnipresent political bloggers), but from curious new users.
“Sometimes I talk longer to the customer than I’m talking to you,” Weston said after an hour. “I want them to be more comfortable and to understand Bitcoin.”
In fact, he’s grateful for the opportunity to clear up some common misconceptions.
“People don’t understand the reason Bitcoin was invented. It was not designed to be anonymous. It was not designed for Silk Road,” he said. “It allows two people to transact across a distance relatively free of fraud and censorship without a third party you may or may not trust.”
For Weston that means donating to causes he cares about, like Wikileaks, without worrying about any entity weighing in on whether he has the right to do so. To him, Bitcoin isn’t a wealth scheme, it’s a “revolutionary new nature” in the way we spend.
“Is it going to take over cash?” Weston asked me. “No. Is it going to replace gold? No. But it’s definitely going to find a niche.”
Photo via btckeychain