The Bitcoin Cash (BCHABC) crowd has many anti-government fans; fiercely defensive of their privacy and suspiciously paranoid of government involvement. To cater to that crowd, Bitcoin.com has announced a new trading platform will launch soon, and it immediately appears to be rife with problems.
Named “Local Bitcoin Cash,” it offers a few selling points immediately: fast trades with other users, “fully private” with no KYC (Know Your Customer) checks, security via a blind escrow system, and support for many payment methods.
It doesn’t take much digging to discover how this type of system goes wrong, as David Jerry, the Wall Street Technologist, has. He immediately points out that the platform is not advertised as a trading platform, which would immediately place it under Financial Crimes Enforcement Network (FinCEN) guidelines.
He then looked hard at the escrow system the platform has described, and it’s not a good one. With Bitcoin.com’s system, a seller can claim to have never received payment for their offer, not provide proof, and retract their end of the deal. There’s little protection for the buyer in the scenario he covers.
What’s worse, if the platform is suddenly ordered to stop trading, possibly due to regulatory pressure, there’s no built-in mechanism to sign the escrow contract to return the value promised to either party. Considering the entire thing is operating without any KYC protection and proudly advertises that, this is a real risk.
Jerry writes:
“Compare this to the standard Escrow contract in Bitcoin, (using Multi-sign or thresholds sigs) where if the escrow company is shut down for whatever reason, the 2 parties, despite their dispute, may be able to broker a compromise and send the 10BCH to a new Escrow company who can arbitrate a mutual settlement between Alice and Bob.
“The real world is full of agreements that need to be renegotiated everyday. Bitcoin.com’s exchange does not allow for that.”
The bottom line is that it’s not a good system, and full of risks. This might play well to the crowd that uses BCHABC the most, but it’s not welcoming to those who are just getting into cryptocurrency for the first time, or are looking for a serious trading platform. The people who use it most are those looking to hide their identity from other, more reputable sites.
Better contract systems are out there, and Jerry knows which one he’d prefer. He concludes:
“In truth, the PROPER way to handle this type of peer-to-peer swapping is via an atomic on-chain swap which swaps the keys on both sides at the same time, coupled with a timed refund txn. (one of nChain’s patents). If the deal were to go bad, then the parties can always seek a licensed escrow to provide an arbitration service, for a fee.”
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