Paxful is a peer to peer Bitcoin marketplace launched in 2015. The marketplace connects buyers and sellers of Bitcoin and acts as an escrow holding seller’s Bitcoin while the Buyer transfers fiat money to seller, for security.
After India’s central Bank imposed a ban on Banks and NBFCs from dealing with people or businesses involved in Crypto in 2018, Peer to Peer exchanges gained notorious popularity in the country. Multiple existing Crypto exchanges switched their business model into a peer to peer marketplace. For some it worked, for some it did not.
Paxful’s popularity is growing rapidly in the Indian community, and their weekly Bitcoin giveaways on Telegram seem to attract many new users as well. Paxful is steadily pulling $40 Million volume every week, at the same time when exchanges like localbitcoins are losing their share of Bitcoin Trade volume.
Paxful was founded in 2015. Based on their website, they have offices in New York, Estonia, Hong Kong and Philippines with HQ in the US. Paxful is also expanding a team in India so it is time for us to swoop in and do a review.
So, how good is Paxful? What differentiates it from the rest? Let us find out.
Paxful’s Peer to Peer Marketplace
Paxful’s website is pleasant and welcoming, one immediately sees a huge list of supported payment methods to Buy and spend bitcoin. Apparently, the exchange wants to use the word “Sell” less, as you can do a lot more than just Buy and Sell Bitcoin on Paxful now.
Right off the bat, you can place an order to buy Bitcoin by simply entering the amount you wish to buy. You’ll be asked to log in or sign up. A list of offers is presented, but not everything will be available for you if you’re a new user.
Mandatory ID verification if 1. Users who reach an equivalent of $1,500 in trade volume or wallet activity must provide ID for verification. 2. Users who reach $10,000 in trade volume or wallet activity must provide ID and address verification.
Simply put, sellers can place restrictions on who they want to trade with. While KYC isn’t mandatory on the platform, a seller may have a condition to only trade with buyers who have completed their KYC. Some other examples of such conditions are “buyers must have completed 3 trades”, or that buyer’s phone number be verified, etc. You can also see a “reputation score” next to the username of traders. A good reputation means the trader is trusted and genuine, voted by other traders.
Paxful claims to have over 300 Payment Methods, not all are being used by Indian users but methods like PayTM, UPI, NEFT, IMPS, are some of the most popular methods used in India. Some Indian offers also include Cash deposits to bank and Cash settlement in person, but they are more expensive than digital payment offers.
You can even buy Bitcoin using other Crypto assets on Paxful. On the website, it says Paxful will soon launch a platform to buy goods and services for Bitcoin.
Overall the Market place looks intuitive and easy to use for beginners.
Buying and Selling Bitcoin
The process to buy or sell Bitcoin on Paxful is quite simple. You can either look for existing offers or create your own offer and wait for a trader to select it. In case you want to pick an existing offer, you can do so as follows:
- Choose the amount of Bitcoin you want to buy or any other currency you want to spend.
- Choose a seller from the list and click “Buy”
- Follow instructions for payment and click “Mark as paid”
- Wait for the seller to confirm payment, Bitcoin will be released automatically.
To create your own offer, you need to verify your ID with Paxful, verification takes only a few minutes. The three step process to create an offer is also simple and intuitive.
- Select the Payment Method.
- Enter the profit margin and trade details like Min. and Max. Amount, time limit, etc
- Enter Trade instructions like Payment Method, select restrictions if any.
Overall, I prefer picking up an existing offer over creating my own, simply because I like to invest and not trade. However, regular traders can actually make good profit by setting up offers with profit margin ranging from 1% to 10%, we will discuss the Exchange rates and premiums below.
Security with Escrow
Paxful provides an escrow service for all Bitcoin transactions. Once a buyer finds a seller and the offer is accepted by the seller, their Bitcoin are automatically moved to escrow. At this point, the seller can’t cancel the trade.
The buyer has a limited time frame to send the money to the seller and mark the payment as ‘complete’. If the buyer fails to do that in the given time frame, the deal will be auto-cancelled and the Bitcoin will be returned to the seller’s wallet.
When both the buyer and the seller have verified that the transaction has been confirmed and all the terms have been met, the money will be released to the buyer’s wallet and the deal will be concluded. If at any point there will be a disagreement between the two parties, the process will move along to dispute.
Paxful moderators will then investigate all the info, consider all the available details and finally make a decision to whom the bitcoins will be awarded.
This is the standard practice across many Peer to Peer Exchanges. I would personally still recommend the user to be careful while accepting an offer. We will discuss the same a little further into the article.
Paxful only charges fee to Sellers not Buyers. The fee varies based on the payment method:
- Bank Transfers: 0.1%
- Credit/Debit Cards: 1%
- Digital Currencies: 1%
- Online Transfers: 1%
- Cash Deposits: 1%
- Gift Cards: 5% iTunes and Google Play. 2% for every other gift card.
The Withdrawal fee for BTC is 0.0005 BTC. Sending bitcoin to another Paxful customer is free of charge for the first 5 transactions sent per month. After that, a fee of $1.00 will be applied to each transaction sent to another Paxful customer.
Exchange rate Premium and Arbitrage
The Bitcoin prices on Paxful at press time are at least 5% more than the actual BTC prices. So if BTC is Rs. 500000 around the world, it will be trading at Rs. 525000 on Paxful.
The prices are not set by Paxful, they are set by traders, and smart traders use price differences across multiple exchanges to arbitrage – profit made from buying on one exchange and selling at the same time on another. Sellers also try to get 1-2% profit over the market price by selling on Paxful, while buyers try to squeeze in 1-2% gap in the price. You can see the price difference based on the “get on the dollar” value. $0.95 to a dollar means there is a difference of 5%
Overall, it is a Maker-Taker economy and it entirely depends on the trader what they wish to do. If the need to buy Bitcoin is urgent, they need to pick an offer and trade. If one can wait, they can create an offer and wait until some other trader picks it up.
Staying Safe on Paxful
Now that we have established how Paxful works, it is time to discuss how not to get scammed on the platform. Since Paxful is a marketplace and not a traditional exchange, they cannot control the flow of Fiat money which is shared directly between traders.
This opens a gap for scammers. Paxful has several checks in place to safeguard traders, but here are some tips for traders to stay safe on P2P Exchanges.
- Pick a seller who has done many traders and carry a good rating.
- DO NOT TRANSFER MONEY until the seller has accepted the request.
- If you are the seller, do not confirm “payment received” until you are absolutely sure you have received the money.
Paxful has built an easy to use Peer to Peer Bitcoin Marketplace. It is still competing hard against domestic as well as international players in India to pull the volume. The marketing campaign, weekly giveaways and a dedicated team for India is helping it grow.
Paxful offers a lot of opportunities to trade Bitcoin using a plethora of payment methods, but each method comes at its own cost. Barring the popular payment systems like UPI and IMPS, one can see very few good trade offers for methods like PayTM, PhonePe, other wallets, gift cards, etc.
A bit of it is to be blamed on the government that has set strict regulations on these systems. The platform is genuine and have existed for 4 years now. We have included Paxful in several of our articles as well.
Negative online reviews about Paxful reveal that users are getting scammed by other traders. They tend to blame the exchange, hence I insist of trading smartly whether it is Paxful or other platforms.
There are no Peer to Peer Bitcoin marketplaces in India. The local exchanges have moved to a P2P INR model or a P2P for USDT, so it actually boils down to LocalBitcoins Vs Paxful and I personally find Paxful to be more user friendly and better looking over LBC.
What do you all think of Paxful? Have you tried it? Let us know in the comments below.
Disclaimer: Paxful and Coin Crunch India share a partnership where the former places advertisement on our products such as this website. The review however is the opinion of the author and is completely unbiased and uninfluenced by Paxful.