You have been mining for quite a while and now would be a nice time to cash out? You've learned enough about Bitcoin to know it's the best money out there - the first to be at the same level as gold? How could you two exchange easily, with minimum hassle? Forget about the trust and feedback system. Real traders do business, not friendly chit-chat. (But you're always welcome on #bitcoin-cad on freenode.net if you want to talk.) So, how can you exchange without the need to trust the other party? First let me introduce the two systems used in the usual transaction.
In Canada many financial institutions offer a service called Interac, which has a marvellous system called Interac e-transfer. Fees are normally between 0 and 2$ per transaction (check with your bank or credit union). The payment takes place in two steps:
- E-mail the money (minus the password);
- Send the password by e-mail, IRC, PM on a forum, smoke messages...
If you are on the Bitcoin (BTC) side of the exchange, you can use an escrow service named Clearcoin. It has no fees for trades below 100 BTC. Again, the normal exchange takes place in two steps:
- Send your BTC to Clearcoin, specify a destination address and a return address.
- Once you're satisfied by the other party, release the BTC.
These two systems can be used to ensure security for both parties, without the need for trust. How does it work?
- First move: Interac e-transfer party: You should send the money via e-mail through your financial institute - but not the password! You don't want to give your hard earned money to a stranger if you make a typo, or if the BTC party is unreliable. This will show you indeed have the money and that the destination is correct.
- Second move: BTC party: Once the Interac e-transfer amount is verified, send the BTC to Clearcoin, with the destination address and the return address. Now, the return address should not be your address. You should send it to a charity. Why? If you simply send it back to yourself, you could easily cancel the transaction after you've got the money and get your BTC back after some time. If you send it to a charity, the other party knows you will never get your BTC back, which means you have every incentive to complete the transaction. If you're being trolled by the Interac e-transfer party, s/he could cancel the transaction. At least you know you didn't lose your BTC to them, but rather did a good action by giving to a charity. As you will see, the same risk applies to the Interac e-transfer party.
- Third move: Interac e-transfer party: When you see the Clearcoin with your address in it and a charity as a return address, send the password. At this point you lose all power. If you did not ask for a charity option in Clearcoin, the BTC party can say thank you, wait for the Clearcoin to expire, and simply get their BTC back. It's also possible for the BTC party to simply accept to give to a charity and keep the money. At least you know the other side needed to say good-bye to their BTC. See this as a good action - it's as if you had given to a charity.
- Fourth move: BTC party: Cash in the Interac e-transfer money and release the BTC in Clearcoin.
That's it! Minimum risk for both party and a speedy transaction. There is no point in time where a party had the opportunity to take the other side's money and keep their own.
(Please note it takes around 30 minutes for an Interac e-transfer transfer to be sent. With the Clearcoin validation and the final validation, you should have entirely completed the transaction within 60-90 minutes.)