How to buy Bitcoin with Fiat without using a third party intermediary
This is a guide how to trade your Fiat currencies (USD, EUR, GBP) for Bitcoin (or for Ethereum) without going through a trusted third party.
While there are many ways to buy Bitcoin with fiat, there is no well documented effective method to do so without using a third party.
Buying cryptocurrency with fiat in generally done through centralized fiat gateways such as Coinbase, Kraken or Bitfinex or decentralized through the use of a trusted third party arbitrator such as in the cases of Bisq or OpenBazaar. A new method of exchange now exists that allows for the exchange of cryptocurrency with fiat without depending on a trusted third party. This method will be discussed here.
Requirements:
- MetaMask.
- Some Ether (ETH). Ether is used as collateral, more on this later.
Buy Ether with Fiat using the FiatDex Protocol
FiatDex is a smart contract protocol ran on the Ethereum blockchain that allows people to buy and sell ETH for fiat without utilizing a third party. Traders lock collateral (150% of the trade amount) into the swap, and they get that collateral back when they complete the trade.
More information on FiatDex below:
Steps of Trade using FiatDex Protocol
Let’s say I want to purchase $75 USD worth of Bitcoin without using a trusted third party.
- Acquire $112.50 USD worth of ETH for the trade collateral using traditional methods (Can’t avoid this step as I need to show the seller I have something at stake prior to trading).
- Find a seller through private channels, such as the FiatDex Telegram, who will be willing to be a counter-party for the swap and discuss methods of exchange, especially irreversible fiat ones.
- The seller opens up a swap position on FiatDex that will send $75 worth of ETH to me, along with putting in the seller’s collateral into the contract then he/she shares the trade ID with me.
- I send my collateral into the contract as well. The seller now knows I am serious about the trade and expects to receive fiat from me.
- I send the seller $75 USD via an exchange method discussed beforehand. The seller receives fiat and acknowledges receipt in the smart contract.
- The contract releases the seller’s collateral back to the seller and my collateral back to me along with $75 worth of ETH.
Trade Ether (ETH) for Bitcoin (BTC) using atomic swaps
Now that I have $75 USD worth of Ether, I want to now obtain $75 worth of Bitcoin without going through a trusted third party or arbitrator. This can be achieved using trust-less cross-chain atomic swaps which is now possible on a couple of decentralized exchanges, such as:
Both exchanges are non-custodial and decentralized, allowing me to trade without trust and without sending my ETH to a third party. I make an ask order for $75 USD worth of Bitcoin using my ETH and it is traded via an atomic swap.
I now have $75 USD worth of Bitcoin minus the blockchain fees from starting with just fiat. If I want to go back to fiat, I only need to do these steps in reverse.
I did not need to enter any personal information or sign up for any of these services to do the swaps. This is the future of cryptocurrency trading.
Happy Trading
And don’t forget to join the FiatDex Telegram to find trading partners.
