How can you build a decentralized future using centralized tools? However, this is what we are doing today in the case of centralized exchanges.
Unless we have completely decentralized censorship-resistance tools for money exchange, we will always be beholden to fiat currencies and governments to permit our economic transactions.
Multiple decentralized exchanges (DEX) are trying to solve these problems. In this article, we will talk about Bisq.
Also Read: A Candid Explanation of Bitcoin
What is Bisq?
- It is a cross-platform desktop application that allows anyone to buy and sell bitcoin in exchange for fiat and other cryptocurrencies.
- Bisq is a trading protocol that enables peer to peer trading exchange, eliminating the need for trusted third party exchange services.
- It is the peer-to-peer network formed by Bisq applications discovering, connecting to, and working with one another to implement the Bisq trading protocol. The network is fully peer-to-peer in that it requires no centrally-controlled servers and has no single points of failure.
Bisq is not a company. It is free software released under version 3 of the GNU Affero General Public License.
Who will use Bisq?
Bisq is built for those who:
- Want to exchange fiat currencies such as euros, dollars or yen, and other cryptocurrencies such as Monero or Ethereum for bitcoin.
- Do not trust any centralized exchange with their funds.
- Want privacy when trading with other individuals.
- Avoid financial surveillance by banks, governments, and other institutions.
How to use Bisq?
In order to use the software, you need to install it. It is available for all mainstream operating systems. Use this download page.
Once downloaded and installed, open the application. It automatically connects with the Bitcoin nodes run by Bisq contributors. However, if you are running a local Bitcoin node, Bisq application automatically finds it.
The application contains an internal Bitcoin wallet. Upon starting the app, write down your seed phrase and backup your wallet data. You are responsible for your own funds since the rest of the Bisq network has no access to them.
Adding Fiat and Cryptocurrency Account
Bisq supports the most popular fiat payment networks such as AliPay, MoneyGram, Western Union, Bank transfer, etc. In addition, it also supports multiple cryptocurrencies. So you need to create an account of the particular payment method to execute a trade of that payment type.
So, for example, if you want to buy or sell Bitcoin using MoneyGram, you need to add your MoneyGram account in Bisq. However, this information never leaves your device and only share with your trading partner.
Anyone can make an offer to buy or sell BTC. When you take someone’s offer, under the hood, your Bisq communicates it with your trading partner.
Both of you need to make a security deposit as insurance against potential fraud by either of you. That deposit is locked in 2-of-3 Multisig, which includes you, your trading partner, and an anonymous Bisq arbitrator.
This security deposit can only be unlocked if two out of three people agree. In the event of a dispute, an arbitrator investigates the trade and determines the right course of action.
Bisq is not a company or legal entity. It is free software, governed by a decentralized autonomous organization (DAO). To learn more about Bisq Dao, check out the following video.
Bisq (previously Bitsquare) started in 2014 and since then processed more than 49K trades. Decentralized exchanges are important for exchangeability between different cryptocurrencies independent from centralized exchanges.
As Decentralized exchange technology is getting better, we will see more DEX in futures, hoping to replace centralized exchange in the near future.