Bisq: There is no Surveillance Discount

This is part of a series of posts on Bisq, the peer-to-peer Bitcoin trading platform. This series will serve as a primer to a Meetup presentation planned for February 2024.

The biggest misconception about using Bisq (and other no-KYC platforms) I hear is that it's "too expensive." This is likely due to looking at the "Buy" tab and seeing most offers with at least a 5% spread:

I don't blame people for coming to this conclusion. If you're used to using a large exchange, you don't usually see the spread or order book. You are presented with a market price and you can buy or sell at this price (and the trade executes very close to this quoted price). There are so many people trading that automatic order matching happens in the background and you get a simple, convenient experience. Unfortunately, exchanges are riddled violations of trust, security, and privacy. Besides having to give your identity for KYC requirements, your personal info and trading habits are likely sold to data brokers, whales and insiders trade against you with this information, you're not directly told that there is a price spread, and you might get rug-pulled and have all of your funds frozen or stolen. People continue to use these honey pots due to marketing and convenience. These are billion dollar companies that, like all big tech companies, use human factors engineering to make the most superficially pleasant experience, giving you the dopamine hit that keeps you coming back. Because they harvest your info for their own benefit, they are able to offer relatively competitive list prices. This is known in the privacy community as the "surveillance discount."

Bisq isn't a company. Like Bitcoin, it's a protocol with a community of devs and users coordinating to build incentives that deliver an experience that is principles-first. You won't get the big tech-like convenience or marketing, but you will get a sovereign experience that is open-source, verifiable, and nearly always self-custodial. The trade off, as often happens with more secure/private apps, is that there is a learning curve, the experiences may feel clunky, and fewer people are using the platform. We call this "low liquidity" (the average daily volume in 2023 was 0.919 BTC or $26,500). The plus side to this is that users are often highly motivated and dedicated to the ethos of the project. Your trading peer is probably a like-minded individual. This makes disputes much easier to get through, in my experience.

So let's re-examine the cost issue. Bisq is more like Craigslist than the stock exchange. You are seeing offers from individuals at the price and quantity they are interested in transacting. Combining this with low liquidity, you end up with a similar experience as craigslist; competitive offers are short lived and bad deals persist. So the "Buy" tab looks like everything is a rip off because those are the offers nobody wants to take! You'll get a better understanding of the market by looking at the trade history. In 2023, the average (weighed) spread was 2.5% over market, but 1/3 were at 1% or better.

Be the Change

Like every free market, supply and demand set the price. On Bisq, there are two different markets simultaneously reconciling demand with supply. The first is bitcoin price, which is determined by global trades of the asset across all exchanges and markets. The other market has to do with establishing trade terms (volume and payment method). Unlike bitcoin price, trade terms are exclusively internal to bisq. More people are interested in being takers than makers. This is probably due to having Stockholm Syndrome from dealing with larger exchanges. We've been babied by the convenience provided by platforms and have to get out of the habit of having all information provided for us in order to make a decision. Some people just aren't comfortable negotiating a price. This is evident in Bisq's incentives. Currently, the trade fees are 1.15% for takers and 0.15% for makers (a 7.6x difference!), and the taker is responsible for paying for 3 on-chain transaction while the maker only pays for one. Yet there are still a bunch of bad looking deals in the order book. If you want to be one of the lucky people to snag a better deal on Bisq, you need to "be the change you want to see in the world," by being a maker instead of a taker. In doing so you'll experience:

  1. Lower trade Fees
  2. Fewer transaction fees
  3. Greater control over terms

So What are the Costs?

The costs to transact on Bisq include the following internal and external factors:

  • Mining (Bitcoin network miners)
  • Trade (Bisq DAO)
  • Money orders (US Post Office)
  • Tracking/postage (US Post Office, applies to money order and cash by mail)

At today's prices and network fees, this ranges from $4 to $30 (0.5-13% of the trade) and varies depending on amount and type of fiat payment.

Bisq trade costs including fiat and postage fees

Bisq trade costs as a percentage of trade amount

The obvious trading costs on a centralized exchange generally include spread (1-2% or more) and trade fees (0-1%). The hidden fees include data harvesting and the cost to self- custody. These are less obvious, as they are incentivized to 1) make as much as they can off your data and 2) charge more than the network requires to keep you on their platform as long as possible. We don't really know how much the data havesting is valued but we can get a sense for self-custody by looking at withdrawal fees. Binance, for example, charges a flat 25,000 sat fee to withdraw. This is equivalent to 178 sats/vbyte for a standard transaction. Even with the recent transaction competition, this is more than double what you'd need to pay to get a transaction confirmed within a few hours. It's also >10% of a $100 trade at current prices.

Some of these values change by volume and some don't. Generally speaking, the larger the trade, the lower your relative costs. Assuming a 1% spread and 2% of trading costs, you're paying 3% in total on Bisq. For a centralized exchange, let's conservatively estimate 1.5% in total costs (incuding withdrawing to self-custody). This gives the centralized honey pots an advantage of 1.5% on a trade of $500. I'd argue this is the value the exchange gets from harvesting and selling your data and passes to you as the surveillance discount. Is your privacy, security, and sovereignty worth $7.50?


Be a market maker. Bisq isn't expensive, there's just no surveillance discount.

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