If you are looking to use Paxful to buy Bitcoin you have to know that there is risk involved. This trading platform isn’t like Coinbase, GDAX, Bittrex and the many other popular exchanges out there. Its a bit more on the risky side and you will see why.
But how risky is it? Is Paxful safe and worth using? Or should you avoid this exchange platform? I’ll get straight to the point here and tell you that no, you shouldn’t avoid it. Overall its a pretty safe platform if you know how to use it.
What Is Paxful?
Paxful is a P2P (peer to peer) bitcoin exchange where you can buy bitcoins directly from other individuals on the exchange and pay in a variety of different ways. In fact, there are over 300 different accepted payment methods ranging from things like giftcards, to PayPal, to Western Union and more.
The main reason that people use sites such as Paxful is because of the many accepted payment methods as well as the fact that no matter where you are in the world you are going to be able to buy bitcoin here, contrary to sites like Coinbase, GDAX, etc. that do not allow users from just anywhere.
If you don’t have to use Paxful then you probably don’t want to. It is and decreased amount of safety because of how the buying process works and how directly interact with the seller. However, there are safeguards in place to keep things running smoothly and to eliminate scams.
Protection From Scammers (for buyers)
Because you are dealing directly with another person on Paxful most people are worried that they might get scammed. However, Paxful does a great job at stopping this from happening. Some of the ways they do this include the following.
Paxful holds the seller’s bitcoin in escrow during the sale. This means that the seller coughs up the bitcoins up front but they are not released to you until the seller verifies that you have paid on the Paxful platform.
There are still some problems that can arise with this safeguard in place but it definitely helps secure the trades. As a tip: Never trade outside of the platform. If a seller asks you to do so then Paxful has no control over what happens and can not mediate the transaction.
The rating system at Paxful is something that every user needs to look at before buying. Paxful provides this system so that buyers and sellers alike can help weed out the bad apples.
When you are looking through the marketplace at bitcoin offers you will be able to see the username of the seller along with a +# in green to the right of the name. This is the rating system. The higher the + number the better; this means the more positive feedback the person has received…
Now if you click on the persons profile, which you always should do before buying, you will be able to see both the positive and negative feedback that they have received. As an example you can see below that this seller has a +5747/-0 feedback score. This is outstanding and someone that you can trust.
You will also be able to read what recent feedback the seller has received so you can see if anyone is having problems and if so what the problem might be.
So you might be wondering what happens when there is an argument between the buyer and seller. After all… Paxful will not release the bitcoins the buyer bought until the seller verifies that they have receive the payment. But what if the seller receives the payment and lies about it?
This is where Paxful mediators step in. Just like a dispute on PayPal or Ebay, Paxful support does their best to determine what the truth is. They take into account the sellers reputation and history when deciding upon a dispute.
This mediation protection isn’t perfect and there is potential for scams to happen but they seem to do a very good job with settlements overall.
Protection From Scammers (for sellers)
The rating system goes both ways. Sellers can also rate buyers. So if they have a very unpleasant and frustrating transaction they can give negative feedback to warn other sellers that they might not want to exchange with the particular buyer.
The mediation for disputes also goes both ways. There are buyers out there that are looking to scam sellers by claiming they have paid when they have not, by sending fraud payments, etc. The mediators help to eliminate this mess.
How Safe Are Your Bitcoins?
Besides providing a platform for buyers and sellers to connect, Paxful also provides everyone with a bitcoin wallet that is linked to their account. So when you buy bitcoins they will be deposited to this wallet.
Paxful holds the private keys to this wallet but does not disclose them. Since they keep them secured then when considering how safe your bitcoins are essentially what it comes down to is how safe your account is. Since you don’t use your private keys the way you have access to your bitcoin is simply through your account.
Like every account, you will have a password and as an added layer of security against hackers you will be able to enable 2-factor authentication (2FA) which I highly recommend you do.
Honestly I would suggest making a password that is at least 15 characters long and enable the 2FA. You can never be too secure when it comes to this.
The 2FA will require you to submit a 6 digit code from your phone that you registered upon signup when logging in, making trades, withdrawing, etc. This ensures that only you have access.
2FA is a standard when it comes to crypto exchanges. So its nice to see this. Your shouldn’t have to worry about your account getting hacked if you have a strong password and 2FA enabled. The Paxful platform itself has also never been hacked that I know of.
Paxful Hacks & Scams
If you Google information about Paxful hacks or scams you will find a lot. So here what I’m going to break them all down and make sense of them for you because just about everything I came across was due to user errors or mistakes.
People’s accounts that have been hacked usually are from lack of security…. as in a poor password and not having 2FA enabled.
Malware infecting your computer could also be the culprit that could potentially steal your password and give someone else access to your account. 2FA wouldn’t allow this to happen which is why its so important.
From what I see many of the scams that people run into could be easily avoided simply by avoiding sellers/buyers without good reputations.
Paxful will disable accounts that they believe are run by scammers. So scammers will often have new accounts with little to no feedback. You also want to be wary of those that just seems suspicious. I’ve read reports from people that have been scammed that claim they should have known better due to strange responses, inconsistent replies to messages, and other things that might tip you off that something isn’t right.
So Is Paxful Safe? Final Thoughts
Paxful is safe but you need to be careful when using it. You could compare it to Ebay or something like this where you are in direct contact with the seller and do business directly. Just like Ebay, Paxful facilitates the transaction and helps keep things safe but they cannot ensure complete safety.
So if you are going to be using Paxful here are some tips…
- Only deal with users that have good feedback
- Contact seller before uploading any documents or doing anything that has to do with payment. Just say “hi” or something to make sure they are there and ready to communicate.
- Do not complete any transactions off of the platform where the bitcoin cannot be held in escrow
- After completing payment be sure to click on the button to verify that you have paid
- (For Sellers) Avoid accepting payment methods like PayPal where buyers can do chargebacks
- (For Sellers) Be careful with gift cards as scammers are known to sell already redeemed cards
Questions, comments, concerns? Leave them below in the comment section and I’ll get back to you soon 🙂