Cancoin is building a LocalBitcoins alternative for professional OTC bitcoin traders

Cancoin is a new peer-to-peer (P2P) bitcoin exchange based in Canada, aimed at professional over-the-counter (OTC) traders. “The OTC market for Bitcoin is bigger than the exchange market,” Civic CEO and Gyft co-founder Vinny Lingham wrote in the summer of 2016. “Exchanges set the price but large trades don’t happen there.”

Cancoin was developed by two brothers, Ty and Shawn Butchart, and according to Kane, the P2P exchange will be exiting their beta this week. “Cancoin is currently trying to gain trust and exposure for our technology which we believe helps Bitcoin as a whole,” Cancoin’s Will Kane told BraveNewCoin. “The marketplace has been up and running in Canada for the last 6 weeks without a hitch.”

The exchange is designed to tap into the OTC market by effectively creating a more advanced alternative to LocalBitcoins. Founded in 2012 and based in Helsinki, Finland, LocalBitcoins has become the main online hub for P2P bitcoin trading. The site accounts for roughly $30 million worth of bitcoin trading volume per week and saw 85 percent growth in 2016. According to Bitcoin.com, this sort of P2P trading is especially popular in Russia and Venezuela.

“Many traders who are afraid to place large orders on LocalBitcoins because of their custodial wallets will find solace in the fact that we don’t control wallets and that it is possible to send bitcoin from a cold wallet into our escrow (order wallet), bypassing even a Cancoin wallet.”
— – Will Kane, Cancoin

The new exchange uses multisignature wallets to protect user funds at all times. A multi-signature address is associated with more than one signing key. The simplest type is a 1-of-2 address, where one key can be used to release funds and there are two key holders.

Cancoin uses a 2-of-2 green address implementation to create a decentralized signing process and “no single point of failure” security. The exchange controls a signing key on Ledger Hardware Security Module (HSM) secured servers, and the user controls a signing key that is privately backed up or secured. A transaction can be made only when these two keys are combined and sent, ensuring total security for the user.

Cancoin also uses a 2-of-3 multisig setup for escrow. One key is held by the buyer, one by the seller, and one by Cancoin. The buyer and seller can both sign the transaction, and Cancoin effectively acts as an escrow agent. The exchange can sign a transaction if a dispute arises.

Alongside the HSM is used to sign transactions, Cancoin is also adding Trezor and Ledger hardware wallet integration for their users. “Trezor and Ledger HSM integration will allow Users to generate their Cancoin wallet and sign bitcoin transactions using their Trezor or Ledger device instead of the in-browser generated mnemonic currently used by Cancoin,” Kane explains.

“Giving users the ability to manage their private keys by using hardware wallet inside the Cancoin P2P bitcoin marketplace is a great step towards the real P2P exchange experience between users,” adds Kamil Brejcha, who previously worked on business development at the company behind the Trezor hardware wallet, SatoshiLabs. “Hardware wallets should not be seen as competitors to online wallets but more as security and feature extensions integrated into online wallet services adding the most important factor, which is trust."

“We’ve built our whole platform so that you don’t need to trust us — we don’t hold any bitcoin or personal information ever.”

• Will Kane

In addition to security, Cancoin also has a focus on user privacy and transparency. While traditional bitcoin exchanges sometimes collect more personal information than a bank, Cancoin collects no such information from their users.

Messages between traders are also end-to-end encrypted, which means even Cancoin cannot read the messages. In a situation where there is a dispute, users are able to decrypt their messages for Cancoin’s arbitration team. Kane added that Cancoin has also open sourced their backend for transparency, allowing the Bitcoin community to build more applications on top of it.

Cancoin offers a number of additional trading features that aren’t seen on other P2P bitcoin trading platforms such as LocalBitcoins. “We are cheaper and also have ‘pro-plans’ for daily traders,” said Kane. “If you talk to a LocalBitcoins trader, they will say their fees can get into the high hundreds or even thousands per month.”

Cancoin also has a scripting environment for those who wish to engage in algorithmic trading. “We have a full programming language price equation script box which will allow a trader to do anything an algorithmic (high speed) trader does,” said Kane. “The script could be hundreds of lines long if someone really wanted to go crazy with it.”

While the private nature of P2P trades make them hard to track and analyze, LocalBitcoins is by far the most widely used P2P trading platform according to data provided by Coin Dance. Other competitors in the area of P2P bitcoin trading include Paxful, Bitsquare, and Mycelium Local Trader.

Paxful has a focus on enabling P2P bitcoin trades that are as instant and private as possible. Paxful’s weekly trading volume is around $4 million. Bitsquare is a standalone, open-source software client that enables the exchange of bitcoin for national currencies and alternative cryptocurrencies via a P2P network protocol. Bitsquare’s weekly volume is in the tens of thousands of dollars.

Local Trader is a feature of the Mycelium bitcoin wallet that allows users to see if there are any other users who wish to trade bitcoin for other currencies in the local area. Data related to how frequently this feature is used is not publicly available.