The premium associated with your peer-to-peer order is the price difference that exists over or under the going rate for bitcoin-fiat found on your typical centralized exchanges.
When browsing the order book, the bitcoin exchange price of live orders are automatically adjusted to include the order’s corresponding premium.
At the bottom of the exchange interface is the price premium of the marketplace over the last 24 hours, generally around +5%, and is to be expected in a private, peer-to-peer environment.
Choose a competitive premium and incentivize fellow robots to provide liquidity to the marketplace with their anonymous bitcoin and fiat!
Choosing a Premium
Create an order, then input the “Premium over Market (%)” which can be a positive, negative, or zero percentage value. By default, the order premium is priced relative to the bitcoin-fiat market rate.
Or, instead of the default setting, makers can select the explicit pricing method (see footnote) by choosing an exact amount of Sats to exchange for the fiat amount given.
When selecting a premium, consider the payment method(s) and amount you have chosen; these, along with your desired premium, will compete with other live orders to incentivize and entice robot takers. Experiment with different premiums to find what works best for your specific orders.
If buying bitcoin, then a higher premium increases the chances an order is fulfilled by a seller; or, if selling bitcoin, then a higher premium decreases the chances of the order being taken by a buyer. As an order maker, you are shown how your order premium ranks (compares) across similar live orders of the same currency.
- Positive premium: trade BTC at an overprice with respect to the average price in centralized exchanges.
- Negative premium: trade BTC at a discount with respect to the average price in centralized exchanges.
- Zero premium: trade BTC at no price difference with respect to the average price in centralized exchanges.
- Relative pricing method: let the price premium move with the bitcoin-fiat market rate.
- Explicit pricing method: set a price premium using a fixed amount of Sats.
- Premium Rank: indicates how your order premium ranks among all public orders with the same currency, ranging from 0% (smallest premium) to 100% (largest premium).
When making the order, you will see a text summary describing your order below the “Create Order” button. For example, buying bitcoin for $100 at a +5.00% premium relative to the market rate would read: “Buy BTC for 100 USD at a 5% premium”
If a mistake is made when selecting a premium, or the order is not taken within your time preference, then the order can be easily cancelled to make a new one.
Note that the percent value is limited to within two decimal places. Furthermore, format the decimal values using “.” (point) and not “,” (comma) as the decimal separator.
So… what should you choose for a premium? Generally speaking, most robots want their order taken fast. A simple approach when deciding a competitive premium is to first take a peek at the existing order book. Review the existing offers and notice the premiums that are associated with your desired currency and payment method. Make your order more desirable than others by choosing a premium that is slightly higher (buyer) or lower (seller) than any existing order premium associated with your desired currency and payment method.
For example, you (buyer) find that the highest premium across existing orders associated with your desired currency and payment method is at 5% premium. Create an order with the exact same conditions but a slightly higher premium than your competitor. Now, sellers browsing the order book will compare orders and notice that your order gives them more fiat for their precious Sats and will be more tempted to take your order!
But your competing order makers might notice their existing order no longer has the highest premium on the order book and thus cancel their order to create a new one for some premium higher than yours… Watch out for a premium war!
Footnote: the explicit pricing method has been removed as an option for technical reasons, but could potentially come back in future updates. Currently, order pricing is only relative to the market rate.
Why Have Premiums?
Naturally, many robots want to buy bitcoin but very few want to sell; subsequently, there is high demand for exchanging bitcoin privately. Premiums are simply the byproduct of that supply and demand relationship in an anonymous, peer-to-peer marketplace.
Therefore, buyers should be realistic and adjust their premiums accordingly; indeed, sellers trading bitcoin for fiat will generally seek a premium because they are providing liquidity with their bitcoin and fiat. However, depending on market conditions, the premium can become zero or negative.
Privacy is valuable for both buyer and seller and always worth a premium, whether it be because of time, effort, or risk; as such, end-users can expect an accompanying premium with their trades.
The relative premium references the current exchange rates of public APIs, specifically blockchain.io and yadio.io prices. The median price of bitcoin in the selected currency is then calculated and displayed as the market rate your premium follows.
The 24-hour premium shown on the exchange interface is determined by the weighted median, not the mean, of successful orders in the past 24 hours. This calculation method is more resistant to outliers and more representative of peer-to-peer market consensus. In other words, the end-user should view this value as the premium they can roughly expect to pay for an order.
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