Advantages = Simple to setup and relatively easy to transact with. If you are planning on making regular purchases/transfers with Bitcoin, then this is a good option. Localbitcoins.com keep a small percentage of all users funds online as needed and store the rest offline in their own systems and processes. They basically store all the private and public keys to all bitcoin addresses on their own secure databases. 

 

Localbitcoins.com operates mainly as a link between individual Bitcoin buyers and sellers much like Ebay and has its own rating system for users. It is a very reliable system. All online trades are protected by escrow. If unsure, you can always purchase a small amount initially from a seller and then gradually increase the size of the purchases. Apart from being easy to buy, it is easy to withdraw your bitcoins using this site into some other easily accessible form of money. Most places for example offer payment-out methods such as cash deposit into your bank account, Moneygram payments, Western union payments, prepaid debit cards and bank transfers. Another useful feature of this site is that bitcoin transfers to and from different Localbitcoins usernames are low or free, enabling micro transactions for everyday use of bitcoin.

 

Disadvantages = Just like if you were to store your coins in any other online wallet service, there is always a chance that the localbitcoins.com site could go down, government intervention can occur, or something else can happen that will cause you to possibly lose your Bitcoins (think of Mt Gox). It is therefore recommended that you only store small amounts of Bitcoin using this exchange service and transfer most of it to another Bitcoin address or addresses you own that have been secured by one of the other methods.