P2P EXCHANGE DIRECTLY BETWEEN INDIVIDUALS

Why p2p exchanges are becoming more popular than traditional exchanges?5 min read

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The world has moved so forward in the digital field in recent years. And cryptocurrencies are the leading subject of this revolution. The p2p or peer-to-peer exchange model was the concept that the creator of the first cryptocurrency, bitcoin had in his mind, a fully decentralized cash system that is traded digitally from all around the world without the need for a centralized authority. P2p cryptocurrency exchanges allow individuals to buy or sell digital currencies without a third party, such as a bank, because users connect directly to each other in a transparent process. The peer-to-peer bitcoin exchange network is a chain of computers, all of which must approve a cryptocurrency trade to prevent duplicating transactions. This article will explain what exactly a p2p exchange is and dive deep into its differences from traditional exchanges to see what it has got more than the traditional one that is being used more and more day by day.

Following the trend of cryptocurrencies has become popular, more people are turning away from centralized exchanges and they are joining P2P exchanges, also known as decentralized exchanges (DEX).

What are p2p crypto exchanges?

A p2p crypto exchange is a crypto platform where users can privately exchange crypto with another one without the need of an intermediary or third parties like a bank. P2p crypto exchanges allow verified users to conduct asset trading without hassle. Instead of using order books to pair the sell and buy orders and control the platform’s assets. The p2p model will enable users to transact with each other directly.

To trade on a P2P exchange, you need to create an account and be verified.

Truly the peer-to-peer cryptocurrency transactions usually do not need the involved parties to provide identification. However, not all cryptocurrency exchanges are truly peer-to-peer. Many of them are centralized exchanges following the rules of the countries they are based in it, this means that the government sometimes requires the exchanges to collect information about the users’ identity. Which is in contrast with what bitcoin was aiming for.

successful exchanges like paxful, localbitcoins, Binance P2P, and wazirX provide P2P services for their clients.

higher security with p2p exchange

Benefits of using a P2P crypto exchange

Flexible payment options

In a p2p exchange, traders can use any type of payment option that the seller accepts. This means you can buy Bitcoin with digital payments, gift cards, or even checks. When it comes to peer-to-peer payment options, no limits can be seen.

Security

the most important reason for trading without intermediaries is that each person’s privacy is protected. Because the exchanges themselves don’t hold crypto, users can make exchanges without worrying about someone stealing their money.

Lower fees

All crypto exchanges charge a fee for every deposit and withdrawal for both crypto and fiat currencies.  This fee is charged for any trade that is done by the users on these platforms. In a p2p exchange, this kind of fee is not charged for these traders. Because there isn’t an intermediary on a p2p exchange, these platforms normally charge an escrow fee.

Accessibility

you don’t need a bank account to buy crypto on p2p exchange, this will make a more accessible method for users in different locations. In fact, most of these platforms only require internet access and a smartphone to execute trades.

No third-party involvement

as we mentioned above there is no middleman when traders are transacted between two users. The transactions are secured via smart contract and ensured via escrow security.

What are the drawbacks of p2p exchanges?

Like everything in the world that has advantages and disadvantages. P2P exchanges have some advantages and disadvantages too.

Low liquidity: the p2p exchanges are new and they have lower liquidity than centralized exchanges which is not a big deal because it can be solved with the help of liquidity API.

 

Speed: because there aren’t any third-party mediators on a p2p platform, trades may take a longer time to be completed you have to make sure that you find the right seller for yourself. Also, the low liquidity problem can be found in decentralized exchanges, Low liquidity may cause another problem and it is a little delay in the trading process. If a p2p exchange fails to attract more users the liquidity will be lowered so there will be a challenge to liquidate the assets.

What makes p2p exchanges choose them over traditional crypto exchanges?

The difference between the traditional exchange and p2p is that the regular bitcoin exchange uses an order book to find pairs and match individuals for buying and selling.

In peer-to-peer transactions, none of the sellers or buyers have no clue who the other party is, this provides a high level of anonymity and privacy protection for users.

P2P marketplaces are opposite the traditional exchanges where instead of using an automated engine to complete the transactions you will manually choose or create your preferred offer and trade directly with a counterparty.

Instead of using an order book to pair the buyer and sellers, peer-to-peer exchanges match buyers and sellers without holding any funds during the trade.

Blockchain technology and the market is constantly evolving with new developments. Various cryptocurrency exchange software development companies provide services for P2P exchanges and others offer p2p development services.

There are some factors that make the p2p crypto exchange grow more than the traditional exchange:

  • Global marketplace
  • Various payment methods
  • Access to restricted markets
  • High security
  • Revenue

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