The types of trading in crypto keep continuously changing. With this, there are changes in the methods of exchange. The traditional centralized exchanges were used for exchanging cryptocurrencies earlier.
However, the centralized process of exchange was rather quite time-consuming, which further resulted in the development of P2P cryptocurrency exchanges.
In this article, we will provide you with the complete details of the Peer-to-peer exchange or P2P exchange. Let us look into this review in detail now.
What is a P2P Exchange?
P2P or Peer-to-peer exchange is a decentralized form of exchange. It basically allows the users or the participants to trade directly with each other. The exchange is maintained on a blockchain-powered platform.
In other words, P2P exchanges allow you to directly transfer cryptocurrency from your account to the account of another person without the need for intermediaries or any third party. P2P exchange gives you a more personalized trading experience as you deal directly with other individuals
These services essentially remove the involvement of the middleman, banks, foreign exchange (forex) services, and other institutions. As it operates by allowing users to make trades between themselves. Since there are no dealers involved, users may be able to get a better rate on their exchange.
Differences Between Traditional Exchange and P2P Exchange
One of the major features of peer-to-peer exchange is the lack of a third party in its processing. P2P matches the people making the orders, instead of matching orders from the order book. This differentiates itself from the traditional exchanges
The process of P2P exchange relies on a network directed by pre-programmed software. This does not need a third party. You only need internet connectivity through your phone or computer to transfer currency to the individual’s account. This, in turn, makes the whole exchange take place almost instantly.
How Do P2P Exchanges Work?
The software In a P2P exchange platform ensures that digital assets are secure and well protected. Once the user gives access to a transaction, the system locks the assets from access by either party. The digital assets are only unlocked and sent to the buyer after the buyer sends the fiat payment to the seller.
This security eliminates the chances of sellers misleading the buyer by holding their assets after the fiat payment has been paid. The trade settlement in the platform happens instantly, even when the fiat currency transfer takes a while to process.
The P2P exchange platform uses software that connects individuals who have similar business interests. After joining the users, the software enables them to negotiate and trade without interference. During the trade, the software locks the digital assets until the fiat payment is sent to prevent fraud by any parties involved.
Benefits of P2P Exchanges
Peer to Peer exchange offers some of the excellent benefits which can be listed as follows:
1) Globalized Marketplace: P2P crypto exchanges offer a wide range of asset trading. The traders can exchange their crypto coins to fiat currencies and vice versa. You can connect with potential trading peers all over the world through P2P exchanges directly.
2) Devoid Of KYC Processes: The crypto users in P2P crypto exchanges are not prompted for KYC verification processes mandatorily. The crypto traders can directly kick-start the trading of assets without any KYC verification.
3) Enhanced Security & Privacy: P2P crypto exchanges render escrow service built on secured smart contract protocols. The arbitrators come into place when there are disputes in the trade operations performed in P2P trade platforms.
4) No Withdrawal or Transaction Fees: Unlike centralized crypto exchanges, P2P crypto exchanges do not incur charges for the withdrawal of fiat money or crypto assets. Also, the P2P crypto exchanges do not have any limitations on deposits or trading crypto coins.
5) Desired Payment Options: P2P exchange platforms offer a wide range of payment options like Paypal, Paytm, bank transfers, credit and debit cards, and much more. Depending on the service provider, the payment options vary. Every P2P exchange has its own set of payment gateways with a lot of options.
Notable P2P exchanges
There are some of the major and notable P2P exchanges which can be described as follows:
1) SIBEX: SIBEX is the world’s first global OTC (Over the Counter) marketplace. SIBEX is a peer-to-peer decentralized exchange that is based in Switzerland. It allows users to trade their cryptocurrencies with no third party involved. In addition, SIBEX is the only completely decentralized swap platform that allows for transactions between Bitcoin and Ethereum blockchains
2) Hodl Hodl: This p2p platform reduces trading time by letting users transfer funds directly to each other. It does not require users to provide their KYC. However, they do have the option of providing it if the user wants to. The main advantage of Hodl Hodl is that it does not hold the user’s funds or ask for KYC. Hodl Hodl is also cheaper than most of the other exchanges and has its own OTC trading desk.
3) LocalBitcoins: LocalBitcoins was launched in 2012 as a trading site for local currencies with its headquarters in Helsinki, Finland. The platform is easy to use, even for beginners, and offers ample privacy. It has reasonable market rates too.
4) Paxful: Paxful was launched in 2015 with its headquarters in Wilmington, Delaware. Paxful has a dynamic team that offers 24h live support to cater to your exchange and needs. The platform has an affiliate program where a user can make 50% of all trades made by their direct affiliates and 10% more from the affiliates.
5) Bitvalve: This platform was developed to take full advantage of the decentralized system of exchange. Furthermore, in BitValve, you have several payment options as they accept a variety of payment methods. It even has a mobile app for Android and iOS platforms.
P2P exchanges Limitations
There are certain limitations associated with the P2P crypto exchanges which can be described as below:
1) P2P crypto exchanges operate on a decentralized network, the entire network needs to be updated every time any of the transactions occur. This further reduces the efficiency of the exchange platform.
2) In P2P exchanges, the community peers are able to implement the blockchain network. Properly adopting the security features is necessary, while forking the blockchain ledger, If there are any lapses, it may provide space for the hackers.
3) Crypto traders have to wait for the desired order request in the P2P exchange platforms, whereas the centralized crypto exchanges have lots of user base.
P2P exchange platforms offer excellent features that personalize your crypto trading experience. Some of the platforms also provide a live chat option for users to communicate easier during trade, while others offer room for you to input your specific trade preferences
Peer-to-peer currency exchanges support fast transfers and provide substantial savings over banks. P2P exchange companies are growing at a fast pace by offering a lower-cost alternative to individuals and small businesses.