If you are into cryptocurrency trading, then you must have certainly heard about the term P2P or Peer to Peer because it is such a popular feature offered by cryptocurrency exchanges. If we are to be honest, cryptocurrency investing has a steep learning curve because it can be quite complicated, it is therefore important to have access to articles such as this one so that you get an indepth knowledge of cryptocurrency trading. This article seeks to explain in detail what P2P (Peer to Peer) crypto trading is.
Peer to Peer cryptocurrency exchanges allow peers to buy and sell digital currency without a third party, such as a bank, because users connect directly through a transparent process. It is important to note that you must be a verified user because P2P crypto exchanges only allow verified users to easily conduct asset trading. A Peer to Peer model allows users to transact with each other directly without using a go-between to retain funds or process transactions. To better understand the Peer to Peer trading, it is important to understand the traditional way of buying and selling cryptocurrencies.
When you buy or sell cryptocurrencies using a traditional exchange, you use charts and other market aggregators to determine the optimal time to buy, sell, or hold cryptocurrencies, what then happens is that the exchange organizes the transaction on your behalf, and the market price determines your final price at the time of transaction. Please note that when making this transaction, , you will not be directly transacting with the other trader and that is where Peer to Peer differs with the traditional way of doing transactions.
One of the major advantages of using a peer to peer exchange is that there is no single point of failure like there is for a centralized exchange, because no funds are stored on the exchange, rather the exchange acts as a place where you can find someone looking to buy or sell Bitcoin and begin the process of making a transaction with them
There is quite a number of P2P exchanges in the cryptocurrency industry at the moment and crypto traders have the luxury of choosing their preferred P2P exchange. Some of the popular P2P exchanges in the world are:
Characteristics of a good P2P Exchange?
It is true that there is quite a number of P2P exchanges in the cryptocurrency world at the moment, you must however be careful when deciding the one to trade with because these exchanges are different and you need to know how you can identify a good P2P exchange. Below are some of the things you should look at;
It is always good to find a P2P exchange that offers you with a number of payment methods such as Bank Transfers, PayPal, Gift Cards, Rewards Points, Credit or Debit Cards, or Crypto.
If you are hoping to have a buy or sell offer filled quickly on a P2P exchange you will want to check to see which ones generate the most traffic and therefore the most volume, otherwise you may be waiting a long time to make a trade.
Because of the direct person to person nature of a P2P exchange, the onus of security falls on you as the user. Yes, there are safety measures in place such as arbitrators and security deposits held in escrow, but you are responsible for looking at a buyer or seller’s profile to determine whether they are a reliable person to deal with.
A P2P exchange must have reasonable trading fees, but generally these exchanges usually have much lower fees than standard exchange fees.
What are some of the disadvantages of using P2P?
It is true that P2P’s have transformed the crypto world, but they are not without their own shortcomings, below are some of the disadvantages of P2P Exchanges;
Slower Trading Speeds
While P2P transactions, one party might delay the transaction for various reasons unlike with traditional trading whereby you don’t need to wait for the buyer or seller to confirm before you can move on from the transaction.
P2P exchanges are still relatively new and have lower liquidity than centralized exchanges.