Buying and selling cryptocurrencies via P2P platforms does not feature market indications or charts, unlike the common methods in traditional exchanges.
What is Peer-to-Peer (P2P) Trading?
P2P trading is a form of crypto exchange model that allows traders to liaise with each other without going through a centralized third party to facilitate transactions.
Unlike the common Bitcoin (BTC) exchanges, which come with strict regulations and verification procedures, P2P platforms are more relaxed in their requirements. Here, you select the preferred offer and then trade directly with the counterparty as opposed to using an automated engine. Therefore, you have the freedom to select the best rate and payment method that comes with lower costs.
It is also an excellent way to help safeguard your privacy because you work directly with the recipient. This direct and more anonymous way of operation makes P2P trading more appealing to most people.
How Exactly Does P2P Work?
P2P works through platforms that help to match sellers and buyers to facilitate this transaction. The platform requires a small fee for every transaction, and traders have to store their cryptos in a central wallet.
Because P2P exchanges help to link buyers to sellers, it is not uncommon to find them being compared to platforms such as Facebook Marketplace and Craigslist. In standard marketplaces, sellers and buyers are free to check and list their own ads. However, they are centralized, and people rarely trust them because you are never sure that the buyer will follow with payment.
In P2P, the main benefit is that you can check the counterparty’s reputation before starting an engagement. Some of the common types of P2P networks include:
- File sharing P2P networks like uTorrent.
- Telephony networks.
- Streaming networks, such as YouTube.
What are the Pros and Cons of P2P Crypto Networks?
P2P come with a number of benefits and cons as well:
- Supports multiple payment methods: These methods connect sellers and buyers and allow multiple payment methods. Some support even traditional payment methods such as PayPal and digital coins like ETH and Bitcoin.
- The transactions are secure: P2P trading platforms are designed with advanced security features, such as 2-factor authentication and encryption for enhanced security. So, users have the confidence that their transactions are safe.
- Are free from restrictions: Since they lack central authority, P2P crypto trading systems cannot be shut down even by states with harsh laws on cryptos.
- Other benefits include community support, no trading commission, and flexible trade orders.
Some of the disadvantages include:
- Low liquidity compared to centralized exchanges.
- The risk of scams still lurks.
- Transaction speed can be pretty low.
To make your operations on a P2P crypto platform, it is important to be extra careful before joining. So, check for features such as user-friendly interface, robust security, reputation, fees and customer support.
With some research and due diligence, peer-to-peer crypto trading can be an awesome method of buying and selling cryptos. So, whether you want to profit from the price fluctuations in the market or simply target flexibility, this might be an excellent point to start.