Peer-to-peer (P2P) trading has been around for a while now, but it is only recently that this type of transaction has become popular. So what is P2P trading, and how does it work?
What is P2P trading?
P2P trading in the crypto space gives users unprecedented control over their funds and trading activities. This type of trading allows buyers and sellers to transact with one another directly, which eliminates any sort of third-party interference in the process.
P2P trades are protected by encryption technology, and several platforms have built-in mechanisms for escrow to ensure that transactions are conducted securely and without any sort of fraudulent activity
How does P2P crypto exchange works?
P2P crypto exchange is an in-demand way of trading in crypto and blockchain network. It functions as a decentralized network in which different individuals can trade digital assets directly with one another in a secure and safe environment.
Instead of the whole process taking place in a central exchange, in a P2P exchange, the transactions are initiated, verified, and fulfilled by users within the network; relieving exchanges from having to store customers’ funds or from having custody of cryptographic assets.
Pros & Cons of P2P trading
Pros
1. Multiple Payment Method
An advantage of P2P trading is that it allows for multiple payment methods to complete transactions, enabling flexibility in payments and creating more opportunities for stakeholders in the process. This method has proven highly successful in crypto trading for users.
2. Secure Transactions
This security measure is further reinforced through privacy protection in digital trade operations, allowing individuals to remain anonymous in all financial activities. By not needing to disclose personal information to participate in the digital asset marketplace.
3. Exposes you to the global marketplace
For many in the crypto community, peer-to-peer (P2P) trading offers an exciting new opportunity to benefit from the global marketplace. By engaging in P2P trades, you can potentially buy cryptocurrency, sell and trade with anyone in the world and access a greater diversity of coins than what is available in localized exchanges. With this, you are opening up numerous possibilities for higher returns and more diverse portfolio management strategies.
4. Restrictions don’t apply
A major benefit of P2P trading is that it is unrestricted in terms of nationality or geography, in other words, anyone in the world can receive or send money in cryptocurrencies without having to worry about stringent regulations in their respective country. This opens up new avenues for users in different countries, who might otherwise lack access to international trading markets due to government restrictions in their home nation.
5. Continuity & customer support
In the rapidly evolving world of cryptocurrencies, peers in P2P trading can benefit from being able to communicate quickly and ask questions in real-time in an attempt to better understand the asset they are looking to purchase or sell. This level of customer support in an often volatile market is one of the primary benefits provided by conducting these transactions in a peer-to-peer setting.
Cons
1. Low Liquidity
One of the major disadvantages of P2P trading in the crypto space is low liquidity. This means that in moments when you want to buy or sell Bitcoin in Dubai or any other digital asset, there may not be enough demand or supply in the market to execute a trade. Low liquidity in P2P trades in crypto can create long-term hurdles and complications regarding evaluating asset prices, resource allocation, and potential arbitrage opportunities.
2. The Risk of Scam
One of the prominent cons of P2P trading is the risk of scams. Unfortunately, buyers and sellers are not always on the same page when it comes to providing products or services. Some kind of fraud exists in any payment transaction but is especially concerning because it often goes undetected without adequate checks in place within peer-to-peer networks.
3. Slow Trading Speed
One downfall that must be acknowledged with peer-to-peer (P2P) trading is the slow speed of transactions. Because it relies on middlemen, such as brokers and currency exchanges, the process of making an exchange has to pass through several steps before funds are transferred. While this adds more transparency to trades, it also adds more time to the exchange process.
Key Features of the P2P Platform
1. Open Source
A key feature of the P2P platform is that it is open source. This means that anyone can view the code that makes up the platform and can make changes to it. This makes it more transparent and allows for more innovation as people can build on the work of others.
2. Peer-to-Peer
The P2P platform is also peer-to-peer, which means that users can interact directly with each other without going through a third party. This reduces costs and can make transactions faster and more efficient.
3. Cryptocurrency Support
One of the main reasons why people use the P2P platform is because it supports cryptocurrencies. Cryptocurrencies are digital assets that use cryptography to secure their transactions and control their creation and distribution. Bitcoin, the first and most well-known cryptocurrency, was created on a P2P platform.
4. Smart Contracts
Another key feature of the P2P platform is its support for smart contracts. Smart contracts are digital contracts that can be used to automate transactions or enforce agreements between parties. They are often used in conjunction with cryptocurrencies as they can help to reduce counterparty risk.
Tips to get more crypto trading on P2P Exchanges
1. Research the different P2P exchanges available and choose one that best suits your needs.
2. Make sure you understand the fees associated with each exchange and factor them into your trading strategy.
3. Pay attention to the liquidity of the markets on each exchange, as this can impact your ability to buy or sell at your desired price.
4. Stay up-to-date on news and developments in the cryptocurrency space, as this can impact prices and trading activity on P2P exchanges.
5. Use stop-loss orders to limit your downside risk, and take profits when you have them to lock in gains.
