The basic assumption of the cryptocurrency community is the notion of a decentralized system with no intermediary in the crypto exchange. Crypto holders often find peace in trading their virtual coins in a platform that has no intermediary or third party monitoring or executing the trade on their behalf. These platforms provide the incentive for people to buy and sell their cryptocurrencies among themselves without the intervention of any intermediary or third party.
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What Is Peer to Peer Trading?
Peer to Peer trading is the act of buying and selling cryptocurrencies directly between users, without the influence of a third party or intermediary.
Peer to Peer trading gives the advantage of being able to determine who buys the cryptocurrencies and who to buy from, the rate, and execution time. Even though Peer to Peer trading may give traders the benefit of managing who to buy from and sell to, there are some risks involved in this type of trading.
How Peer to Peer Trading Works.
Peer to Peer trading does not work like other marketing platforms where someone can just post ads of their crypto and expect to get an interested buyer. Of course, this type of trade is risky because one can fall for fraudsters.
Peer to Peer platforms is designed in a way that protects both the buyer and seller by implementing a feedback or rating system.
Imagine trading your crypto with a stranger online and you end up not getting paid by the buyer. P2P platforms like Paxful can protect both parties from fraud by safeguarding transactions through the use of escrow to secure cryptocurrencies until both parties have confirmed their satisfaction with such transactions. If any party is dissatisfied with the transaction, an appeal can be filed to the platform’s customer support department.
Advantages Of Peer to Peer Trading
- Provision for multiple payment methods
When trading on traditional exchanges, you may not get many payment options compared to P2P platforms like Paxful. It supports over 350 payment methods available, which includes the use of gift cards.
- Global marketplace
One benefit of using a p2p is that it offers you access to a global market harboring buyers and sellers of the cryptocurrency. It gives one the incentive to buy and sell cryptocurrencies with people across the world in a few seconds.
- No trading fees
Traditional cryptocurrency exchanges attract a fixed rate for every trade, Most P2P platforms allow traders to connect and perform transactions with no charges. It is important to understand that not all P2P platforms offer this benefit, so be sure to check the terms and conditions when choosing a peer-to-peer platform.
- Secured transactions using escrow
Most P2P platform has an escrow service to protect buyers and sellers. When one wants to secure a transaction with escrow, funds are held and only released when the deal is settled by both parties involved. If either party fails to meet the terms of the deal, the cryptocurrencies will be returned to your wallet.
Disadvantages Of Peer to Peer Trading
- Slower trading speeds
Even though P2P transactions can be conducted instantly the moment both parties have confirmed the transaction, one party could delay the transaction for many reasons. With traditional trading, one doesn’t need to wait for the buyer or seller to confirm to end the transaction. With P2P, the buyer or seller can change their minds at any time and decide to quit the trade.
- Low liquidity
P2P exchange platforms are still relatively new and have lower liquidity than traditional exchanges. This reason has forced massive traders who need to complete major transactions to choose over-the-counter trades or buy and sell using the standard exchange.