What is P2P in cryptocurrency?
P2P (Peer-to-Peer) in cryptocurrencies is a method where the buyers and sellers make transaction directly to each other without the interference of middleman or central authority. This model takes advantage of technology to ensure that transactions are held safely and transparently between counterparts, usually with the aid of smart contracts or escrow services to ensure the honesty of the swap.
In the context of cryptocurrency, P2P trading lets traders trade digital currencies directly, usually through methods they favor, such as bank transfers, PayPal or even in cash. P2P platforms are matchmaking sites that bring together buyers and sellers and handle the infrastructure necessary to connect buyers to sellers, without the need for human intervention, giving priority to transaction.
How does P2P work in cryptocurrency?
- User-enrollment: A user enrolls into a P2P platform and carrys out due verifications such as user KYC.
- Scrutinizing listings: Buyers and sellers place ads detailing the cryptocurrency they wish to exchange, quantity, price and payment types they will accept.
- Transaction beginnings: Once a buyer/seller selects an offer, the provider locks-in the cryptocurrency into an escrow.
- Payment and confirmation: Buyer pays seller and buyer receives confirmation of payment. The cryptocurrency is sent to the buyer when the seller confirms that the payment has been received.
- Dispute management: If any problems arise, including missed or incorrect payments, the platform offers a dispute resolution process.
Advantages of P2P
- Decentralized: No central authority regulates the Trade, consistent with the cryptocurrency philosophy.
- Access: P2P trading brings cryptocurrency access to areas with little banking infrastructure or where access to traditional exchanges is prohibited.
- Lower costs: P2P platforms generally have lower fee structures than traditional exchanges.
Disadvantages of P2P
- Risk of fraud: If proper precautions are not taken, there may be a risk of scams.
- Dispute resolution: It’s not uncommon for there to be disputes between parties and it can be difficult to sort out these disputes if the platform lacks good mediation tools.
- Low liquidity: P2P marketplaces can have relatively lower liquidity and volumes as opposed to centralised exchanges.
Top Cryptocurrency Exchanges Supporting P2P Trading
- OKX (OKX is user-focused first and foremost. They relied on maximum convenience and speed of the exchange, and OKX does this very well. In addition, OKX has its own and very convenient decentralized wallet to store tokens securely.).
P2P digital currency trading provides an easy, flexible, and diverse trading model. Although it carries risks, including fraud and difficulties resolving disputes, the advantages — such as low fees, make it a compelling choice for many cryptocurrency fans.
