Bitcoin and several other cryptocurrencies were created with the original idea of Peer to peer exchange, that is the direct exchange of cryptocurrencies between crypto holders. However, over time people have come to focus on centralised and decentralised crypto exchanges. Crypto exchanges are firms or organisations where individuals or firms can easily buy and sell their cryptocurrency. People also have the option to hold their cryptocurrencies for an extended period on these exchanges.
However, users may face difficulties with some crypto exchanges since their trading platforms are difficult to understand and use to buy, sell, and hodl crypto. Yet, there is an alternative that many people are unaware of and that is trading crypto via P2P.
You can also sign up on a crypto exchange like Yellow Card and have the website immediately connect you with someone willing to sell or acquire bitcoins. The Crypto exchange is then regarded as a P2P exchange or platform. Users can also post ads to buy or sell cryptocurrency at a specific price range and through a predefined platform.
To better explain the difference between trading via P2P and. directly through a crypto exchange let’s use an example of a traditional shopping platform. When shopping on Amazon or Jumia you browse through the catalogue to find a product you like and check for the best price. You pay the funds directly to Amazon or Jumia without meeting or sharing details with the actual seller of the product.
The transaction is completed, that is you get your product and the seller gets their money without direct contact between you and the seller. This is how a crypto exchange works traditionally. The crypto exchange is the trusted third party that facilitates the transaction while protecting the identity of both the buyer and the seller.
However, when shopping on eBay or Jiji the process is very much different. You browse through a catalogue of products with the sellers' details displayed on the platform. You can contact the seller to negotiate the price or simply complete the transaction over the internet wherein you pay directly to the seller’s account and the seller sends you the product directly. This is much similar to p2p. The only difference is that rather than buying some products you are purchasing cryptocurrencies.
P2P transactions can also be facilitated off a crypto exchange that is, you can meet a buyer or seller outside a crypto exchange and complete a transaction. For instance, you may meet a seller or buyer via a Facebook ad, Twitter ad, or even someone on your contact list e.g on WhatsApp. You can then proceed to negotiate a price and once finalised the transactions are completed.
Peer-to-peer transactions mean that you have detailed information about the person or entity you are interacting with such as their name, crypto wallet address, bank account details, IP address, location, and in some cases may involve face to face meetings.
When buying or selling cryptocurrencies via a crypto exchange you do not have the option to negotiate the price and often use charts or market aggregators to determine the right time to sell and buy to earn a profit. P2P makes it easier to conduct arbitrage trading, that is buying an asset at a lower price on a platform and selling at a higher price on another platform. You can also post ads of your own to encourage people to patronise you. Some P2P crypto exchanges may even provide a layer of protection such as a feedback or rating system, in which your customers can rate you either positively or negatively.
Although they are significant risks with P2P several people have taken to using P2P for several reasons such as:
Although P2P offers several benefits such as total control over the process, it also poses certain risks that may lead to an altogether loss of your crypto asset and funds.
P2P may prove confusing and risky for a person who does not have adequate information about the process. These tips will make it easier for you to protect yourself from fraud and also easily access crypto via p2p.
P2P provides an easy way to access cryptocurrencies yet if not done properly may pose significant risks that may lead to the loss of your asset. It is therefore important to do your own research and exercise caution when pursuing p2p. However, a more secure option for p2p is to trade with a trusted p2p exchange platform.
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