From its conception, Bitcoin was commonly traded in two ways; Traditional or Centralised. These two modes of trading are simple transactions made through third-party platforms. These platforms help buyers by regulating cryptocurrency prices and making sure the transactions are clean and legal.
However, using these third-party platforms can get expensive because they take a percentage from each transaction. Bitcoin has the highest USD conversion rate today. In turn, a small percentage can mean a lot of money. Each transaction can also take a very long time to be verified, typically making buyers wait for at least a few weeks. Because of these inconveniences, Peer-to-Peer Trading was created to provide more direct trading options.
In the context of computers and technology, Peer-to-Peer (P2P) services have been around for a very long time. By definition, a Peer-to-Peer service is a decentralised platform where two parties are connected without any third-party interference or regulation.
One platform can have a wide range of services, from streaming to file sharing. A very famous file-sharing P2P platform is μTorrent, and probably where most people hear the term Peer-to-Peer for the first time. An online marketplace can also count as a P2P trading service, with Facebook’s Marketplace booming through 2020.
Decentralisation is a crucial characteristic of cryptocurrency trading. However, several cryptocurrencies are traded through different third-party platforms that help note, mediate, and regulate all the transactions. While this can be a more straightforward option, it carries far more risk to each transaction
A direct P2P Trade is more like a gentleman’s agreement because it is more of a trust system. While trade is done through a third-party platform, it offers far more security in the transaction. Several security issues can come because of P2P Trading. Because the seller controls the price, there is a greater need for due diligence to be done for the cryptocurrency that you plan to purchase. Thus making the process a little less simple.
We know that P2P Trading eliminates any excessive taxation or added value to your transactions. This kind of trading would give the seller more control over the exchange of the cryptocurrency, from picking buyers to deciding on the pricing. This same freedom allows buyers to save money on transactions by not paying for any transaction fees and saving time on transaction verification.
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One advantage of using P2P platforms is that they are primarily international information platforms, not trading platforms. The crypto exchange is launched by a particular company that is registered in a certain country. This means that there are no specific fees to be followed within the trading process.
The platform is just there to support the traders by connecting sellers and buyers to each other. This, however, can also highlight possible scamming or security issues within the process of the transaction. The information given through the whole transaction process is minimal and will only include what is necessary to make the trade. This is both a positive and negative thing because it keeps traders anonymous through the process. This could be both dangerous and safe at the same time, depending on how you look at it. This anonymity can also help in barring any government pressure in the case of larger-scale trades.
Next time you decide on what platform you need to trade on the cryptocurrencies you want, looking at P2P Trading as an option could sway your opinion in a specific direction. Different cryptocurrencies can show different things about P2P Trading. For example, it may be too risky to trade this way for Bitcoin, but it may be more profitable for Dogecoin trading. The amount of information that is given also differs because of the platform. Full platforms offer much more information on different traders; many even include complete portfolios to provide more credibility to any possible future trades.