Crypto P2P exchanges

What is P2P on crypto?

P2P trading is a way to exchange cryptocurrency that lets users do business directly with each other without going through an intermediary.

P2P trading sites often have considerably more flexibility than conventional crypto exchanges, which generally have rigid rules and demand users go through an authentication process before they can access and utilize the platform.

When you do peer-to-peer trading, you can choose the offer you want and do business directly with the other person instead of using an automated engine. This gives you more options for selecting the most affordable rate and payment option for your needs. Also, direct contact with a trader allows you to better protect your privacy.

But because there is no middleman, it is much easier for people to sign up without verifying their IDs. Since this could hurt the security of the crypto exchange, most decentralized exchanges have a lot of safety measures in place. Most peer-to-peer exchanges have a feedback or rating system to protect all parties and add an extra layer of security. You'll be able to check their reputation and ratings before doing business with them.

P2P cryptocurrency exchanges also let you explore a variety of traders to see what they have to offer. You can choose from several ways to pay that have varying costs and still keep control of your money.

Pros:

Feasible payment options

P2P platforms provide traders with various payment methods based on their convenience. However, the availability of the payment methods depends on the seller. Payments could be in the form of gift cards, digital payment systems like PayPal, credit cards, digital currencies like Bitcoin or Ethereum, or checks.

Low trading fees

There is a fee for every trade on peer-to-peer (P2P) cryptocurrency exchanges, but it is much less than on centralized cryptocurrency exchanges. Additionally, since these platforms don't use intermediaries, they charge escrow fees.

Flexible trade orders

Through crypto P2P trading platforms, you can set your own trade orders, giving you more control. You can decide how much money you wish to exchange and the price you want to purchase or sell. You can't use this kind of flexibility on centralized exchanges, where the exchange itself controls the order book.

Security

P2P networks provide escrow services, holding payments until agreements are finalized between traders. To start secure transactions, the security function employs two-factor authentication and encryption.

Access to the global market

Through P2P crypto trading, you can access multiple buyers and sellers worldwide. If you are in a country where cryptocurrency trading is banned, you can still trade on P2P platforms as they are not regulated by central authorities.

Cons:

Low liquidity

Compared to centralized exchanges, P2P crypto trading platforms often have less liquidity. This implies that your trade order might not always be matched by someone who is actively trading. As a result, you might have to search for a buyer or seller for longer, which could affect the cost of the currency you're trying to purchase or sell.

Slow speed

Using P2P cryptocurrency trading platforms has some dangers, just like other trading platforms. The trading speed is slow because there are chances that one party might stop the transactions midway or the buyer and seller might not be able to agree on terms. Trying to buy or sell cryptocurrencies might cause delays and inconveniences. If the price of the currency changes during the transaction, it could also have an effect.

An interface that is hard to use

Since there isn't a middleman for regulation, it can be hard to figure out how to use the P2P platform. Moreover, a learning curve is involved throughout the onboarding process.

Main types of P2P crypto exchanges

There are three leading P2P crypto exchanges:

Decentralized exchange

Here, there is no centralized oversight and no intermediary overseeing the trades. DEXs (decentralized exchanges) use smart contracts and decentralized applications to make trades happen based on well-known metrics. The Ethereum blockchain now powers the majority of DEXs.

Your private information is secure because there is no known know-your-customer (KYC) requirement. DEXs are also safer if security checks are considered when smart contracts are written. But the interface might not be as good as CEXs (centralized exchanges), which could affect the number of trades and how fast they happen.

Centralized exchange

A centralized exchange is the most common type of Bitcoin exchange. These are usually easy to use. They are generally governed by a central body, usually the exchange's owner.

Every order in CEX is recorded and checked by the company to ensure it is secure and correct. Most of the time, you can trade one cryptocurrency for another and use money from your bank account or credit card on these exchanges.

One of the key features that the majority of CEXs provide is customer support. For individuals just starting out in cryptocurrency trading, this is quite advantageous.

However, your money will continue to be in a wallet that the CEX controls. A "know-your-customer" (KYC) procedure that asks for some personal information may also be part of the process of signing up.

Hybrid exchange

The advantages of centralized and decentralized exchanges are combined in hybrid exchanges. Users in DEX have total control of their money. For instance, they can decide whether to trade using smart contracts or to keep a wallet.

A hybrid crypto exchange tries to solve the problems with decentralized exchanges by letting clients see their private keys. Addressing the DEX's exorbitant trading fees was another one of the HEXs' main objectives.

How does a peer-to-peer cryptocurrency exchange work?

You must provide an email address and password to sign up for a P2P crypto exchange. There are no requirements for ID verification. Each cryptocurrency has multiple buyers and sellers with different rates, payment methods, and purchase amounts.

Once you make an offer, the transaction process begins. In some cases, the buyer and seller both have to give some collateral toward an escrow contract, which will be released if the transaction is successful.

In the event of a conflict, the affected party will be compensated. In other cases, the seller has to give collateral, which they receive back once the buyer approves the transaction.

How to exchange crypto using P2P

Methodology for compiling our ratings of crypto exchanges

Traders Union applies a rigorous methodology to evaluate crypto exchanges using over 100 quantitative and qualitative criteria. Multiple parameters are given individual scores that feed into an overall rating.

Key aspects of the assessment include: