P2P Crypto trading 101- top facts you need to know

Did you know it was Satoshi Nakamoto himself who had envisioned the concept of a P2P marketplace in crypto? Bitcoin’s famous founder was driven by the mission to introduce a completely decentralized electronic cash option that could be traded in the P2P ecosystem- without the control of any centralized authority. Irony is, the majority of crypto exchanges today operate under a centralized authority. However, you also have P2P crypto trading platforms that allow “direct” trading in a peer-to-peer ecosystem.

The crypto market is poised to rally up in the coming 7-8 months. A bunch of promising coins are also predicted to take an upward swing by the end of this year. Ethereum, for example, has been forecasted to grow by 400% by the end of 2022, especially for the Merge upgrade. Bitcoin, while currently hovering around $20,000 as of June 2022, is predicted to hit $100,000 by the final quarter of 2022. A good bunch of altcoins too speak of promise, especially Ripple, Cardano etc. If you are aspiring to dive into the crypto scene, you have to create an account with a crypto exchange. Now, centralized exchanges generally charge higher fees- if you want a more economical solution, count on P2P crypto trading.

P2P crypto trading overview

P2P crypto trading is a form of cryptocurrency trading that is conducted through a Peer-to-Peer exchange. For better understanding, you can think of a P2P crypto trading exchange as a marketplace. Staying true to the “P2P” format, P2P crypto trading platforms allow “direct” crypto trading between buyers and sellers on the platform. The exchange here serves as an online marketplace where buyers and sellers find each other to conduct crypto trades. 

A P2P crypto trading platform executes trades worldwide, backed by the security of smart contracts. 

Not same as decentralized exchange

One of the major aspects of P2P crypto trading is the “decentralization” factor. Unlike regular centralized crypto exchanges, the P2P crypto trading exchanges are not controlled by a centralized authority. In that light, these P2P exchanges are often used interchangeably with decentralized exchanges. But these two aren’t the same. While the “decentralization” factor is common yet there is a difference in how these two exchanges work. A decentralized exchange follows an anonymous trading approach where buyers and sellers never get to know each other. On the other hand, a P2P crypto trading exchange always follows a “direct” approach- in a P2P marketplace, buyers and sellers find one another for trading. 

How does a P2P crypto trading exchange work?

A P2P crypto trading exchange operates as an online marketplace for crypto trading experience. Here are a few pointers that explain the major aspects of a P2P crypto trading platform.

  • Buyers and sellers can connect with one another directly over the P2P crypto trading platform
  • Sellers can put ads citing prices on the P2P crypto trading platform
  • Sellers can also post discounts and special offers on the P2P marketplace
  • There is no fixed price; coin prices can vary from one seller to another in a P2P crypto trading exchange
  • Buyers have the opportunity to post review and rate sellers
  • The payment can be made online or offline- however, the online payment mode is the most popular in contemporary P2P crypto trading exchanges today.

How to buy a coin or trade crypto on a P2P crypto trading exchange?

Let’s say, you are a buyer who is looking to buy crypto from a P2P crypto trading exchange. Here are the steps to follow to buy crypto from a P2P crypto trading exchange.

  • Create account with a P2P crypto trading exchange
  • Complete the verification process- the exchange will ask for your basic details and government ID proof
  • Register your profile 
  • Browse through the seller profiles and ads posted by the sellers
  • Look for a reliable seller with high reviews and ratings
  • Contact the seller and place order
  • Choose your preferred payment method and make payment
  • When both buyer and seller decide on the order, the amount of coins to be purchase is kept in the exchange’s escrow wallet
  • The P2P crypto trading exchange will release the coins as soon as the seller confirms the payment
  • In case, the buyer doesn’t receive the coins even after the money has reached the seller’s account, s/he can always lodge a complaint at the P2P crypto trading exchange.

Escrow wallet

The Escrow wallet is one of the defining features of a P2P crypto trading platform. The escrow wallet stores the coins when a buyer places an order but the seller is yet to confirm the payment. The wallet will release the coins immediately after the seller affirms the payment. However, it must be mentioned here that the escrow wallet is mostly for short term storage. After the seller confirms the payment, buyers can transfer the coins to their own wallets.

Advantages of a P2P crypto trading exchange

P2P crypto trading exchanges come with a  wide range of benefits. Here is a brief on the various advantages of P2P crypto trading platforms.

  • Allows trading worldwide
  • Accepts buyers and sellers even from countries where crypto has been banned
  • No middlemen interference 
  • Buyers and sellers get room for negotiation in P2P crypto trading
  • Flexible prices as the price is not set by a centralized authority
  • Buyers can browse through various seller profiles to find the ideal price and seller
  • Lower fees compared to centralized exchanges; some of the P2P crypto trading exchanges don’t even charge the transaction fee

Wrapping up

We will wind up the article with a list of pro tips on how to choose the most reliable P2P crypto trading exchange for you.

First, look for a P2P crypto exchange that accepts only verified sellers. Your chosen one should allow trading in a wide range of crypto assets to cater to all kinds of buyers and sellers. Besides, check beforehand the various kinds of payment options and fiat currencies supported by the platform. If you are planning to pay in local currency, make sure your chosen P2P platform accepts your local fiat.

Don’t forget to check the security measures adopted by the P2P crypto trading exchange. The best ones invest in risk-management measures and advanced security tools like 2-factor authentication.

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