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The Ethereum-based decentralized exchange (DEX) aggregator “1inch” has added an all-new P2P feature to its DeFi arsenal. The feature allows users to swap tokens directly with other, individual users, rather than through an aggregated exchange. Unlike traditional transactions, this lets users make trustless trades through smart contracts that ensure both users receive their desired assets.
Understanding P2P Orders
As explained in a press release shared with CryptoAdventure, users must find a counterparty with whom to exchange tokens before using the feature. After securing the counterparty’s crypto address, users need only enter it into the 1inch dApp’s P2P order tab.
Traders can agree to swap tokens at any rate they choose, or at the market rate determined by 1inch’s spot price aggregator tool. Released last month, the spot price aggregator collects price data from various other DEXs on Ethereum and determines token prices using liquidity weighted average. Users can also mark a specific percentage above or below the market rate, to give a consistent discount/markup on a swap.
After the swap order is created, it may be sent to the counterparty using a simple URL (sent by email, messengers, etc). The counterparty then finalizes the swap by filling the order – pre-signed by the sender – and paying the gas fee.
Built atop the 1inch limit order protocol, order swaps are now available on all platforms and blockchains 1inch supports. These include Ethereum, BNB Chain, Polygon, Avalanche, Optimistic Ethereum, Arbitrum, and Gnosis Chain.
Benefits of P2P Swaps
Demand for such a product has reportedly been common for a while, though few DeFi platforms had actually implemented it. Compared to trading through exchanges, peer-to-peer allows users to sidestep certain risks.
For example, exchanges may not have the liquidity to handle large-scale orders for certain tokens. Liquidity refers to the ease with which a token can be traded, and is determined by how many are available for trade at a specific price. Similar to trading volume, market prices tend to be more fair, accurate, and less manipulable in high liquidity markets.
In a related vein, peer-to-peer swaps allow traders to avoid slippage costs. This is when market prices change between when an order is signaled and actually fulfilled, which can be common in the volatile crypto space.
Finally, P2P swaps give users trustless access to presale tokens, or unpopular tokens that aren’t yet listed on exchanges.