A crypto exchange Crypto.com confirmed that hackers stole nearly $34 million during Monday's hack. In a Tuesday update, the exchange revealed that hackers stole 443.93 bitcoin ($18.7 million), 4835.25 ether ($15.2 million) and approximately $66,200 in USD. The company faced criticism over its communication after the incident. The company's CEO only confirmed the hack on Wednesday, three days after it took place. In total, the hack affected 483 users. However, Crypto.com said that they fully reimbursed all of them. The…
With time, the types of crypto trading keep changing, and so do the methods of exchange. Understandably, the earlier means of exchanging cryptocurrency used the traditional centralized exchange. When cryptocurrency was still new in the market, this exchange method boosted its popularity in the sector.
However, the centralized exchange process was rather time-consuming, which prompted the development of P2P cryptocurrency exchanges.
As a cryptocurrency enthusiast, you are probably on the lookout for easier ways to exchange crypto with other traders out there. Well, look no further, as P2P exchange is a fast-rising method to buy and sell cryptocurrency. In this article, we’ll answer your question about how it all comes together.
What is a P2P Exchange?
P2P or Peer-to-peer exchange is a decentralized form of exchange that allows participants to trade directly with each other. The exchange is maintained on a blockchain-powered platform. Simply put, P2P exchanges allow you to directly transfer cryptocurrency from your account to the account of another person without the need for intermediaries.
The removal of third parties from your exchange comes with many benefits, such as faster transactions and lesser fees. P2P exchange gives you a more personalized trading experience as you deal directly with other individuals. So just how is this different from the traditional centralized exchange?
Differences Between Traditional Exchange and P2P Exchange
The traditional exchange process starts with posting an order, which usually contains an amount of and the price of cryptocurrencies you want to trade. After that, the company hosting the exchange places the order in a shared ledger with similar orders coined the order book. Then, the buyer selects the order fitting their budget.
The third-party is responsible for matching the buyers’ and sellers’ orders of cryptocurrencies on their platform at a fee. To initiate the trade, the buyer needs to provide valid identification that is verified by the intermediary. Finally, once the verification is complete, then the cryptocurrency gets transferred to the buyer’s wallet. The intermediary company uses its staff to handle all these interactions, and therefore the whole process takes a long time.
The process of P2P exchange, on the other hand, relies on a network directed by pre-programmed software that doesn’t need a third party. You only need internet connectivity through your phone or computer to transfer currency to the individual’s account. This, in turn, makes the whole exchange take place almost instantly.
How Do P2P Crypto Exchanges Work?
The biggest draw of peer-to-peer exchange is the lack of a third party in its processing. This difference in operation to traditional exchange ensures that instead of marching orders from the order book, P2P matches the people making the orders. Instead of your order being used to match to a buyer or seller, the platform matches you to the buyer or seller.
Therefore, when the system finds your matching buy and sell order, the software doesn’t process the trade but instead connects you with the buyer/seller. It leaves it up to you to conduct the deal without interference. The only time a third party is involved is when they act as arbitrators during disputes. Otherwise, the business is left to the two participants.
The nature of this trade makes the fees of P2P exchange more cost-effective. The lack of intermediaries and a platform that barely interferes with your business ensures that you pay very light fees—most P2P platforms charge fees ranging from 0%-0.7%.
In a P2P exchange platform, the software ensures that the digital assets are secure and well protected. Once the acting individuals consent to a transaction, the system locks the assets from either party’s access. The digital assets are only unlocked and sent to the buyer after the buyer sends the fiat payment to the seller.
This security eliminates the chances of sellers duping the buyer by taking back their assets after the fiat payment has been paid.
The platform’s trade settlement happens instantly, even when the fiat currency transfer takes a while to process. It concluded that the trade settlement between the parties is closed after exchange.
In a nutshell, the P2P exchange platform uses software that connects individuals who have similar business interests. After joining the individuals, the software leaves them to negotiate and trade without interference. During the trade, the software locks the digital assets until the fiat payment is sent to prevent fraud by any parties involved.
P2P exchange platforms have different features that personalize your crypto trading experience. Whereas some platforms provide a live chat option for users to communicate easier during trade, others offer room for you to input your specific trade preferences. For example, you’re able to specify the country you want to trade-in or the payment method you prefer.
These platforms are very flexible in what you can buy using your cryptocurrency. There are hundreds of different products and currencies to trade in to fit everyone’s needs.
Let’s look at some of the best P2P crypto exchanges to consider.
Best P2P Exchanges
The fact that the markets are not regulated makes the prices differ in every platform. Therefore, it is essential to compare prices and consider the price differences before committing yourself to one.
SIBEX is the world’s first global OTC (Over the Counter) marketplace. Based in Switzerland, SIBEX is a peer-to-peer decentralized exchange allowing users to trade their cryptocurrencies with no third party involved.
Moreover, SIBEX is the only completely decentralized swap platform that allows for transactions between Bitcoin and Ethereum blockchains; traders can create, deploy, and validate complex transactions to carry out blockchain-based smart contracts.
Another significant feature of SIBEX is that the exchange is non-custodial, which means you are in full control of your cryptocurrencies and your trading data all the time. Simultaneously, the pricing and order book displayed are real quotes from other traders on the platform. This means that the buyer and the seller are mutually settled through the SIBEX built-in smart contract technology.
It was launched in February 2018. The Hodl Hodl exchange provides a secure platform with a trading fee of 0.6% (0.3% for buyer/ 0.3% for the seller). The exchange, however, doesn’t charge anything for Bitcoin withdrawals. They lock user funds during the trade to minimize the possibility of bitcoins being stolen before the transaction is complete.
This p2p platform reduces trading time by letting users transfer funds directly to each other. It does not require users to provide their KYC, but they can provide it if the user wants to.
The main advantage of Hodl Hodl is that it does not hold the user’s funds or ask for KYC. Hodl Hodl is also cheaper than most of the other exchanges and has its own OTC trading desk. The desk provides users with non-custodial escrow services for large-scale trade for trading and withdrawals.
LocalBitcoins has launched in 2012as a trading site for local currencies with its headquarters in Helsinki, Finland. Here people trade directly with each other at a trading fee of 1% while the withdrawal fee is set at 0.00001 BTC.
The site supports all payment modes ensuring that you can make smooth transactions wherever you are. Your KYC is required when your trading Bitcoin for safety purposes. The platform is easy to use, even for beginners, and offers ample privacy. It has reasonable market rates too.
Paxful was launched in 2015 with its headquarters in Wilmington, Delaware. The company has been growing strong over the years and offers a trading fee of 0.5-1.0%. It provides users with the chance to buy and sell bitcoin at a withdrawal fee of 0.0005 BTC.
The company accepts over 300 payment methods such as debit or credit card, PayPal, Western Union, and several other local payment methods. It has one of the best user interfaces and low rates that favor the user.
Paxful has a dynamic team that offers 24h live support to cater to your exchange and needs. The platform has an affiliate program where users can make 50% of all trades made by their direct affiliates and 10% more from the affiliates.
This platform was developed to take full advantage of the decentralized system of exchange. The creators aimed to overcome the system’s disadvantages and make their p2p exchange platform as efficient as possible.
Based in Cyprus, the exchange platform offers low fees with a 0.8% fee applied to traders who can’t pay in BTV and a 0.5% fee if they pay in BTV.
Furthermore, in BitValve, you have several payment options as they accept a variety of payment methods. You can easily trade in different cryptos types, too, as the exchange supports multiple cryptocurrencies, including Bitcoin, Ethereum, and many more.
It even has a mobile app for Android and iOS platforms.
P2P exchange continues to change the trading world and gives traders a platform with their interest in mind. However, as a cryptocurrency enthusiast, you realize the importance of due research and looking further into companies before investing. The same goes for P2P exchange platforms. The history of a company and reviews it is getting are one way to check their credibility. Be sure you have done proper research and are confident the company isn’t out to defraud you before you pick a platform.