Peer-to-peer (P2P) cryptocurrency exchanges have made it more common for cryptocurrency traders to interact directly with one another without the use of an intermediary or other third party.
The idea has developed into peer-to-peer (P2P) crypto lending, where users can lend their cryptocurrency to a borrower looking for a loan using cryptocurrency collateral. Since cryptocurrency investors can choose their rates for borrowing and lending, both concepts offer much greater flexibility.
One less well-known method of buying Bitcoin and other cryptocurrencies is P2P Bitcoin Exchange, also known as Peer-to-Peer Bitcoin Exchange. While centralised and decentralised exchanges offer facilities for you to conduct trades, you don’t interact directly with the other party. That is how a P2P Bitcoin Exchange differs from other methods: you can explore different sellers and choose your best price.
What is P2P Cryptocurrency Exchange?
Peer-to-peer (P2P) cryptocurrency exchanges let users trade digital currencies with one another without the involvement of a middleman like banks or other centralised authorities.
Verified individuals can thus execute all cryptocurrency trade without any problem. Furthermore, P2P cryptocurrency exchanges may manage all cryptocurrencies without using order books to match buy and sell orders.
Instead, these transactions enable direct communication between consumers, streamlining the process. This approach allows users to conduct transactions and retain funds without needing an intermediary.
However, the absence of a middleman makes it considerably more straightforward for people to register without ID verification. Moreover, since this could compromise the crypto exchange’s security, most decentralised exchanges have numerous security safeguards in place.
How Does P2P Exchange Work?
P2P cryptocurrency exchanges are anonymous and decentralised, which may lead you to believe that they are a target for fraud, scams, and cryptocurrency theft when you first learn about them. However, you’ll have second thoughts after you learn how P2P cryptocurrency exchanges operate.
You only need to enter your email address and password when signing up for a P2P cryptocurrency exchange. Additionally, working on P2P cryptocurrency exchange will typically not require you to offer any ID verification.
Then, various purchase and sell options for Bitcoin and other cryptocurrencies will be available. Each buyer or seller will demand different rates, payment options, and maximum or minimum purchase amounts.
The transaction starts once you’ve selected the deal that best meets your needs. A portion of peer-to-peer exchanges demands that both parties pay some collateral to an escrow contract, which will get released after the successful transaction.
What to look for in a P2P Exchange
Security, trading costs, volume, and payment options are items to check for in peer-to-peer exchange, just like in a centralised exchange.
The responsibility for security rests with you as the user because P2P exchanges are direct person-to-person. Safeguards such as arbitrators and escrow accounts for security deposits are in place. Still, you are responsible for reviewing a buyer’s or seller’s profile to determine whether they are a responsible party to deal with.
P2P cryptocurrency trades are non-custodial. Thus, the fees will probably be less than if you were to utilise a standard centralised exchange. Furthermore, on most P2P exchanges, there are no costs associated with buying or selling Bitcoin; the only costs are associated with advertising on the site, which is different from merely posting a buy or sell offer.
There is no central authority to take a commission because transactions are conducted directly between users. As a result, when there are fees, they are often less than 1% overall and frequently exclusively on the seller’s side. Only when utilising an alternate payment method are there typically increased fees.
This is something that differs by the vendor as well as by exchange. For example, some vendors will take specific payment methods, such as bank transfers, credit or debit cards, or cryptocurrencies, which may be the only ones because they are more in line with centralised exchanges.
Other vendors might accept alternative payment options, like PayPal, gift cards, points from loyalty programmes, and even goods and services. So examining each exchange’s prospective payment options makes sense if you’re seeking a unique way to purchase or sell bitcoin.
Because P2P exchanges are direct, there are probably fewer users on the website, which results in lower trade volume. Therefore, if you want to purchase or sell an offer to be filled fast on a P2P exchange, you should look to discover which ones produce the most traffic and, consequently, the most significant volume; otherwise, you can have a long wait before making a trade.
Read our Blog: 10 Cheap Cryptocurrencies To Buy 2022
P2P vs OTC Crypto Exchanges
Over-the-counter (OTC) crypto exchanges are the second most common cryptocurrency trading platform after peer-to-peer (P2P) exchanges. In addition, centralised crypto exchanges also referred to as OTC exchanges exist. Here are some of the main ways that these two platforms differ from one another.
OTC cryptocurrency exchanges prevail in the quest for the fastest trading times. Because a broker or administrator helps OTC cryptocurrency exchanges regulate the transaction, this is the case. The trade thus closes practically immediately.
P2P cryptocurrency exchanges, on the other hand, leave it up to the users to control their transactions. This entails locating the buyer or seller, initiating the transaction, reaching an agreement on the terms of the transaction, sending the cryptocurrency and escrow fees, and confirming the payment.
Overall, the speed of the transaction is entirely dependent on the availability of each participant to check each step. The trade can go significantly quicker as long as the buyer and seller finish their parts of the transaction on time.
The risks associated with the two categories of crypto platforms vary as well. For instance, you might encounter counterparty risks with an OTC cryptocurrency exchange if one side doesn’t finish its payment.
In addition, you risk underpricing because the mechanism is opaque. P2P cryptocurrency exchanges, on the other hand, run the risk of having reduced liquidity, which implies that the trader can lose interest in the trade due to the lengthy transaction process.
Review of the Top 5 P2P Bitcoin Exchanges
Determining a P2P cryptocurrency exchange’s safety is crucial before choosing it. Since you are dealing directly with other traders and the exchange is not charging a charge, the exchange’s security is crucial.
They determined whether the P2P cryptocurrency exchange has enough cryptos to conduct transactions and enough users to obtain the best rates. Advanced users might search for extra services like margin trading, staking, or finding the best P2P crypto lending tools.
One of the world’s top P2P and margin trading exchanges for cryptocurrencies, Binance is also the biggest in terms of trading volume. The Binance exchange processes $26 billion in transactions every day; by comparison, the second-largest exchange in the world processes $6.6 billion, demonstrating the exchange’s size.
One of the reasons Binance is regarded as the best P2P cryptocurrency exchange overall is that it facilitates trades between traders from all over the world using spot and P2P trading, as well as on futures, options, and margin-based products.
Users can sell or buy Bitcoin (BTC), Ethereum (ETH), DogeCoin (DOGE), Binance Coin (BNB), and stablecoins like Binance USD (BUSD), Tether (USDT), and MakerDAO on the Binance P2P platform (DAI).
Huobi is one of the top peer-to-peer cryptocurrency exchanges. With an average daily trading volume of $3.4 billion, it is presently the ninth largest cryptocurrency exchange in the world.
Users can access P2P trading on Huobi and trade in over 50 currencies, including USDT, BTC, ETH, and HT (Huobi Token). Furthermore, neither manufacturers nor takers get charged any commission costs.
With Bybit you may stake your cryptocurrency with a guaranteed payout and use its P2P network, Bybit is one of the best P2P cryptocurrency exchanges. And the fact that 5.50% APY is available while staking USD Coin (USDC) at Bybit makes it an appealing choice.
Because you can only transact in Tether via the Bybit P2P cryptocurrency network, it has additional restrictions (USDT). Of course, you can use a variety of fiat currencies, but the list is not as extensive as that of other leading P2P bitcoin exchanges like Binance or Huobi.
Many different payment options are available, and using the P2P platform to purchase is free. There are certain restrictions, though, and these change based on the seller’s terms.
One of the most appealing peer-to-peer exchanges for bitcoin is Paxful since their P2P platform allows you to buy bitcoin with no commission. However, in contrast to several other exchanges, there is a more significant 1% fee for coin sellers here.
The only cryptos available are Tether, Ethereum, and Bitcoin (BTC) (USDT). But with a modest minimum transaction amount of just $10, you can pay using more than 350 different payment methods.
You get free access to a bitcoin wallet powered by BitGo, a top provider of safe bitcoin wallets, even though Paxful doesn’t offer as many crypto services as some of the other best P2P bitcoin exchanges described above. Consequently, you can save your cryptocurrency in one of the best wallets for storing it safely.
Buying and selling bitcoins between individuals is the only activity that LocalBitcoins concentrates on. Using various fiat currencies and payment methods, you can buy bitcoin from other individuals.
Bitcoin buyers pay no fees at all. However, there is a 1% fee on each successful sale for sellers who publish advertisements to sell their bitcoin. Additionally, users can send cryptocurrency for free to their LocalBitcoins wallet.
P2P cryptocurrency exchanges are better for those who would instead manage the transactions themselves and retain custody of their currencies. In addition, these platforms are far more secure than centralised exchanges, despite taking more time.
Xbo’s commitment to safeguarding your funds and privacy should be considered when choosing an exchange. The privacy of users, assets, and data is of utmost importance to Xbo. To ensure the security of your operation, Xbo uses military-grade security.
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Binance P2P is among the best regarding decentralised exchanges, offering all the tools needed to make crypto transactions quick and easy. So when selecting a P2P cryptocurrency exchange in 2022, go by our advice.
Binance offers the broadest selection of cryptocurrencies for P2P trading and payment options and some excellent built-in security features. There is also a good selection of extra features for cryptocurrency fans, like spot trading, margin trading on cryptocurrency options and futures, swap farming, and even a cryptocurrency savings account. So open an account right now for free and get started right away.