P2P Exchange (The Function + Famous P2P Exchange Platforms)

P2P Exchange (The Function + Famous P2P Exchange Platforms)
8 min read
25 December 2022

A peer-to-peer cryptocurrency exchange is somehow what it sounds like, it means that it is explained as an exchange where you can exchange cryptocurrencies directly with another peer. The exchange is from one to another, but one cannot decide on who he can trade with. The user is confined to fees and methods by which he can pay, and if he is using a centralized exchange, such as Binance or Coinbase, he will need to complete Know You Customer processes in order to be approved to trade on the site. Interestingly to mention, Peer to peer exchanges require no identity verification and do not require you to give up custody of your funds. One of the main benefits of using a peer to peer exchange is that there is no single point of failure like there is for a centralized exchange, due to the fact that no funds are stored on the exchange, rather the exchange acts as a place where you can find someone looking to buy or sell Bitcoin and begin the process of making a transaction with them.

How do peer to peer exchanges work?

  1. Most p2p crypto exchange softwares work similarly.
  2. First, you register for the site, which requires an email address and password, no identity verification.
  3. When the registration is complete, you can see that there are buy and sell offers posted for Bitcoin, and other altcoins depending on the exchange.
  4. Each offer has a different rate, different accepted methods of payment, and generally a minimum or maximum purchase or sale amount.
  5. As a buyer, you simply search through the various offers, find one that suits your needs, and then contact the seller to set up the transactions.
  6. And as a seller, you simply post what you have for sale, what you will accept as payment, and if any extra fees are involved.

Generally, once a transaction is started on a peer-to-peer exchange there are a couple of different ways in which the transaction is completed. The first way is that some sites require both the buyer and seller to send Bitcoins or some other collateral to an escrow contract, and when the trade is done, the collateral is released. The next way is that other sites require the seller to send the Bitcoin to an escrow account and it is only released to the buyer once the seller confirms receipt of payment.

What are some major features of a P2P platform?

Payment Methods: Payment methods are some things that vary not only by the exchange but also by the seller. Some sellers may only accept certain methods of payments that are more in line with centralized exchanges, such as bank transfers, credit or debit cards, or crypto. Other sellers may accept completely different methods such as PayPal, gift cards, rewards points, and even goods and services. If you are looking for an out-of-the-box way to buy or sell Bitcoin it makes sense to assess each exchange’s potential payment methods. But the fact of having different methods might attract so many users.

Volume: P2P exchange means that there are likely not as many users on the sites and as a result, there is less trading volume. If you are hoping to have a buy or sell offer filled quickly on this type of exchange, you will want to check to see which ones generate the most traffic and therefore the most volume, otherwise, you may be waiting a long time to make a trade, because it takes so much time to find the best offer.

Security: Security is one of the important options in a P2P exchange. Because of the direct person-to-person nature of a P2P exchange, the onus of security falls on you as the user. There are safety measures in place such as arbitrators and security deposits held in escrow, but you are responsible for looking at a buyer or seller’s profile to determine whether they are a reliable person to deal with.

Trading Fees: The main aspect of making P2P crypto trades means that you are likely to have lower fees than if you were to use a traditional centralized exchange. Most P2P exchanges actually have no fees for buying or selling Bitcoin, you only pay a fee if you advertise on the site, which is not the same as simply posting a buy or sell offer. Because transactions are directly between users, there is no third party to make the deal. The fee is 1% or less, in total, and often is only on the seller's side. The only time there are generally higher fees is when using an alternative payment method.

Some P2P exchange platforms are:

Paxful

One of the most popular peer-to-peer exchanges on the market today is Paxful which has been heard by so many. It started in 2015 and now with over 4.8 million users, transactions secured by escrow, and only 1% fees on the seller side of the transaction, Paxful is a great P2P option. Paxful claims that they accept over 300 different payment methods, including PayPal, Western Union, gift cards, rewards points, or even physical assets such as a car. It should be noted that while all these payment methods are possible, they are not always actually available, as a seller has to be willing to accept these payment methods.

Localbitcoins

Locanbitcoin started in 2012 in Finland, and now it is one of the most popular P2P crypto exchanges on the market today. Their longevity in the industry means that they have some of the best volumes of any P2P exchange, and they accept many different payment methods including PayPal. There are no fees for buying or selling Bitcoin on Localbitcoins, you will only be charged a fee if you advertise that you are looking to buy or sell, and even then you are only charged 1% of any transaction generated through the ad.

HODL HODL

It is a global P2P Bitcoin trading platform, that allows users to trade directly with each other and they do not hold users’ funds but lock them in multi-sig escrow. This minimizes the possibility of Bitcoin asset theft and reduces trading time. Since Hodl Hodl does not hold any money, digital or fiat, it is not subject to complex identity verification procedures. This allows trades to happen directly between users’ wallets without having to submit your identity to the trading platform.

Local.bitcoin.com

As the name represents, it is just like LocalBitcoins, but it is solely for the trading of Bitcoin Cash (BCH), and not Bitcoin. It is a private peer-to-peer platform where you can find others who are interested in trading BCH for local currencies via a blind escrow smart contract. The fees are 0.25-0.75%. Prices seen on the website already have the fees accounted for, meaning you will receive exactly what is shown.

LocalCoinSwap

It is a great P2P exchange where you can buy and sell many kinds of crypto assets in a decentralized but safe manner. There are potentially 250 different payment methods available and 25 cryptocurrencies are supported on the exchange. There are no fees for buying or selling on the exchange. LocalCoinSwap uses an escrow service to protect both parties during the trade and makes cryptocurrency trading a fast, secure, and private experience as it always should be.

 

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Daniel 2
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