Home > Blog > What do I need to know about P2P trading?



Peer-to-peer (P2P) trading is a direct trade of users with each other without the participation of an exchange as an intermediary. When working on a traditional crypto exchange, the platform organizes the transaction on behalf of the client, and the market price determines the final value of the asset at the time of the transaction. P2P trading involves conducting a transaction directly between users on their chosen terms, writes RBC Crypto.

However, such operations carry certain risks due to the absence of a third party. Large platforms provide some protection for the parties to the transaction by offering escrow accounts, feedback systems and user ratings. When making P2P transactions outside the crypto platform, the risk of encountering fraudsters increases significantly.

P2P Transaction

The P2P platform is a “meeting place” for the seller and the buyer, allowing them to conclude a deal on favorable terms for both parties. The user publishes an ad on the platform, specifying specific conditions for buying or selling cryptocurrencies, such as price, payment methods and limits.

The second party looks through the ads and, having selected suitable conditions, places an order to conduct a transaction with a specific seller. The platforms offer a variety of search filters: you can select counterparties by their location, payment methods, rating, and even view only those who have passed full verification. On most platforms, information about specific sellers is available: the number of orders executed by them, customer reviews and trading volumes.

The exchange is the guarantor of transparency and honesty of the transaction, and the platform also resolves disputes between its participants. Many sites offer escrow of funds for the duration of the transaction. In this case, escrow accounts are used: assets are held on them until the buyer makes the payment.

Verification is not always required to work on P2P platforms. On some services, you can not provide personal data, somewhere you are asked to specify only a phone number or email. but there are also platforms that require to complete KYC verification and connect Google Authenticator. Sometimes services request additional information to increase trading limits, but mostly they allow you to trade cryptocurrencies without disclosing a large amount of personal data.

Automated P2P trading using telegram bots is becoming increasingly popular. They are divided into two types — separate exchange bots operating on the principle of ordinary exchange services, and programs tied to a well-known P2P platform.

Also, to attract new users, crypto platforms offer referral programs: the client receives a percentage of the exchange commission from each transaction of the users invited by him. Opportunities for market participants to buy cryptocurrencies on P2P exchanges are constantly expanding.

Advantages of P2P

When trading on P2P exchanges, there are many more payment methods available compared to traditional platforms. Payment methods include bank transfers, cash, the use of electronic wallets, PayPal, gift cards, SWIFT transfers, Western Union and others.

P2P platforms in most cases allow traders to connect to the service and conduct transactions with zero commission. Not all P2P exchanges offer such a service, so you should definitely familiarize yourself with the terms of the site. Some exchanges charge a small commission for placing an ad or % from the amount of the transaction.

Transaction protection with the help of an escrow service blocks funds until the parties fulfill the terms of the transaction. If either party fails to do this, the cryptocurrency or fiat funds are returned.

To buy cryptocurrencies on a P2P exchange, it is not necessary to have a bank account. On most platforms, this only requires internet access and a phone.

Disadvantages of P2P

Although P2P transactions are carried out fairly quickly, one of the parties may delay the transaction for various reasons. Also, the buyer or seller may change their mind and abandon the transaction already in its process. A normal transaction can take from 10 minutes to several days (depending on the selected payment method).

Liquidity on P2P platforms is lower than on centralized exchanges. Therefore, traders who make large-scale transactions usually prefer to work on a standard exchange or over-the-counter trading, when platforms provide an opportunity to buy and sell cryptocurrencies from an administrator or broker (OTC).

Another disadvantage of the P2P service is the lack of popularity of this system. Due to the small number of users, it takes longer to find a suitable offer.

As with many other cryptocurrency transactions, trading on the P2P platform there is a high risk of entering into a transaction with an unscrupulous counterparty. To avoid meeting with a fraudster, you should choose a reliable platform for making a transaction and carefully read the statistics of the counterparty.