Home Guide What is P2P Cryptocurrency Exchange?

What is P2P Cryptocurrency Exchange?



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P2P stands for “person to person”, which means “person to person” or “face to face”. In other words, P2P is a transfer of cryptocurrency directly between users, bypassing intermediaries. 

The transfer of funds for such an operation is carried out with the help of special software and does not require the involvement of third parties, while for other methods the transfer is carried out using exchange services that charge for their services in the form of commission. 

As in everything, the pros and cons of each type of transcation. However, P2P, in essence, embodies the idea of ​​decentralization, including those that guided the creators of Bitcoin.

Why did Created P2P?

P2P transaction were created to solve / avoid problems that appeared with ordinary translations. Due to the fact that a very limited number of structures accept payments in cryptocurrency, it was necessary to exchange it for fiat currencies in order to make purchases. It was then that had to resort to using exchangers. However, a minus of such a system is that the exchangers are controlled by people, the owners of the services are both the solvers of disputes between users and the controllers of their actions. In addition, they charge a fee for their work.

When using conventional exchanges, the user places information that he intends to buy a certain amount, for example, Bitcoins, or sell. The exchanges searches for matching offers and makes a deal. Transactions with such a system can last from 5 minutes to several hours.

With P2P transfers, the system is somewhat similar, a person places an offer to sell or buy, a special program finds the corresponding sellers / buyers and connects them to each other. Usually, in such operations to resort to the help of a third person is not necessary.

P2P Advantages

  • The main advantage of such a system is the absence of a link on which all operations are tied. In other words, with ordinary transfers, when the exchange service comes under attack, all the operations that he performed are frozen. With P2P this is impossible, because this “weak link” simply does not exist.
  • Another advantage is independence from the state and other structures that seek to control the circulation of cryptocurrencies and can put pressure on the exchangers. In the case of P2P, if it succeeds, do it only point wise, without damaging the exchange system as a whole.
  • Anonymity. In view of the fact that the governments of many countries began to suspect that they could “launder” money with the help of cryptocurrency, they introduced laws requiring exchangers to collect data about users. When using P2P, no one collects any data, that is, all users can remain anonymous.
  • Translation security. Due to the fact that the funds do not go through any currency accounts, but are transferred directly from the user to the user, they cannot be stolen “on the way”.

Disadvantages of P2P

The disadvantages of P2P are associated with the lack of popularity of this system. Because there are still not a large number of users, it takes longer to search for offers. Reduced liquidity. Because of this, P2P is of little interest to traders who make money on ordinary exchangers. In addition, some talk about the problems of fraud. After all, the transfer of Bitcoins can not be canceled, unlike fiat currencies.

However, for this in P2P services there are public arbitrators who solve such disputes and buffer fees in bitcoins. When buying a user who pays for Fiat makes a contribution when the payment passes, the contribution is returned to him.

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