P2P trading in crypto is one of the most efficient ways for investors to exchange their assets without losing time on intermediaries. The system is based on decentralized networks, where users benefit from better control of transactions and privacy on the blockchain, serving as a safety net from custodial risks and market manipulation present within centralized networks.
There are a few ways to buy and trade crypto at the moment, from using a credit or debit card, a bank deposit or a third-party payment, which is less recommended since you have to rely on external payment channels. But peer-to-peer is the safest and can be used for any cryptocurrency, so you can buy Ethereum P2P fast and efficiently. Moreover, this transaction method often provides an escrow that provides an extra security layer before confirming and releasing the asset’s trade.
However, P2P might have some downsides depending on your risk management, so let’s see what it’s about.
Some key features of P2P crypto trading
P2P trading’s best feature is decentralization, allowing users to interact without the involvement of an authority, creating a trustless environment and reducing human errors. Resource distribution is also improved through consistency and performance.
Besides being a decentralized ecosystem, with P2P, you receive a broad asset variety, which gives you the opportunity to properly diversify a portfolio by leveraging numerous payment methods, from digital wallets to cash. P2P also crosses geographical borders, so users have a broader range of trading opportunities with investors and traders across the globe.
Privacy is also a vital element in P2P trading, provided through proper identity verification requirements, but also with the help of escrow services that keep the assets in adequate conditions and safety until both parties ensure their agreement.
Steps required in P2P trading
Crypto trading is pretty straightforward in facilitating how transactions are made. You need to find a P2P platform that suits your needs best, register with the necessary information and verify your identity. Then, you learn how to create a trade listing with the price and crypto amount features settled for the investors to see. Through the platform, you’ll receive a match whose interested in your offer, after which comes in the escrows that hold your assets.
Then comes the negotiation part, which is the most important in P2P trading because you will discuss trade terms and additional requirements, which leads to a confirmation of the trade or not. If both parties agree on the contract, the escrow will release the assets that will reach the digital wallets, after which traders can provide ratings on how efficient the platform’s services were for them.
Why is P2P trading worthwhile?
P2P trading offers plenty of benefits for any type of trader, but the most important is ensuring high levels of privacy for anyone who values anonymity or asset security. At the same time, users have a lot to choose from in terms of assets, so they can access special deals without the involvement of third parties. Locking up these assets is done through flexible terms regarding pricing and payment methods, so there’s no one left out.
Since there are no intermediaries, trading fees are considerably lower compared to centralized exchanges, and investors don’t cover the cost of escrow services since the P2P platform provides them. This system works since these ecosystems are based on constant feedback that helps identify and solve problems.
Finally, P2P trading systems provide a lot of liquidity due to the increasing number of buyers and sellers trading in pools. More liquidity translates to better prices and less congestion on the network, which facilitates fast transaction execution.
Still, P2P is challenged by the following issues
Like most trading methods, P2P is surrounded by challenges that must be tackled. For instance, despite the high-security services, the counterparty risks remain. Regardless of your intentions, you don’t know who’s behind the screen, so the risks of dealing with individuals who are prone to fraudulent activities might discourage you from continuing your transaction. There’s also the possibility of the other party to avoid fulfilling their part of the contract.
P2P trading uses smart contracts to settle arrangements, which is the highest security method of ensuring each party is doing their job. Unfortunately, there are several flaws in smart contracts, form code vulnerabilities to access control issues. Moreover, the escrow systems can also be inefficient in securing users’ information, such as private key or wallet data, leading to security breaches.
Finally, regulatory uncertainty is present in the entire cryptocurrency market but affects P2P trading, especially since its legal framework is more or less accepted in different areas. Local regulations are incredibly different from one country to another, and the only way P2P can be accepted worldwide is for those countries; governments to agree on a set of guidelines to mitigate safety but offer traders legal support in using P2P platforms.
Choosing the perfect P2P exchange
Before getting to trading cryptocurrency, you must research the best exchange that provides you with a decent security layer and a varied array of assets. The first feature you must be careful about is safety, so watch out for platforms that don’t ensure advanced encryption or multi-signature wallets that safeguard your funds. Exchanges with multi-factor authentication are always a good choice.
It also helps to check reviews of the platform and its media reputation to understand how other users perceive its services. This step might take some time because some exchanges delete negative reviews, but make sure you check numerous forums and community platforms for genuine reviews.
Finally, remember to verify the fees included in the final transaction because they will differ for withdrawing and other services from one platform to another. It would be best to use an exchange with transparent fee information.
Final considerations
P2P crypto trading is one of the best ways to trade digital assets because it ensures decentralization features and is fast due to the lack of intermediaries. It’s a pretty straightforward trading method, and anyone can leverage exchanges, but users must be wary of illicit behavior from other parties and regulatory risks.