A lot of buzzwords are circulating in the financial & technology space over P2P Crypto Exchanges.
P2P (Peer to Peer) - Decentralized Exchanges that permit users of the market to trade cryptocurrencies directly with each participant without any 3rd party involvements to process all cryptocurrency tradings. Basically cryptocurrency exchanges are organizations that serve as intermediaries between their participants and create a certain profit by collecting fees. The interactions between counterparties on peer-to-peer (P2P) cryptocurrency exchanges are automated directly and exclusively by the pre-programmed software system, with no involvement and requirement for humans or intermediates.
Peer-to-Peer Cryptocurrency Exchanges were a natural development of the method or system, aimed at eliminating some of regular crypto exchange limitations. Most part of the cryptocurrency existence, online cryptocurrency exchanges served as the first gateways into the cryptocurrency world.
Online Cryptocurrency Exchanges such as BTC China, Bitstamp, Kraken, and other exchanges, have been satisfying that need as the most famous place for trading cryptocurrencies and bitcoins for fiat money.
Disadvantages is that, unlike Bitcoin itself, these crypto-based exchanges are run by companies. This process means that they have more staff, oversee and maintain all the interactions between their valuable customers, mainly they serve as arbitrators in cases of disputes and collect some kind of fees for doing all that activities.
Few members of the crypto or bitcoin community have set out to disrupt the business market by producing a new kind of solution. it's totally decentralized peer to peer crypto exchanges, that exchanges are performing not by humans but by the most trusted software systems.
The Cryptocurrency Exchange Software is used to automatically connect participants ( buyers and sellers) with each other, based on the certain rules and regulations that they prefer.
First, let’s see how a normal cryptocurrency exchange platform works. Most of the people looking to sell popular Bitcoins or cryptocurrency specify the particular amount that they’d like to sell bitcoins at. All those related requests called orders and that has stayed in a common ledger, known the order book.
When another user wants to buy Bitcoins, they either look for a fulfill or satisfactory price in the order book or if no one user can be found, create their own buy order, specifying the rules and terms of the certain condition as they like. Whenever possible deals occur, the crypto exchange matches buy and sell orders by the amount and processes the cryptocurrency trades.
Nowadays, Popular cryptocurrency, Bitcoin transactions can take more time 5 to 10 minutes at least & up to several hours. Fiat money transactions basically take even more time. In this kind of cases, international payment methods may take more days to complete the whole process. In order to speed up the transaction process of crypto trading, the cryptocurrency exchange serves as a most trusted intermediary. This crypto exchange settles all crypto trades immediately, even though the actual cryptocurrency transactions might have not yet been completed. In this case, to remove the need for a 3rd party involvement, P2P crypto exchanges operate in a different way.
Actually, Instead of matching orders in the order book, they match the user behind those particular transaction orders. So, whenever a matching buys and sell orders are accrued, the cryptocurrency exchange software does not automatically process the particular cryptocurrency trade, but instead, this exchange method connects both buyers with the seller, permitting them to conduct the particular satisfaction with the deal without any 3rd parties or intermediaries. Still, intermediaries may be involved as arbitrators in case of possible disputes, but no manual involvements from the cryptocurrency exchange are required by default.
The main advantage is that Bitcoin itself, the cryptocurrency exchange software alone is perfectly capable of matching crypto traders with participants or each other in a decentralized method.
P2P Cryptocurrency exchange platforms permit high resistance to transaction censorship that is really cheap to use, privately and securely when realized properly. The main Benefits of decentralized cryptocurrency exchange platforms arise from not having one company in charge of whole things. A single point of authority permits some of the benefits actually the faster trades. However, this process also works as the single point of damage that means each and every bit of failure to it affects the whole exchange system. This is the major advantage of the P2P Crypto exchanges, achieved by removing that one percent of the damage.
Cryptocurrency transaction censorship resistance. Normal cryptocurrency exchanges are mostly run by humans they may be exploited by governments by imposing regulatory rules and restrictions. In this case, the recent intervention by the citizen's Bank of China, which is lead to two of the popular and big cryptocurrency exchanges in China freezing all Bitcoin withdrawal activities for a whole month. As a participant and user, actually you wouldn’t want that to happen to your valuable funds.
Coming to this case, (P2P) Peer to Peer cryptocurrency exchanges are practically invulnerable to any government interference, because of these exchanges don’t have any central point of authority which could be pressure. In case, even if some 3rd parties are forced to cease user operations, the rest of the cryptocurrency exchange system remains not affected. This is the major advantage that is exactly what has caused an increase in the participant base of LocalBitcoins, one of the top popular P2P cryptocurrency exchanges.
Cheap kind of operations. Again and again, Normal cryptocurrency exchange platforms are operated by humans, who have to be confirm paid for their processing works. P2P cryptocurrency exchanges are run by specific trusted software, so there are no chance or little to no corporate overhead and also by extension, very small fees for the participants or users if any.
Privacy is the most important aspect of the cryptocurrency exchange platform. In recent years, government sectors around the world have been very successfully enforcing AML ( Anti-Money -Laundering) and KYC ( Know Your Customer) regulations on cryptocurrency exchange platforms. This kind of oversight forces the cryptocurrency companies running those crypto exchanges to collect as much info on their participants as possible aspects like names, places of residence, ID numbers, and more details.
This kind of approach goes without saying that the government can't impose those rules and regulations on P2P cryptocurrency exchanges, which means that crypto trades can be conducted in a much more to separate or private manner there.
P2P Cryptocurrency exchanges do not hold Bitcoins for their participants or users instead of this case they connect crypto traders and permitting that crypto trader to conduct deals directly. Not having to entrust your crypto coins to a 3rd party creates the transaction process much secured. If no one holds your funds means no one can steal them or lose them intentionally.
In order to prevent possible fraudulent behaviors or activities, different P2P cryptocurrency exchanges use different kinds of solutions. Classically, they are a reputation and stature based system of cryptocurrency community arbitrators, obligatory deposits for the particular duration of a crypto trade, or face-to-face discussion or communication between traders.
The best way cryptocurrency trades are conducted on P2P crypto exchanges leaves the participants vulnerable to fraud activities. Majorly Bitcoin payments are final and that payments cannot be refunded. But, fiat money based transfers are often refundable. Because of that possible and best transaction method based exchanges, a bitcoin buyer may send their fiat money and of course, receive the Bitcoins and then able to raise request a refund from their certain bank or other financial companies they are using and depart from the seller with nothing issues.
In order to prevent such kind of examples, P2P cryptocurrency exchanges introduce all kinds of security and safety features. For example, Coinffeine has a certain system of obligatory deposits before crypto trade beginnings, both buyer and seller, counterparties have to deposit a particular price of Bitcoins. If all transactions and deals go well and the cryptocurrency trade completes without any issues, those deposits return back to the participants or users.
If a particular dispute order does take place, an arbitrator appointed by the cryptocurrency community hears both buyer and seller sides and resolves it. The certain deposits are then mostly used to compensate the victim of the attacker or fraud and the particular arbitrator’s services. A reputation system for arbitrators that they do not abuse their influence and powers.
LocalBitcoins is a peer to peer (P2P) bitcoin business marketplace based in Helsinki, Finland has chosen another kind of approach. Localbitcoins allows the customers to meet in a specific person to conduct their bitcoin trades. This is the most trusted way they can ensure the overall deal is fully completed before farewell ways. Obviously, this limits crypto trade opportunities to the certain location a crypto trader resides in. Hence, the particular name of the service holder justified tradeoff for increased security.
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