Trading like-for-like is as old as humankind itself. In one way or another, we’ve been exchanging things with each other for centuries. Today, things are no different. Peer-to-peer crypto exchanges are one of the best ways to connect directly to other investors and trade in a way that suits you.
How are Peer-to-Peer Crypto Exchanges Different from Regular Exchanges?
Fundamentally, peer-to-peer crypto exchanges aren’t any different from fiat-to-crypto exchanges or crypto-to-crypto exchanges. In both settings, you’re buying/selling digital coins such as Bitcoin (BTC) with other people. However, inside a peer-to-peer exchange, you know the person you’re trading with.
If you read our Binance review, you’ll see that this platform allows you to buy/sell multiple assets. However, what you can’t do is interact directly with other users. Instead, Binance acts as an order book into which all orders are written and, subsequently, fulfilled.
In contrast, if you use peer-to-peer crypto exchanges like LocalBitcoins, there isn’t a general order book. Instead, one person will list the coins they have to sell and people will offer to buy them. In many ways, peer-to-peer crypto exchanges are like eBay for tokens while regular exchanges are more like Amazon.
Why Peer-to-Peer Crypto Exchanges Are Perfect
Peer-to-peer crypto exchanges are a great way to trade because they link back to the fundamentals of blockchain technology. When Bitcoin’s whitepaper came out in 2008, the underlying principle was simple: remove the central authority so that people could exchange funds with each other.
Peer-to-peer cryptocurrency exchanges between people. Image source: Zapp2Photo/Shutterstock.com
Basically, Bitcoin and every other blockchain is a peer-to-peer network that uses cryptography rather than a central authority to authorise each transaction. By using peer-to-peer crypto exchanges, you’re essentially going back to the fundamentals of the technology.
Although regular exchanges offer certain benefits over peer-to-peer systems, the counter to this is that you get to deal directly with people. That, on its own, is a huge positive as it gives you more control, something blockchain technology was designed to do.
Are Peer-to-Peer Crypto Exchanges Safe?
Peer-to-peer crypto exchanges are no less safe than their counterparts. The only thing you need to take care over is the person you’re dealing with. Fortunately, the best peer-to-peer crypto exchanges rate users and allow you to assess their credentials before you agree to a trade.
What’s more, money is often held in escrow, meaning you aren’t sending money and hoping the other person will fulfil their end of the deal. Yes, these platforms don’t have the same regulatory oversight as financial exchange eToro. However, if you pick your peers carefully, you won’t have to worry.
The same principle applies to peer-to-peer exchanges as ebay, you are more likely to trust a seller who has completed thousands of transactions with 100% feedback, however because they are another person there will always be counter-party risk. Basically, do your due diligence before you buy.
The Best Peer-to-Peer Crypto Exchanges
If you want to trade directly with your fellow traders, one of the best peer-to-peer crypto exchanges is LocalBitcoins. This site only allows you to buy/sell Bitcoin. However, it also has a counterpart in LocalEthereum, which allows you to do the same with ETH.
Featured image source: Imagentle/Shutterstock.com