The simplest and most understandable form of buying cryptocurrency is through an exchange. However, there are several alternative options. One of them is buying coins from other users on a special platform. I’ll tell you what a P2P exchanger is, how a P2P cryptocurrency exchange works, how to choose the right platform and not fall for the tricks of scammers.
What is peer to peer
P2P, or peer-to-peer means “from equal to equal”, is a special model of partnership cooperation on the Internet.
Another name for these networks is peer-to-peer networks. At an early stage of development, the acronym P2P denoted the simple transfer of data within peer-to-peer networks. How it works? Each computer can alternately play the role of a server that stores files and the role of a client that downloads them. Approximately the same principle is based on the P2P exchange of cryptocurrencies.
Peer-to-peer networks are used in P2P payments in business. These are card transactions or transfers between bank accounts using mobile applications. The second way is crowdlending (peer-to-peer investments). It is financing projects on an intermediary platform where a potential investor and a borrower meet.
There is also P2P lending. In this case, a lender and a borrower intersect at the service site. They receive or issue loans directly, without involving banks and other financial structures in their schemes.
Peer-to-peer technologies are also widely used in the cryptocurrency market. This happens when users’ computers are “combined” into a single decentralized network. They mine cryptocurrencies together, while sharing computing power. All information about transactions carried out in this way is stored securely.
How a P2P exchange works
P2P cryptocurrency exchangers are a place where you can exchange cryptocurrency and withdraw the amount received to your card or bank account. This is a fairly common way to exchange coins for fiat in the cryptocurrency market. There are a lot of exchangers, among the most popular are LocalBitcoins, Binance p2p, Cryptolocator, Hodl Hodl, PaxFul and a number of others.
P2P exchanger is a place where you can exchange cryptocurrency and withdraw the received amount to your card or bank account. This is a fairly common way to exchange coins for coins in the cryptocurrency market.
There are no special differences between them, except for the list of cryptocurrencies with which these exchangers work and the features of confirming the identity of users. The higher the amount, the more difficult the verification. Sometimes it happens that exchange offices do not verify a client without documents confirming his income.
A transaction on a peer-to-peer platform is actually a transfer of money from one user to another on an automated platform. Therefore, P2P cryptocurrency exchange minimizes commissions or eliminates them.
Commissions from sellers
Most often, such exchangers take commissions from coin sellers. The amount of commission does not exceed 1% of the transaction amount.
However, the intervention of a third party in the form of technical support or an independent arbitrator may be needed in a disputable situation. This can happen when one of the participants in the exchange tries to deceive another user.
One of the differences between such an exchanger and P2P exchanger platform, sellers or buyers for a transaction are selected by the intermediary himself, and on the exchange, the choice of participants is the prerogative of the system. The tools of the peer-to-peer platform are extremely simple. Therefore, such exchangers are the first choice for beginners who are either not going to upgrade in trading, or want to quickly sell or buy coins.
P2P cryptocurrency exchange: pros and cons
One of the advantages of peer-to-peer exchangers is the security of transactions. This is facilitated by the built-in rating system, which is set immediately after the transaction. With the help of them, a reliability rating of buyers and sellers of the exchange office is created. Everything is simple here. The higher the rating, the more reliable the exchange participant. An additional protective factor is escrow – securing the transaction.
P2P exchanger Pros
- Transaction security
- International composition of users
- Maximum number of payment methods
During the exchange, virtual money, as it were, freezes and enters users’ wallets only after the transaction is confirmed. Among the advantages of a peer-to-peer exchange office are the international composition of users, the maximum number of payment methods. Transactions often go through without additional commissions from the system. It is also worth noting the presence of “fool protection” in such an exchange office, a random error cannot unbalance the system, unlike a conventional crypto exchanger. It’s all about decentralized peer-to-peer platforms.
P2P exchanger Сons
- Getting “dirty” money
- Low liquidity
- Hacker attacks
Cons are also present. For example, the result of the exchange may be the arrival of “dirty” money obtained by criminal means. The fact that such money was received on their balance: users will find out after blocking the account at the request of law enforcement agencies. The likelihood of such an unpleasant event occurring increases if the user selects a member with a low rating.
Experts also attribute the low liquidity of such platforms to the minuses. And if there are practically no problems with the transaction speed in crypto exchangers, then in peer-to-peer systems they may not take place due to low user activity.
There is also a certain risk that the data on all transactions that are stored in the system may suffer from a hacker attack.
P2P exchangers: how not to become a victim of scammers
There are some fairly simple but important rules that will help you avoid fraudulent schemes in peer-to-peer exchangers.
The first rule is to conduct transactions only with reliable users. Before the transaction, carefully study the user profile. A reliable user will have a high rating, his identity is confirmed in the system, and he will have a high percentage of successful transactions. It makes sense to refuse the transaction if all this is not there. But if you decide to take a risk, then under no circumstances confirm the fact of the transaction until there is no money in your account. Otherwise, the chance of losing them is very high.
Also, when selling or buying coins, ask your transaction partner to comment on the payment. Such a comment confirms the purpose of the transaction and will certainly help if you have to open a dispute.
There are two more typical schemes, as a result of which one of the participants in the transaction may be left without money. In the first scheme, the fraudster first sends a payment to another user, but immediately asks the support service to cancel the transaction due to an alleged mistake with the card or account number. The transfer is not canceled if the text of the transaction comment matches the purpose of the payment in the system. The same story – with a “criminal” translation, it is the comment on the transaction that will help the user to distance themselves from this story. He just changed the money in the exchange office, but he had no idea about their origin.
Do not forget that the username and the name of the cardholder must match, if this does not happen, you need to clarify personal data in the client service of the peer-to-peer platform. And then you need to check the payment itself. It is not necessary to confirm the success of the transaction if it is made from another card or comes from another person. Such a transaction, according to experts, cannot be disputed.
An important condition of the anti-fraud rules is to conduct all transactions within the platform, not agreeing to take them to other platforms, including chats in other messengers. Outside the service, a scammer can get money and hide with them. Such offers should be reported to the site’s customer service.
Disclaimer: This article is not investment advice. Assess the risks yourself before making any investment decisions.
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