Crypto Exchanges have been quite popular for years now as they offer different methods or modes of trading. P2P or Peer-to-Peer Crypto exchanges have a vast user base as they do not involve a middleman. Despite being centralized, P2P exchanges work in a manner similar to decentralized platforms, which makes them quite special.
P2P exchanges facilitate trading between two users directly without intermediary involvement. These types of exchanges have an Escrow based system that ensures the safety of the trader’s assets. Whenever a trade occurs between two users, the Escrow based system locks the Crypto asset until both buyer and seller confirm the requirements have been produced, thus increasing the trust for users.
Most beginners in the trading industry tend to approach P2P Crypto exchanges due to their simple and efficient user interface. In this blog, we at Coinsclone have presented complete valuable information about P2P Crypto exchanges, their working process, features, and many more.
What is a peer-to-peer crypto exchange?
A peer-to-peer Crypto exchange is a platform that focuses majorly on eliminating a middleman during a trade. Here, sellers create advertisements on the platform to sell their Cryptos, and buyers invest in these Cryptos if it matches their specifications. These exchanges can also be called Ads-based exchanges due to the extensive role played by advertisements.
In simple words, peer-to-peer represents “person-to-person.” Instead of matching the trades, this platform matches the people who make orders. Once the buyers and sellers are matched, the exchange software doesn’t execute the trade immediately. Rather, it connects the buyer and seller and enables them to set their own terms, such as price, exchange rate, etc., which is one of the main advantages.
P2P crypto exchange users do not have to worry about liquidity as these exchanges have that factor in abundance. The trading volume is usually high in these exchanges, with trust built upon the users through security.
Meanwhile, let us look into the differences between a peer-to-peer exchange and a centralized exchange.
Difference between peer-to-peer crypto exchange and Order book based Centralized exchanges
A lot of people have needed clarification on the differences between order-book-based Centralized exchanges and peer-to-peer exchanges. The admin of the Order-book based Centralized exchanges usually acts as a third party to regulate a trade that takes place between two users. In P2P Exchanges, a middleman does not come into play, and the trade is regulated through an Excrow-based system.
Secondly, Order-book based Centralized exchanges charge trade fees to ensure that the trade takes place in a smooth manner between two users. On the other hand, P2P exchanges do not charge trade fees or sometimes charges less trade fee.
Also, an order-book-based Centralized system provides complete information about the current trades taking place with the pricing. Limit order, stop order, and Market order are the three main options available in an Order book-based Centralized system for the users to trade which takes place through an automated matching engine. This isn’t the case with P2P exchanges, as the traders can directly contact each other for price adjustments while trading.
Next up, we can look at how trade takes place in a peer-to-peer exchange.
How peer-to-peer Crypto exchange works?
To explain the working process of a P2P Crypto exchange, we have taken the example of Paxful, which is one of the popular Ad-based exchanges.
If you are a user who wants to sell Bitcoin on Paxful,
- The first step is to create an online sell advertisement containing the details of the payment method, your pricing, limits, and terms of the trade as a free-form message.
- The next step is to add Bitcoin to your Exchange Wallet for buyers to open trade requests from your advertisements.
- Once the buyer opens trade, your bitcoin is transferred from the wallet into the Escrow system. You, as the seller, have to guide the buyer in payments throughout the trade with the help of chat support.
- When the buyer pays the equivalent fiat for the bitcoin and confirms he has paid, you will receive a notification through either e-mail, SMS, or on the website.
- Once you confirm that the buyer has paid, you can release your bitcoin from the Escrow system, which gets deposited in the buyer’s wallet.
This is the simplest way to trade in a P2P Crypto Exchange for the users. Also, trading in Paxful is quite user-friendly, and many startups are looking to develop a platform like Paxful at a low cost.
Moving on, let’s see some of the popular p2p crypto exchanges.
Some popular peer-to-peer crypto exchanges
There are quite a number of Peer-to-peer Ads-based exchanges in the industry, but only a few have earned a name for themselves. Here are some of the popular peer-to-peer Crypto exchanges.
- Binance
- Remitano
- Huobi
- Bybit
- Kucoin
- OKX
Pros of peer-to-peer crypto exchange
P2P Crypto exchanges have quite a number of benefits in the long run for users. Here are the pros of P2P Crypto exchanges.
Less Trading Charges
Unlike centralized Exchanges, peer-to-peer bitcoin exchanges charge a minimal percentage. Since the exchanges are completely operated by the people, there are no such high trading charges involved.
Security
Peer-to-Peer Crypto Exchanges do not hold the funds of their users. They connect the traders and make the deals directly. Therefore, security is highly leveraged. Since no third party is involved, it makes the trading process safer and more secure.
Government Intrudence
In Peer-to-Peer Bitcoin exchanges, they are practically invulnerable to government regulations. This is because there is no middle authority involved in trading. Therefore, traders are free to trade anywhere, regardless of local or global customers.
Free to Select Cryptocurrencies
Traders don’t just need to stop with Bitcoin in the P2P exchanges. Users can trade with a variety of cryptocurrencies that are supported by the exchange, including Bitcoin, Ethereum, Litecoin, Ripple, Monero, etc.
Features of peer-to-peer crypto exchange
When a user enters an exchange, the first thing to note is the platform’s features. On a positive note, P2P Crypto exchanges have managed to satisfy that aspect with extraordinary features. Here are some of the top features of a P2P Crypto Exchange.
- Escrow Service
- Advertisement listing for buying/selling Bitcoin
- Multilingual facilities
- Dispute Management system
- Multiple Payment methods
- Site API
- Attractive User Panel
- Automatic KYC/AML Verification
- Custom Wallet services
- Transparent pricing
- Referral program
Having seen the features, there has been a frequent question mark over how P2P Crypto exchanges make money, and we have the answer to that.
How do peer-to-peer Crypto exchanges make revenue?
P2P Crypto Exchanges have few ways to make money, and not many aspiring startups are aware of it. The more the number of users entering the platform, the higher the liquidity will be, which in turn helps the revenue generation factor. Since these P2P platforms provide additional security to the users, a strong trust factor is built among the traders.
Once trust is built among the users, the owners can set a percentage of profit in various ways. We have mentioned a few ways to make money in P2P Ads-based exchanges for easy understanding.
- Withdrawal fees
- Listing fee
- Commission fee for helping Ad-based trades
- Market affiliation for foreign fiat conversion rate
All these fees come under the direct category. However, futuristic startups should also know the indirect way of generating revenue. Once the exchange has earned its reputation among traders, other features can be included, which can result in profit generation for the owners. This is why Peer-to-peer Crypto Exchange development has been considered one of the smart business ideas in the market.
Conclusion
On the whole, P2P Crypto Exchanges are a great way for users to trade and a perfect revenue-earning model for business heads. If you are an entrepreneur with P2P Crypto Exchange development ideas, We at Coinsclone should serve you in the right way. Our company has an excellent record in terms of providing entrepreneurs with what they require in a customized manner.
Besides, Coinsclone takes pride in offering the optimum development solutions for business heads that approach us. Our P2P Crypto Exchange script is pretty much affordable considering both time and money factors. Get in touch with us to turn your project ideas into an effective business in the market.