It’s tough to wrap my head around the fact that bitcoin is actually 10 years old now. That means 10 years worth of experience in a growing and passionate community. That’s 10 years of mining, 10 years of investing, and 10 years of trading bitcoins. And it looks like Bitcoin is here to stay for 10 years more!
Back then, not a lot of people knew about what bitcoin was or what it could bring to the table. Bitcoin was a first of its kind. It was the “messiah” of all cryptocurrencies. In today’s age, problems are different. People are asking questions like “why are there so many cryptocurrencies?” or “what makes cryptocurrency go up and down?” Although not everyone may be educated about the topic, it seems that a lot of people are now aware of the existence of cryptocurrencies.
The community has evolved since then and now, there are hundreds of ways to buy bitcoin. This includes a concept that the whole Bitcoin technology and philosophy embodies: peer-to-peer trading.
Peer-to-peer Trading and How It Differs from Traditional Trading
To understand how peer-to-peer trading works, you’ll first have to understand how trading was done traditionally. Right now, bitcoin exchanges are separated into two categories: peer-to-peer marketplaces and traditional bitcoin exchanges. So what’s the difference?
Traditional Bitcoin Exchanges
Traditional bitcoin exchanges are a more used and more well-known form of bitcoin exchange. It’s the type of exchange that has been around for a long time hence it being more used and well-known.
On traditional bitcoin exchanges, buyers and sellers are matched via order books. Order books are electronic lists that contain the preferences of each buyer and seller. Once the buyer and seller are matched, a middleman is tasked to carry out the trade. The middleman will essentially complete the trade for the buyer and the seller. This means that buyers and sellers rarely interact with one another. Buyers and sellers don’t exactly know who they’re trading with since there are no direct interactions between them. This can be both a good and bad thing. The good thing is that it allows more privacy for both buyers and sellers (if you prefer to trade anonymously). The bad thing is that there is no personalized touch to it, that means you don’t have control over how the trade will go.
Since traditional bitcoin exchanges have been around longer, people use them more compared to peer-to-peer marketplaces. Despite that, the popularity of peer-to-peer system seems to be slowly increasing. This may be due to countries like Africa and Venezuela. Countries with struggling economies and underbanked populations see peer-to-peer marketplaces as a way out of financial crisis. Because of the decentralized nature, it’s definitely more appealing to use a peer-to-peer marketplace for trading.
On these peer-to-peer marketplaces, buyers and sellers are matched with sellers and they need to complete the trades themselves. Some peer-to-peer marketplaces even provide the option for the buyer and seller to choose the right offer they want to be a part of. The personalized or more “human” touch that peer-to-peer marketplace add to bitcoin trading can do a lot of good for the trading experience, but more on that later.
Peer-to-peer Marketplaces vs. Traditional Bitcoin Exchanges
Traditional bitcoin exchanges, although they may have worked in the past, have a lot of problems which make a case of it being obsolete (at least for people who are looking to TRADE bitcoins – traditional bitcoin exchanges are ideal for people who are using bitcoins SOLELY for investment purposes).
The biggest problems of traditional bitcoin exchanges so far are:
Although traditional bitcoin exchanges may allow easier trading bitcoin for beginners, they usually implement higher fees. It seems like convenience comes with a price. Since there is a middleman that is tasked to complete the trade for the buyer and seller, he/she will be compensated via fees from the trade.
Peer-to-peer marketplaces have lower fees because the buyer and seller are tasked to carry on the trade themselves. It’s simple really: no middleman = lower fees.
Vulnerability to External Factors/Regulatory Restrictions
Cases have shown in the past that traditional bitcoin exchanges can fall victim to regulatory restrictions. One example that comes to mind was when all withdrawals were frozen in China. This is because The People’s Bank of China intervened and it affected two of the largest exchanges in the country. As a user, this is the last thing you’d want to happen to your funds.
Peer-to-peer platforms merely connect buyers and sellers. Users are usually not affected by regulatory restrictions. Though some regulatory factors can pop-up here and there within the platform, most peer-to-peer marketplaces are decentralized as Bitcoin itself.
I’m not saying that traditional bitcoin exchanges aren’t safe, but on peer-to-peer marketplaces, there are a ton of security measures that help prevent scam. You might be asking yourself “since it’s a peer-to-peer platform, isn’t it more susceptible to scammers?” The answer is both yes and no. Yes, because it’s true that there is more potential for you to run into scammers on a peer-to-peer marketplace. No, because there are security measure to prevent exactly that.
Most peer-to-peer platforms have security measures such as escrow to protect both buyers and sellers from any potential scam. Escrow is a security system that acts a third party in trades. This third party would hold all the coins until all the proper requirements are submitted. The coins would then only be released once the trade is completed and both parties are happy. Also, added security measures such as activating 2-Factor Authentication on your account is recommended on peer-to-peer marketplaces for an added layer of security.
As said earlier, peer-to-peer marketplaces just have that personalized touch that traditional bitcoin exchanges don’t. This personalized touch can allow users faster and more efficient trades. How? As a vendor and buyer, you can set your own rules and requirements for a trade. This makes each
Why Buying and Selling Bitcoins is Better on A Peer-to-peer Marketplace
Now that you know the difference between a peer-to-peer marketplace and a traditional exchange, you’ll need to understand what makes peer-to-peer finance an obvious choice when trading bitcoin. There are three major factors that make peer-to-peer marketplaces superior if you’re looking to trade bitcoins:
Peer-to-peer marketplaces have a lot of payment methods available. Hundreds of them. If you want to buy bitcoins with gift cards, they’ve got offers for it. If you want to buy bitcoins with PayPal, that’s right, offers. If you want to buy bitcoins via cash-in-person, they can do that. I think you get the point.
The number of payment options is one of the reasons that make peer-to-peer marketplaces the best place not only to buy bitcoin, but also to sell bitcoin. If you’ve got some extra bitcoins on your account and want to trade them for (discounted) gift cards, you’ll also find many offers for people who are willing to do so.
Since it’s a platform where buyers are matched with sellers, more and more payment methods are coming into fruition every day. Peer-to-peer marketplaces usually allow their users to suggest new payment methods, hence the ever-growing list of payment methods.
Power Over Your Funds
As a seller on a peer-to-peer marketplace, you can now set personal preferences to the way you trade. This is good for two reasons:
- You can set your own profit percentage. Most peer-to-peer platforms will allow you to set how much bitcoin buyers will get on the dollar. This is HUGE. This allows you to choose how much you can make from your trades. Obviously, making it too high will scare away buyers, but it allows you to set a fair profit ready for claiming.
- You can filter who you trade with. This also applies if you’re buying bitcoins, but it lessens the burden of being a seller. The last thing you’d want is for some fake buyer to be running away with your hard-earned bitcoins. As said before, it’s totally possible to run into scammers on peer-to-peer marketplaces. The best thing to do about it is to filter out the people you trade with. YOU decide who to trade with.
Note: this means you’ll have to do some research and figure out and identify the red flags that scammers often present in a specific marketplace or platform.
As a buyer, you have the chance to find great deals from good vendors. Trusted vendors (that trust you as a buyer) will sell you bitcoin at a lower price. This will also allow you to avoid the obvious scammers and other vendors that set their profit percentage too high. It’s all about creating a trustworthy community of traders.
As both a buyer and seller, peer-to-peer marketplaces allow you to form fruitful business relationships from all over the world. These business relationships can last a lifetime and can earn both of you a lot of money.
Peer-to-peer platforms usually have a live chat feature (at least the better ones do) that allows you to have a real-time chat with a dedicated member of the support team or with your trade partner.
Being able to chat with the support team can help you use or utilize the platform effectively. If you’re confused about how the site works, what to do if a certain situation happens, or even just have a general question, you can message them and they should be glad to help out.
Being able to live chat with your trade partner can help if you’re buying bitcoins and need clarifications on how to finalize the trade. If you’re selling bitcoins, you can chat with your partner to make verifying his/her payment easier on your part. This makes everything about bitcoin trading fast and easy since you are directly in contact with the person that you are trading with. How the trade will go is up entirely to both of you.
As said many times earlier, peer-to-peer trading adds a personalized touch to trading and these are the pros that come with a more personalized trading experience.
How Buying and Selling Bitcoins Work on A Peer-to-peer Marketplace
Although not all peer-to-peer platforms have the same specific process, each follows a general process:
Searching Through The List of Offers.
Assuming that you’ve already made an account, looking through the list of offers is the first thing you’ll be doing. There are a couple of factors you’ll want to consider while doing this:
- How much bitcoin you’ll get on the dollar. The more bitcoin you get per dollar, the better the offer is.
- Requirements of the vendor. Make sure that you can comply with all the requirements of the vendor before engaging in trade. If you start a trade and you cannot comply with all the requirements, it could be taken against you.
- Reliability of the vendor. Each platform will have their own indicators, whether it be a reputation system or a number of trades done before, each platform has a way of telling a good vendor from a bad one.
- Availability of the vendor. Make sure that your vendor is available and ready for trade as trading with an inactive vendor can cause problems for you.
Once you’ve found the offer that best suits your preferences, it’s time to start the trade.
When the trade begins, make sure to submit all the requirements that the vendor needs. After you’ve sent all the requirements, make sure to mark the trade as “paid” (marking the trade as “paid” may vary depending on the platform you’re using).
Completing The Trade
Once you’ve submitted all your requirements to the vendor, he/she will then verify your payment (the time it takes to do this depends on the payment method you chose). Once the vendor has verified your payment, he/she should then release the bitcoins from escrow and the trade is complete
It’s quite easy to reverse engineer the buying process and figure out the selling process.
Creating a Sell Offer
This is the form that you’ll have to fill that will set your preferences. This part will include the payment method you’ll be receiving, your profit percentage, trade time, trade requirements, etc.
The next step is to wait for someone to bite on your offer. The buyer will then send their payment. Once you’ve verified their payment, you should release the bitcoins from escrow and the trade will be completed.
Selling your bitcoins can allow you to get a number of payment methods, including gift cards you can buy at a discounted price.
Peer-to-peer, a Proven Winner
You’ve been sleeping on peer-to-peer platforms and now is the time to wake up. Despite the recent price dip of bitcoin, people continue to trade on peer-to-peer marketplaces such as Paxful. The platform even saw a 20% increase in trades despite the dip.
Peer-to-peer has not only shown that it has the capability of making a profit but also has the capability of helping those in need. Paxful has also shown that with their #BuiltWithBitcoin campaign by promising to build 100 all over Africa (with 2 already complete) and scholarships to refugees.
Wake up and join the peer-to-peer financial revolution!