Peer-to-peer (P2P) trading is a way of buying and selling cryptocurrencies where traders buy and sell directly with each other on a cryptocurrency exchange app or website.
The cryptocurrency exchange provides an online platform to connect buyers to sellers and sellers to buyers. The exchange also acts as a regulator between both parties to ensure safe trading.
To further explain, think of the cryptocurrency exchange platform as a marketplace where a buyer and seller come together to trade with each other.
As it happens in the market, a seller can set their own prices, and the buyer can choose to buy from them or move to another seller with preferable prices.
How Does P2P Trading Work?
As mentioned earlier, the cryptocurrency exchange acts as an online platform or marketplace to connect buyers and sellers. When a buyer and seller agree to a trade, the platform opens an escrow to hold the crypto about to be sold.
Escrow in crypto is a smart contract that holds the assets until both the buyer and seller agree that the conditions of the trade have been correctly met.
To explain further, a smart contract is a computer program that automatically completes a trade when certain conditions are met. A computer program is a set of instructions that tells a computer what to do in a language that it understands.
Imagine that you want to buy Bitcoin from a seller. Instead of signing a paper contract and relying on a third party to ensure the seller gives you the Bitcoin when you pay for it, you use a smart contract.
The smart contract contains the terms of the agreement, such as the price and the date of payment.
Once you and the seller agree to the terms, the smart contract is sent to the blockchain, where it is publicly visible and cannot be changed.
When you send the money for the Bitcoin, and the buyer has confirmed they have received it in their wallet or account, the smart contract automatically sends the Bitcoin to your wallet.
Using Escrow for P2P trading helps ensure that everyone involved in the transaction keeps their promises and reduces the risk of fraud or non-delivery.
To illustrate how P2P trading works in practice, let's take the example of Peter, a trader who wants to exchange USDT (Tether) for ETH (Ether).
Here is how the exchange would work:
- Peter creates an account on a cryptocurrency exchange app or website that offers P2P trading like Obiex.
- Peter logs in to the app or website and searches for traders offering to exchange ETH for USDT.
- Peter finds a trader, Martha, offering to exchange 3 ETH for 5000 USDT.
- Peter sends a trade request to Martha to make the exchange.
- The app/website creates an escrow to hold Martha's ETH until she confirms Peter has paid the USDT into her wallet.
- Once Martha confirms the correct amount of USDT has been paid to her wallet, the app/website pays the 3 ETH into Peter's wallet.
- The trade is now complete.
P2P trading can work for any cryptocurrency pair, including BTC/ETH, USDT/USDC and SOL/BUSD. It can also work for fiat to crypto pairs.
For instance, you can trade Naira (NGNX) for Bitcoin (BTC) or Bitcoin (BTC) for Naira (NGNX). The process works the same as we explained above using the two traders, Peter and Martha.
Why should you use P2P trading?
P2P trading offers the following advantages:
Wide range of trade offers
As a buyer, you can access many sellers with different exchange rates and payment methods. As a seller, you gain access to more buyers and trading deals. It's like going to an online marketplace to shop for the best trading deals.
P2P exchange services allow you to trade crypto with people in different parts of the world in a few minutes. A buyer in Nigeria can strike a deal with a seller in Kenya, and in less than 5 minutes, a deal has been successfully completed.
Multiple payment options
Multiple payment options are always a benefit in the marketplace. With P2P trading, buyers can make payments through different wallets, bank accounts or even in person. It also encourages traders to make more trades without worrying about how to pay or if their available means of payment would be accepted.
Secure transactions through Escrow
As stated before, P2P crypto exchanges use escrow services to protect buyers and sellers from fraudulent transactions. Escrow ensures that the assets held by the seller will only be given to the buyer when both persons successfully meet the transaction terms.
P2P Trading on Obiex
At Obiex, we understand crypto traders need various choices for trading coins and tokens. That is why we are building a P2P marketplace where buyers and sellers can come together to trade safely and securely.
With Obiex P2P, you can access various crypto prices from different sellers. We've also made our P2P marketplace secure for buyers and sellers to eliminate fraud and scams.
The Obiex P2P marketplace will be launched soon. To be the first to know, follow us on Twitter, Instagram and Facebook. You can also join our Telegram community for access to exclusive offers, announcements and more.
P2P trading offers a wide range of trade offers, secure trading through Escrow and access to a global crypto marketplace. The Obiex P2P marketplace will allow traders to sell and buy crypto on a safe, secure and flexible platform.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.