With more emphasis on the freedom of operations and importance given to privacy and anonymity in recent times, a P2P Cryptocurrency exchange is viable.
It promotes decentralization and eliminates the cumbersome role of intermediaries in processing transactions and executing trades. Hence, a buyer and seller can deal directly.
Advantages provided by a P2P Cryptocurrency Exchange
- Highly secure – All transactions are recorded and stored on the blockchain network, accessible to every participant without restrictions. KYC (Know Your Customer) guidelines are strictly enforced and are synced with the database. There are lesser chances of fraud occurring due to the absence of a central authority along with checks and balances introduced in the system.
- Transaction censorship – Since all transactions are processed through the public blockchain ledger, there are no chances of hacking information as it is a distributed network.
- Global access – International transactions executed through fiat money takes hours to process. However, P2P cryptocurrency exchanges can be accessed by anyone from any part of the world at an affordable cost. This is very useful as buyers and sellers who operate in nations where cryptocurrency has not been legalized can also use a P2P cryptocurrency exchange.
- Low operational charges – A majority of expenses are reduced with the elimination of third parties. Since specialized software is used to execute daily operations, the fees are pretty low when compared to other exchanges that hefty levy charges.
- Superior privacy – P2P Cryptocurrency exchange guarantees the safety of the personal information of users. Transactions take place on the trustworthy relationship established between a buyer and a seller. There is no possibility of stealing or loss of cryptocurrency taking place intentionally or unintentionally.
Why a P2P Cryptocurrency Exchange is proving to be a big difference ?
- Fraud prevention – Amidst frequent occurrences of scams in the industry, the reputation has taken a serious beating. As regulatory bodies tighten the noose around the operation of cryptocurrencies, P2P cryptocurrency exchange acts as a blessing in disguise with its emphasis on privacy and security. The chances of fraud occurring are reduced as both buyers and sellers are aware of the cryptocurrency laws prevalent in their country and execute their deals on a secure blockchain system.
- Role of arbitrators – Though P2P cryptocurrency exchanges abolish the role of intermediaries, they permit arbitrators to exercise their rights whenever disputes arise between buyers and sellers. They help in maintaining the privacy of deposits received and monitor the time taken to implement a trade.
Features to include in a P2P Cryptocurrency Exchange
- Trading engine – It helps in smooth order processing and satisfies the interests of buyers and sellers. Auto-matching should be enabled without wasting any time.
- Automated KYC and AML compliance – Administrators can verify the user’s profiles based on the information provided. It will help in reducing the chances of scams and improve the integrity and authenticity of the exchange.
- Multiple payment methods – Since a global audience will be catered to, ensure that your platform accepts the buying and selling of currencies through numerous payment methods. It will enable the quick and efficient processing of transactions.
- Security features – Make your platform secure by introducing steps like two-factor authentication, email authentication, jail login, and end-to-end encryption. This should be enabled for admins as well as for the users.
- Support for multiple currencies – Make sure that popular cryptocurrencies and fiat currencies are integrated into your platform. Similarly, make your wallet equally compatible
- Technical support – Ensure that all glitches and issues faced by the users are resolved swiftly. Provide round-the-clock technical assistance in multiple languages. It will drastically improve the user experience and contribute to higher retention.
- Establish a robust admin panel – It acts as a central management console to control the daily operations. Maintenance of escrow functionality and dispute resolution is handled effectively by an admin panel.
- Allow crypto swapping – Ensure that users can swap their cryptos between each other through a reliable trading process without the involvement of third parties. Breach of agreements can be avoided.
Limitations of P2P Cryptocurrency Exchange
- Longer trade time – Though third parties have been eliminated from the process, traders have to wait until the Bitcoin and fiat transactions are completed before a trade is concluded. This can lead to a situation where buyers and sellers may be forced to pay higher prices to execute a trade faster.
- Low liquidity – Professional traders need facilities like fast transactions to execute timely deals. The interest levels of a P2P cryptocurrency exchange are low as they would be preferred only by those who value privacy, security, and freedom of payments. Many individuals, as well as institutional traders, continue to stay away from a P2P cryptocurrency exchange.
- Less intuitive to use – They are mostly targeted at small and specific audiences of crypto traders and are not attractive to newcomers. Hence this contributes to a lower trading volume and leads to problems in operations and existence.
- Lack of value-adding features – Only basic trading features are offered in a P2P Cryptocurrency exchange. Special facilities like margin trading, stop-loss trading are not offered. Hence, it loses its sheen.
- Not governed by regulations – In case of any theft or dispute, it becomes increasingly difficult for users of a P2P cryptocurrency exchange to recover their digital assets. In the absence of a central authority and non-compliance with government guidelines, fraudulent transactions may occur affecting its credibility and reputation.
Follow all the above guidelines before investing in a P2P cryptocurrency exchange. Despite possessing some disadvantages, it has a bright future in heralding a revolution to displace centralized cryptocurrency exchanges.