Categories: EducationFAQ

Why Should I Use A Peer-to-peer Bitcoin Exchange?

In the world of Bitcoin exchanges, the vast majority of trading activity takes place through centralized platforms. This is rather strange, considering that Bitcoin is a decentralized and peer-to-peer protocol for digital money transfers. Over the years, it seems that people have lost track of why peer-to-peer exchange solutions matter, particularly for buying and selling Bitcoin. But what makes these concepts so special to begin with?

P2P Exchange Of Value Is The Right Way To Go

No one should think that centralized and peer-to-peer exchange platforms cannot co-exist. Both types of trading platforms have their own merits and cater towards the need of users in different situations. Centralized platforms are useful for traders who like quick and convenient order book matching. Moreover, centralized Bitcoin exchanges are not difficult to come by these days.

But their peer-to-peer trading counterparts offer a few things that other exchanges simply cannot. Selling and buying Bitcoin or other cryptocurrencies for national currencies without entrusting funds to an intermediary is the primary selling point. After all, when using an exchange such as Coinbase, Kraken, or BitStamp, the company controls both the fiat currency and cryptocurrency balance until users move funds off the platform again.

In a peer-to-peer trading setting, funds move directly between multiple parties. This type of practice makes buying and selling safer on paper, even though it can bring some other logistical problems to the table. Dealing with large quantities of Bitcoin is always a risk, but those problems are not inherent to only cryptocurrency traders.



Related Post

There is another reason why peer-to-peer trading platforms are appealing to specific users, though. Unlike the centralized counterparts, a P2P environment allows for privacy. Given the recent scrutiny by the IRS against the Coinbase exchange, it is understandable why not everyone wants to leave a paper trail of their Bitcoin buying and selling habits. Don’t be mistaken, however, in thinking that this automatically has something to do with tax evasion.

Traditional Bitcoin exchanges forced users to verify their identity, through a Know-Your-Customer procedure. Peer-to-peer Bitcoin platforms don’t always require verification, allowing for users to only expose their data to people they conduct business with. It is up to the peer-to-peer platform in question to ensure that this information remains safe from prying eyes by using encryption or the Tor protocol.

But there are some drawbacks to P2P exchanges that make them less suited for most cryptocurrency traders. Advanced trading features are absent, and order books are hosted on the user side. Executing trades can only be done when both parties are online. It is possible that these features will improve over time, but for now that is the price to pay to get rid of centralized Bitcoin exchanges.

If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.

JP Buntinx

JP Buntinx is a FinTech and Bitcoin enthusiast living in Belgium. His passion for finance and technology made him one of the world's leading freelance Bitcoin writers, and he aims to achieve the same level of respect in the FinTech sector.

Share
Published by
JP Buntinx

Recent Posts

KAS PRICE ANALYSIS & PREDICTION (March 10) – Kas Volatility Low as it Broke Monthly Support, Incoming Collapse?

Kas advanced bearish this week as the price continued to break down after initiating drops…

22 hours ago

$KAITO Token: Early Excitement Fades, But Long-Term Growth Potential Remains

This year, the crypto community generated a lot of excitement when the $KAITO token launched.…

3 days ago

Sharpe Ratio Signal Highlights Risk-Adjusted Performance of Key Crypto Assets

In the cryptocurrency market, which is characterized by constant volatility, knowing how assets actually perform—and,…

3 days ago

U.S. Government Holds 198,800 BTC, Mostly from Criminal Seizures

The current estimated valuation of the vaults of Bitcoin held by the U.S. government is…

3 days ago

Ethena Faces Market Shift Amid Bybit Theft, But Secures $100M Funding for Future Growth

Ethena, a rapidly growing venture in decentralized finance (DeFi) that is known for its USDe…

3 days ago

Manus AI’s Official X Account Suspended Amid Crypto Scam Allegations

On March 7, Manus AI, a leading artificial intelligence company, encountered an unanticipated problem when…

3 days ago