In recent years, peer-to-peer bitcoin marketplaces have been becoming more and more popular as opposed to traditional bitcoin exchanges. This is because peer-to-peer marketplaces have allowed its users to be more creative in terms of what they can do with the bitcoins they trade. They’ve also given more users an opportunity to be more in-control of their finances—but more on these later.
Traditional bitcoin exchanges are usually more well-known and they’re more used because they’ve been around for a longer period of time. On a traditional bitcoin exchange, buyers and sellers are matched via order books and then the platform will usually extend a hand to help them finish the trade—acting as a middleman. This means that there is little to no interaction between trade partners.
Peer-to-peer marketplaces, on the other hand, are platforms that merely match buyers and sellers. They work primarily through offers and offer lists. So if you were looking to buy bitcoin on a peer-to-peer marketplace, you’d first input your preferences (currency, payment method, etc.) and then you’d be shown a list of offers that match those preferences. You’d then choose an offer from the list and then start trade with a vendor. The buyers and sellers are tasked to complete the trade on their own and moderators will only intervene in cases of dispute.
So what makes peer-to-peer marketplaces so appealing?
Pros: Power to the People
As mentioned earlier, buyers and sellers on peer-to-peer marketplaces have a more personalized trading experience compared to traditional bitcoin exchanges (there are also usually less fees on peer-to-peer platforms). The aspect of it being more “personalized” can allow trade to be quicker and more efficient. Here are a few features found on (most) peer-to-peer marketplaces that personalize your trading experience:
- Hundreds of payment options– The biggest peer-to-peer bitcoin marketplaces around have hundredsof payment methods—and that’s not an exaggeration. Having all these payments will allow both buyers and sellers to penetrate different markets. And because there is such a wide variety of payment options on these platforms, users have an easier time when it comes to buying and selling bitcoins. These payment methods allow people to buy Bitcoins with PayPal, bank transfers, cash, gift cards, and many more.
- Trade chat– Peer-to-peer marketplaces will often have live trade chats that will allow you to communicate with your trade partner. This can help the trading be more efficient as any clarifications can be made between the buyer and seller at any time. This feature will also allow people to form business relationships that could be beneficial for both parties.
- Personalized offers– As mentioned earlier, buyers and sellers can set their preferences when it comes to searching/creating offers. Buyers can choose among a long list of offers depending on the price of the bitcoin, the currency, the payment method, etc. Sellers can tailor those offers according to their preferences as well. They can set the price of their bitcoin (profit percentage), preferred currency, and some platforms even offer a “near-you” style of offer that would only show buyers the offer if they were geographically near them.
Although traditional bitcoin exchanges seem easier because of the platform acting as a middleman, there are often extra fees attached to that. Fewer fees are implemented on both buyers and sellers on these platforms, making peer-to-peer platforms more cost-efficient than its predecessor.
Last but not the least, trades are not affected by the price of bitcoin. If you’re constantly trading on a peer-to-peer marketplace, the price will never matter since your money is technically changing form over and over again. If you buy bitcoins at a certain price for a $20 gift card, you’ll be able to buy the gift card back—selling bitcoins for gift cards. Peer-to-peer marketplace users are not/should not be phased by dips in bitcoin’s price. Even during the most recent dip (where the price dropped to around $3,000), there are reports that show that trading volume was even higher on these platforms.
Cons: Anyone can trade
As mentioned several times in this article, traditional bitcoin exchanges often act as a middleman and help buyers and sellers trade—making it much easier for the traders. Peer-to-peer marketplaces can come off as a little intimidating (especially to newbies) as the learning curve is much steeper. This is mainly due to the nature of trading on these platforms.
On peer-to-peer marketplaces, anyonecan trade. Although it has been mentioned that the personalized trading experience can make trades more efficient, it solely depends on your trade partner. Sometimes, you’ll have a trade partner that knows what he/she is doing and sometimes, you’ll have a trade partner that’s not so experienced and will take a little longer. Even when you have a partner that’s experienced, bitcoin and fiat transactions still have to come through and be verified before the trade is completed—so allow a little time for that.
Having a slow trade partner is bad, but having a scammer as a trade partner is worse. Since anyone has the ability to use peer-to-peer marketplaces (meaning that no bank accounts need to be linked, some platforms don’t require ID verification, etc.), people sometimes run into scammers. Fortunately, peer-to-peer platforms have started evolving since then. They’ve begun implementing security measures that are specifically tailored to combat scammers. These measures include escrow systems, 2FA, and upgraded moderators.
The perfect vehicle for peer-to-peer finance
When it comes to traditional bitcoin exchanges versus peer-to-peer marketplaces, neither platforms is better. Choosing one will depend on your trading style. Make sure to give both a shot to figure out which one you like more.
Bitcoin and peer-to-peer marketplaces, as mentioned earlier, have seen a rise in popularity. This is because people are starting to find creative ways to use them as vehicles. People are starting to figure out that bitcoin can be used for more than just investment. It can be used for making payments, sending remittances, wealth preservation, and who knows? There will probably be more possibilities in the future.