As the name implies, crypto peer-to-peer (P2P) trading is the trading of cryptocurrencies directly between one crypto owner and another. It is faster and cheaper than traditional ways of trading, because it does not involve an intermediary.
P2P trading usually happens on a decentralized platform known as a P2P platform. While there are dedicated platforms for doing this, centralized exchanges like Binance also provide such decentralized platforms.
Trading on P2P platforms provided by centralized exchanges costs nothing since there’s zero fees. There’s also no interference from the platform unless one of the parties in the trade raises concerns on a trade.
Because P2P trading is usually done using your local currency, it is an easy way to sell your crypto assets for your local currency, or use your currency to buy crypto directly without having to use a centralized exchange.
You can use different payment methods, depending on which one is most convenient for you. The trading platform usually provides a wide range of payment options that you can choose from to make your trade as easy as possible.
How P2P Trading Works
As stated earlier, P2P trading can be done on a centralized exchange platform or on a dedicated P2P platform like Paxful. Although the details of the trades make them slightly different, the process is basically the same.
In both cases, you need to register and complete KYC on the platform to start P2P trading. After meeting the conditions, you can now go to the trading portal and then look for traders who wish to trade.
For the sake of this guide, we’ll assume you’re using the Binance P2P platform. After completing KYC, you can proceed to the P2P trading platform and search for sellers. Let’s assume you wish to buy some USDT.
Select the “Buy” option and then enter the amount of fiat currency you wish to spend. When you do this, the system will filter the traders by the amount of USDT you wish to buy, and rank them from the best price offer to the worst.
Choose the top most offer, as this is usually the best you can get. You can then enter the amount you wish to pay, and you’ll see how much USDT you’ll get upfront, based on the seller’s rate.
Proceed to click the “Buy” button and the seller will be notified of the trade. You’ll then be expected to send the specified payment amount to the seller’s provided account details and then notify them by clicking on the button that says payment has been sent.
They’ll then be expected to release your USDT once they receive confirmation that the money has gotten to their account. There’s usually no fear that the seller will try to cheat but if they do, you have a choice to appeal the trade, and the platform will take up the case.
If you provide sufficient evidence that you did send the payment but the seller didn’t release the assets, the platform will release the assets to you because they were locked in an escrow account the moment you confirmed that you had paid for them.
Pros of P2P Trading
There are many advantages to using P2P trading. The first is that the trade is done in your local currency. This opens the door to several possibilities, including buying crypto with cash if you live close to the seller.
Secondly, it is absolutely free, and almost instant, depending on the time the other party takes to respond.
Cons of P2P Trading
P2P trading also has its cons, one of which is that you have to complete KYC before usin the service. This may be a turn off for those who don’t like the idea of leaving digital footprints.
Also, there are chances of fraud, but this doesn’t usually occur because their are grave consequences and no one who’s serious would risk such consequences.