A P2P Cryptocurrency exchange is a new method in trading where users can directly deal with each other on a platform. There won’t be any intermediaries or third parties in the system except in the case of dispute resolution. Hence, banks, forex services, and other institutions are removed from the process. Users can get the best market rates in the absence of commission-seeking dealers. Instead of matching orders by looking at the order book, P2P exchanges match the people behind these orders.
There will be no intermediation from the financial institutions and no regulations by the financial authorities. Some of the popular P2P exchanges currently functioning are LocalBitcoins, Paxful and Bitvalve.
The process by which P2P Cryptocurrency exchange development works
- If the buyer decides to purchase a digital asset, he will be asked to transfer the payment to the seller.
- Once the seller confirms the receipt of the payment, the digital assets will be unlocked from the escrow system and sent to the buyer.
- There are no chances of sellers misleading the buyers or vice-versa due to the extensive security measures enabling instant settlement of transactions.
The crucial elements needed in P2P Cryptocurrency exchange development
- A high performing matching engine - It ensures that the orders raised by the buyers and sellers are matched quickly with low latency and high efficiency. It has to recognize different types of buy and sell orders. It facilitates fast and safe trading while managing the exchange efficiently.
- Robust security measures - To safeguard the funds and data of the users, steps such as two-factor authentication, password-protected user access, SSL implementation, and jail login have to be taken without fail. It adds another layer of protection and establishes trust in your exchange.
- Quick AML verification and adherence to other guidelines - All the users’ identity and background must be thoroughly checked before onboarding them into the platform. The AML verification process must be expedited ensuring high efficiency without any delays. This will create a strong and authentic user base of buyers and sellers for the P2P exchange. It also helps in preventing any scam attacks on the platform.
- Technical support in multiple languages - Since the P2P platform will have a global user base, it is important to render technical support in several languages. This will help in providing the best user experience and improving retention.
Advantages rendered by P2P Cryptocurrency exchange development
- Access to a global marketplace - A wide range of assets can be traded on a P2P platform. It offers fiat to crypto conversion and vice-versa too. Profitable deals can be stuck with other traders all over the world without any interference.
- No KYC verification - The crypto users of a P2P platform are not subject to any KYC verification process easing their onboarding. They can directly kickstart their trading of assets quickly.
- Ensures supreme security - Through a secure escrow service built on superior smart contract protocols, a high level of security is ensured. Disputes that arise during the execution of trading operations between the buyer and the seller are sorted out by the arbitrators.
- Zero transaction fees - No charges are levied on users for the withdrawal of fiat money or crypto assets. Generally, there are no limitations imposed on deposits made or on the trading of crypto coins on the P2P platform.
- Wide range of payment methods - P2P exchanges accept payments made through debit and credit cards, bank transfers, UPI, money sent through apps like Paytm, and PayPal, etc. It will vary depending on the service provider.
- Highly resistant to transaction censorship - In the absence of third parties or intermediaries, while executing transactions, a P2P exchange makes use of an immutable and distributed ledger for ensuring the processing of transactions in a secure way.
- Quick resolution of disputes - Arbitrators ensure smooth dispute resolution between buyers and sellers. They can make the right decisions by checking the transaction history and bank statements of users. The transacting parties will be asked to lock in some amount in the smart contract escrow before the trade. The escrow will release the amount once the trade has been successfully settled without any hassles.
Limitations involved in P2P Cryptocurrency exchange development
- Since they operate on decentralized networks, the entire system has to be updated whenever transactions occur. This reduces the efficiency of the platform.
- Hackers can exploit the exchanges if the users do not implement the security measures properly. This leads to incidents such as money laundering, fraud, and other illegal activities.
- It will take a lot of time to execute a transaction as crypto traders have to patiently wait for the desired order request in a P2P platform. On the other hand, centralized exchanges have a huge user base enabling robust routing of orders.
The future in store for P2P Cryptocurrency exchange development
While they have not become as popular as established centralized exchanges, the progress made in P2P Cryptocurrency exchange development so far has been impressive. They also comply with AML verification checks. It will be preferred by users who wish to have better security and more privacy. It enables even users with modest income to take part in the modern economy by using the power of Fintech. It does face some challenges in the form of regulatory pressures, intermediary interference, and the need for custodial services. Widespread adoption should be the aim for the uncertain future as it aims to hand the control of assets in the users’ hands without any authority control.
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