Bitcoin, the first cryptocurrency, was the idea of Satoshi Nakamoto. Bitcoin was introduced to facilitate peer-to-peer transactions that would allow people in the network to transact freely across the globe without any third-party intervention. To enable such a system, the value points of decentralization had to be leveraged to enable the functioning of a true marketplace, thus P2P exchange development.
of a P2P exchange platform
exchange platform works on the mechanism of decentralization that
connects buyers and sellers on a virtual system. Both parties come
and put their orders (buy and sell orders) on the platform. A P2P
exchange is underpinned by a smart contract-based escrow system to
enable trusted transactions. As soon as the order matches, the assets
of the seller are locked in the escrow account. On the other hand,
when the buyer transfers funds to the seller in exchange for buying
crypto (say in USD, EUR), and when the seller confirms having
received the funds, the seller’s assets are released from the
Escrow account and transferred to the buyer’s wallet.
Advantages of P2P platform:
- Enhanced privacy: The framework of the FinTech regulatory system is ever-changing and becoming stringent day-by-day. Many retail and institutional investors have started investing in the crypto market. With increased trading, rigorous regulations have come into place. Due to the integration of fiat payment gateways such as UDS, EUR, etc., exchanges are adopting KYC checks to comply with the increased need for security. Thus P2P platforms are also walking on the same lines and have started aligning themselves with all the security guidelines.
- No centralized mechanism or middleman: Most of the popular exchanges such as Binance, Coinbase and others are centralized exchanges that operate as corporates in the crypto world. However, P2P exchange development eliminates third-party functions and P2P exchange platforms operate without any central authority.
- Control of assets: The users in the P2P exchange platforms are given complete control over their assets. Buyers are provided with the option to secure their assets through an escrow account and multi-sig wallet. Although centralized exchanges also allow their users to transfer their funds to an external wallet, crypto owners do not withdraw their holdings and prefer to keep their assets on the exchange software. There is a famous saying “if not your keys, then not your coins”, which that if you put your assets on the exchange, then you are more prone to hacking and internal malpractices.
- Increased adoption: P2P platforms limit the requirement of banks to transact the monies or assets. Therefore, the platform operates in all jurisdictions and also has the potential to cover the 1.7 unbanked populations.
Challenges of P2P platform:
- Trust mechanism: P2P platforms do indulge in disputes at times. There are instances where buyers or sellers perform inappropriate activities to take advantage of the situation. For instance, the buyer may claim that he has sent the currencies without actually sending them, or the seller may claim that he has not received the selling amount even after receiving them. In all these cases, the dispute redressal system of the P2P exchange comes into action to resolve the issue.
- Liquidity: P2P exchange platforms at times perform lower than centralized exchanges in terms of liquidity.
- Option of trade orders: P2P platforms offer lesser trade options than centralized exchange platforms. While P2P exchanges mostly offer market orders and other similar functions, centralized exchanges offer many other types such as limit orders, stop losses, APIs, etc.
Due to the increased hacks in the centralized exchanges, even Binance and many other renowned exchanges prompted the crypto traders and users to shift to P2P exchange platforms. An increased need for P2P exchange development has been witnessed in the global crypto market. P2P platforms are making the whole trading process straightforward.
a stronger regulatory and banking framework, P2P platforms are
witnessing wider adoption.
If you are also planning for P2P crypto exchange development, Antier can help. Whether you want to build a WazirX-like exchange or a custom P2P exchange, we offer customized services to help you accomplish your business goals.
free consultation is available to discuss your business needs, no
obligation, just a friendly chat to work out if we can help.