If you are a long-time investor, you will certainly be familiar with P2P – peer-to-peer networks. However, for new traders, what P2P is is still a strange concept and many issues need to be learned. In the cryptocurrency market, P2P trading is the most popular. Let’s find out with Learn Crypto Trading right here. 

What is the P2P model?

P2P‘s full name is Peer to Peer Network. This is the term used to refer to peer-to-peer transactions. This means a transaction is made directly between the buyer and seller of cryptocurrency without the need for an intermediary. Not only connecting two traders, P2P can also create an effective protective barrier to ensure the safety of transactions. 

To make it easier to understand, you can imagine that you can directly buy and sell coins like Bitcoin, ETH, … without going through intermediaries. For example, at CEX, you will place an order and the exchange will evaluate the market to add your order to the system, searching for trading conditions on your behalf. But when choosing P2P trading, you have complete control over everything, from price to payment time and even who you want to trade with. 

Learn how peer-to-peer operates and operating principles

Understanding the nature of a P2P peer-to-peer network, traders can also easily imagine how it works. 

• P2P does not hold user orders. It only supports direct money transfers for users to transact themselves. 
• First, users post the amount they want to sell and set a specific price. The P2P exchange will search and match an order with a person who is placing a similar buy order.
• Once the seller and buyer confirm the transaction, the crypto will be held until the transaction is completed. This will help ensure the safety of all participants. 
• When the buyer pays the seller directly, the P2P transaction is processed. The escrow service will proceed to unlock the cryptocurrency to transfer to the buyer’s account. 

P2P trading is used for direct transactions of cryptocurrencies. With derivatives transactions, investors need to choose exchanges that support these types of contracts. 

Advantages of peer-to-peer network

P2P transactions have many outstanding advantages compared to other transactions in the Crypto market: 

The P2P trading marketplace is deployed globally by individual agreement

P2P can be deployed in hundreds of countries. This can help traders buy and sell cryptocurrencies quickly in just a few minutes. Its marketplace allows for extremely convenient global deployment. 

See more: What is crypto? Discover what the world of Crypto

There are many payment methods when using P2P

Traditional Crypto exchanges often limit payments. Meanwhile, trading with P2P will have many options. Traders can even pay with cash. This will be extremely convenient for people who do not have a bank account. 

P2P transaction fees are minimal, even zero

Peer-to-peer allows traders to optimize costs. Many exchanges support customers with very low prices, even zero. Of course, each P2P exchange will have different regulations. Therefore, investors need to consider costs before choosing a trading platform. 

Safe and secure peer-to-peer network transactions

Through escrow, P2P buyers and sellers can feel secure with every transaction. The amount traded will be listed until both parties complete the transaction obligation which will be transferred to the buyer. At the same time, every transaction will have a specified time. After this time, the order will be canceled. The transaction amount will be returned to the seller’s account. 

What potential risks do P2P peer-to-peer networks have? 

Besides the benefits, peer-to-peer networks also have some basic risks:

• P2P transaction speeds can be slow compared to transactions on traditional crypto exchanges. Because on traditional exchanges, traders will not need to wait for the buyer/seller to confirm the transaction. 
• Low liquidity compared to CEX exchanges. Therefore, large investors may not like to trade here. 

Application of P2P network in the Crypto market

It can be said that P2P is a useful and convenient tool for traders to invest in cryptocurrency. In addition to direct trading, traders can also minimize transaction fees. P2P applications can be leveraged in many ways: 

Leverage P2P to arbitrage with fiat currencies

Using Fiat – fiat money to trade coins is the way you can make money with P2P. At each exchange, traders can choose from a variety of fiat currencies and arbitrage. 

For example, the buying price of BTC in the current period is 20,000 USD, and the selling price is 19,500 USD. Meanwhile, if the price of BTC is 23,000 EUR and the selling is 22, 800. Thus, if you buy BTC for USD and sell it for Euro, you will have a corresponding profit of 200 Euro. 

Taking advantage of the price difference of fiat currencies to buy and sell coins helps investors make effective profits. This forces you to learn about price differences and choose to buy and sell in different markets. 

Profit from peer-to-peer trading between Crypto exchanges

There are also different price differences between P2P exchanges. For example, on exchange A, BTC is sold for 20,000USD. However, on exchange B, it is sold for 20,100 USD. Thus, a trader needs to buy coins on exchange A and sell these coins on exchange B to earn a profit of up to 100 USD. 

See more: Open Bybit account: Explore the world of Crypto

P2P trading guide for new traders

Making transactions with P2P is not too difficult. New traders can follow the process below:

• Choose a decentralized exchange that supports P2P trading. Open an account at the exchange and perform authentication steps to have a genuine account to trade. After logging in, deposit money and select P2P to proceed with the transaction. 
• Select Buy order. Select the Crypto coin you want to trade. You should consider finding out the prices of coins and setting up appropriate buy and sell orders. When buying coins, you should choose a seller with the following criteria: best price, appropriate amount, high number of orders executed by the seller, and good order completion rate. 
• The system will lead to the payment transfer page. The trader makes payment with options and sends a payment bill to the buyer. After the transaction is completed, you will receive the corresponding amount of coins
• In case you do not want to buy coins anymore, you can return to the Order page and select Cancel order. Specify the reason for canceling the order for this peer-to-peer network transaction. And you should only cancel the order if you haven’t paid yet. 

Conclude

Learn Crypto Trading has detailed information for you about P2P trading and related issues. It can be seen that this is an extremely interesting and safe cryptocurrency trading option, suitable for traders with little capital. Watch for other trading guidance news from us to gain more useful and practical trading experience!

FAQs

Does peer-to-peer trading use leverage?

No, peer-to-peer network transactions use direct payments without leverage.

What does the safety of P2P transactions depend on?

The safety of this transaction will depend on the trading platform as well as the security and safety measures that that platform applies. Therefore, traders need to pay attention to choosing a crypto exchange with reputable peer-to-peer support to participate.

Is margin required when trading peer-to-peer?

Correct. Choosing an exchange with a margin will help avoid more risks, to avoid the situation where the buyer has paid but the seller does not deliver the coins.