The popularity of cryptocurrency exchanges is growing steadily, yet many don’t know what it is and what it does., So, let us educate ourselves about the platforms that enable the exchange for crypto users. P2P crypto exchange offers numerous benefits to the users through blockchain and its features, thereby facilitating seamless exchanges of cryptocurrencies.
What is a P2P Cryptocurrency Exchange?
P2P cryptocurrency exchange is an online platform that allows its users to trade cryptocurrencies for other cryptos or fiat(real-time currency like dollars/euros). It facilitates direct exchange without any intermediaries.
What purpose does it serve?
P2P exchanges were developed to tackle multiple issues faced by users in using the cryptocurrencies. Some of the primary reasons were,
- Bridging the cryptocurrencies with the real-world economy.
- Expanding the market for similar services.
- Reducing the expenses on human resources.
- Implementing a decentralized approach.
How do P2P cryptocurrency exchange platforms function?
Parties involved in the trade are the buyers and sellers. Exchanges are facilitated by a public order book and matchmaking algorithms.
- Sellers place ‘sale orders’ on the order book that can be viewed publicly.
- Buyers seeking to acquire cryptocurrencies search the order book for satisfactory orders to engage in.
- The buyers are also allowed to place ‘buy orders’.
- When matched, the buyer and seller engage in exchanging funds.
- Exchange is governed by smart contracts that oversee the protocols and end-to-end transactions.
- Successful transactions are recorded as entries in distributed ledgers.
- P2P cryptocurrency exchanges offer a decentralized approach through distributed ledgers.
- They provide reliable traceability of transactions.
- Transparency in trade is promoted by publicly distributed ledgers.
- Smart contracts automate the transactions.
- Prompt contingencies are also offered by smart contracts.
Overall, these platforms enable users to exchange cryptocurrencies and utilize their full capacity in the real world.