With many enterprises aiming to operate their businesses without any intermediary in the system, p2p decentralized exchange is a viable avenue for them. Buyers and sellers can directly carry out trades between themselves and supreme security and complete anonymity will be assured.
How does a p2p trading exchange function?
- The user has to become a member of the platform.
- He has to create his wallet for sending and receiving cryptocurrencies.
- He can either post a buy or sell order on the platform.
- The matching engine will match the request raised by the buyer and the seller.
- Traders can negotiate the price and payment methods through the in-built encrypted chat facility.
- If both sides find the terms and conditions favourable to them, they seal the deal immediately.
- The smart contract will hold the seller’s cryptos.
- The buyer initiates the payment process.
- The seller will verify the payment receipt.
- The asset will be released from the escrow after the seller confirms receiving the payment from the buyer.
- The buyer will receive the cryptocurrencies in his wallet.
The typical features of a p2p trading exchange
- Absence of a formal registration process – Users can commence their trading operations on the platform just by using their digital wallet without needing to undergo a sign-up process.
- No requirement to make an initial deposit – Users need not make any deposit to start trading. They can trade from one wallet to another with the help of robust smart contracts. This will attract new users into the platform especially those who do not have sufficient financial backing.
- Automated trading facility – By using Hydro API documentation, trading is facilitated through bots which provides a seamless experience for the traders.
- 24×7 trading option – Users of a p2p token exchange can smoothly trade round the clock through mobile apps on Google Play Store or Apple App Store available on their smartphones. This enables them to keep track of their funds or assets constantly. All the details of their crypto holdings will be present right at their fingertips.
- Low trading fees – The charges collected for carrying out trading on the platform are minimal. The average maker and taker fees are just 0.1% and 0.3% respectively. A discount will also be provided for Hydro Protocol Token (HOT) holders.
- Secure processing of transactions – The hydro smart contract protocols monitor the execution of transactions by the users. It provides a safe, fast, and secure environment for the exchange of digital assets.
The other features available are multi-chain development on a variety of blockchain networks, asymmetrical fee structure, market order capability, order expiration option, stable coin trading facility, and reduced gas fees.
The advantages of using a p2p ethereum exchange
- They are equipped with multi-signature wallets adding another layer of security for the cryptocurrency transactions made by the user.
- A margin trading facility is available which will boost the traders’ earnings by many times. Traders who have limited resources can use this feature to add leverage to their investment.
- The p2p ethereum exchange is armed with Cross-Site Request Forgery (CSRF) protection to avoid unwanted leakage of data from the users’ side. Other security aspects include two-factor authentication and SSL implementation.
- There is a reduction in the overhead costs as software systems will automatically operate the p2p transfers between the users on the platform. This also contributes to a decrease in the overall user fees.
- They are highly resistant to transaction censorship and are completely free from any government intervention or control by a central authority.
- There is no chance of any loss of funds as the users need not entrust their assets to any third-party.
- The best user experience is provided as technical support is available in multiple languages 24×7.
- A secure admin panel is available for real-time monitoring of the operations and they handle critical elements like dispute management and the escrow system.
Some of the limitations of an eth p2p exchange are
- They are less intuitive to use as they cater to small and specific sets of audiences and are not so attractive to newcomers in the market.
- They suffer from long trading times leading to delay in settlements as traders have to actually wait for the fiat transactions to complete before concluding a trade.
- The lack of liquidity and trading volume, when compared to centralized exchanges, leads to a lack of demand in an eth p2p exchange. Professional traders who want fast execution of transactions to strike timely deals would prefer using a centralized exchange instead as they would not find anything attractive in p2p platforms.
- They lack functionality as they offer only basic trading options in contrast to the centralized cryptocurrency exchanges. They lack features like stop loss and take profit trading.
- Since they do not follow KYC (Know Your Customer) or AML (Anti Money Laundering) regulations, it can lead to possibilities of fraudulent transactions to occur in the system.
Despite having a lot of merits and some demerits, p2p decentralized exchanges are progressing in the right direction. It can allow cheaper and faster transactions for the traders circumventing the limitations imposed on crypto trading by a traditional exchange.