Sell your crypto peer-to-peer with zero trading fees on Coinhaven. Simply browse through the already posted buy or sell ads. If you don’t see an ad that you like or if you would rather wait to get a better price, go ahead and post your own buy or sell ad. Get started right away by visiting our beginner-friendly Coinhaven P2P trading platform here.
*Sellers trade for free. Buyers pay a small fee deducted from the amount of crypto they get against the amount of fiat they want to spend before creating an order.
What is a Peer-to-Peer (P2P) network and how does it work?
Recall the first time you heard the term peer-to-peer network. It was probably at the tail-end of the 1990s or around the early 2000s. The popularity of file-sharing programs for PC, such as Limewire, Napster and BitTorrent even made some headlines in regards to music piracy. Those were the days before Spotify and video streaming, so you may have even used one of more of these P2P programs yourself in order to obtain your favorite musician’s new album or the funny new comedy film everyone at school was talking about. If you’re younger, however, P2P may seem to you like a term shrouded in mystery. Luckily, this article will help explain and clarify what P2P means within the current context and how it relates to digital asset trading.
Intro to peer-to-peer (P2P) networks
It’s getting more technical now. A peer-to-peer (P2P) network consists of a network between two or more devices that collectively store and share files. Each member of the network is called a node and acts as an individual peer. The term peer is deliberately chosen because it implies the absence of a hierarchy within the network, meaning that nodes have equal power while storing and sharing data and there is no “middle man”. P2P is collective sharing in its purest form.
Within the FinTech industry, P2P usually signifies the exchange of cryptocurrencies (or other digital assets, such as NFTs) via a distributed network. Exchange platforms that have a P2P feature allow buyers and sellers to trade between themselves with no need for intermediaries. In fact, P2P networks are at the core of most cryptocurrencies and blockchain projects.
How P2P works
Because there is no central administrator or server, P2P systems are usually maintained by their distributed network of users. Each node stores a copy of the files being shared and fulfils both the role of a client and a server to other nodes. This means that each node can download AND upload files (or parts of a file) to and from all other nodes.
Because every node can store, transmit and receive files, P2P networks are usually faster, more efficient and more secure as they grow in size. In fact, they are quite secure to begin with, because unlike traditional networks, P2P networks don’t have a server to act as a single point of failure. Such truly distributed architecture makes P2P systems extremely resistant to cyberattacks.
Knowing these facts, it is little wonder then that the use of P2P distributed architecture in the context of decentralized blockchain protocols has become P2P’s most famous use case to date. After all, it is the technology that made Bitcoin possible way back in 2008. The peer-to-peer structure of cryptocurrencies acts as digital ledger that publicly records all activity on the network, making certain that each node holds a copy of the blockchain while simultaneously comparing it to other nodes.
To ensure all data is 100% accurate across all nodes, the blockchain network is designed to instantly reject any malicious attempt at altering even one byte in the dataset being shared. This task is carried out by so called ‘full nodes’ on the network, as they are the ones doing the necessary computational work to verify transactions against the blockchain protocol’s consensus rules. Each full node holds a complete, regularly updated copy of the whole blockchain, which allows full nodes to collectively verify the true state of the distributed ledger.
What is Peer-to-Peer (P2P) trading?
Peer-to-peer trading is the activity of buying and selling cryptocurrency between users in the most direct manner possible – without a third party or intermediary. But how is that different from bitcoin trading on a traditional crypto exchange like Coinbase or Binance for example? Aren’t all trades on any exchange by definition peer-to-peer since blockchain itself is about decentralization? Well, not quite. When users of traditional exchanges buy or sell Bitcoin or altcoins, they don’t actually get to transact directly with one another. The exchange platform itself acts as the intermediary of the trade and usually takes a certain percentage of the trade’s value in the form of transaction fees. Furthermore, crypto trading on such centralized exchange platforms means that the price users buy and sell at isn’t determined solely by the users but mostly by the market price at the time of the transaction.
By contrast, P2P trading provides traders with significantly more control over who they buy from or sell to, as well as over the price and the settlement time. Due to the decentralized nature of such trading and the absence of someone reliable to broker the deal, there could be certain risks involved in peer-to-peer trading. Fortunately, this is where an advanced P2P exchange interface, such as Coinhaven’s P2P platform, comes in handy as it has been designed to prevent most types of attempted fraud between peers.
How P2P crypto trading works
The main function of P2P crypto exchange platforms is to connect buyers with sellers. The interface allows users to browse buy/sell ads or post their own buy/sell ads. It is much safer to do that on a designated P2P exchange platform rather than on some P2P web forum because P2P exchange platforms have mechanisms in place to ensure that everyone involved in a transaction is protected from being defrauded by their counterparty. One such trust-establishing mechanism is a well-implemented public rating and feedback system. For example, if a user sells Bitcoin to another user, but does not receive the expected payment in return, they can leave negative feedback that could disqualify the fraudulent buyer from future attempts to trade on the platform.
Another security mechanism that P2P platforms use to safeguard transactions and reduce the risk of fraud is to implement escrow functionality. Escrow serves to secure the digital assets in the exchange until both parties have confirmed the transaction. For example, if a seller is exchanging their crypto for fiat, the platform can withhold the cryptocurrency amount from being sent to the buyer’s blockchain wallet until the buyer’s fiat transaction has been confirmed. The platform will then allow the crypto trade to go through, thus ensuring the safety and security of all funds involved. In case the buyer or the seller is subsequently unhappy with the transaction, they can file an appeal to resolve the issue or call Coinhaven’s customer support for help.
Armed with all this knowledge, you are now ready to begin P2P trading on your own. Get started by visiting our beginner-friendly Coinhaven P2P trading platform here.