Full form of P2P is Peer to Peer. P2P or Peer to Peer is a way in which there is direct user interaction between two parties or groups. P2P services have played an important role not only in the business of the P2P cryptocurrency exchange but also in retail, technology, e-commerce, energy, etc. In a P2P network, the “peers” are the system/party/groups that are connected to each other via a network. Transactions of any kind happen directly between these systems or parties or groups.
What does it signify in cryptocurrency
So, what does P2P mean in cryptocurrency? How do P2P exchanges work? We are going to discuss everything in detail.
We know that P2P is Peer to Peer that this transaction between any two object without having a middle man in between.
How P2P Cryptocurrency Exchange Works?
So, the cryptocurrency exchanges like Localbitcoin and WazirX uses this method to help their users buy/sell cryptocurrencies with a minimum hurdle. If you are a user who wants to sell your crypto and there exists a user who wants to buy at the same rate you are offering then the P2P exchange platform like these connects you with them.
Once connected, the buyer is then asked to deposit funds directly to the seller’s bank account. While the sellers crypto get frozen until the transaction took place. Once transacted, the platform, send the frozen cryptos to buyers account. The platform, make sure that a successful trade(buy or sell) took place between them and act as an escrow for safekeeping of the transaction.
It works like this –
How P2P exchange work for Buyers –
Step I – Buyers places an order to buy. The exchange finds a suitable seller as per the price offered.
Step II – The Seller, pay directly to the buyer’s bank account and seller confirms his payment.
Step III – The Exchange like WazirX releases the escrowed crypto to the buyer’s account.
How P2P exchange work for Sellers –
Step I – Seller places an order to sell his cryptocurrency. The exchange frozes/escrows the selling cryptos.
Step II – Buyers pays the money directly to the seller’s bank accounts through IMPS/NEFT or e-wallets (Whatever that specific exchange supports).
Step III – The seller confirms that he received the payment and the exchange release the escrowed cryptos to the buyer’s wallets.
And this is how a successful trade took place between two peers/person using P2P.
In case of any disputes, like buyers sent the money but the seller never confirms it, in that case, the seller contacts to the exchange and then the exchange will take over and clear your funds. They ask for your transaction id and take a call over it.
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