The term “bitcoin” is one that you more than likely have heard of. That does not necessarily mean you know what it is, so I am going to be helpful and let you know. (And, if you already know, bear with me!) To put it as simply as possible, bitcoin is a digital currency that is part of the bitcoin network. You can buy bitcoin and it is another way of providing payment for an object, service, etc., like a wire transfer. However, bitcoin transactions are in no way represented in a physical form, such as in cash or a check. Someone receiving bitcoin as a form of currency will receive it as a security code, with 16 symbols included. The symbols are then decoded with the receiver’s smartphone, to get what is known as cryptocurrency. This means that you have now received digital currency and you can use to pay for items or services online. (If the merchant excepts bitcoin cash, of course.) Although bitcoin is a digital currency and can be used for almost any transaction online, it can be cashed out into a physical currency. Still with me?
Now, a peer-to-peer bitcoin exchange is much more personal than a “regular” bitcoin exchange. This means that you are trading directly (buy and sell bitcoin) with another person and, therefore, have more information that belongs to that person or business. You have more information than simply a code and have a better understanding of who you are trading with. By completing a peer-to-peer bitcoin exchange, you have been matched or have found someone who is also interested in trading currency in this way. Therefore, you do not need to go through a third party to exchange these bitcoins and can exchange it directly between you.
We are going to look at five of the pros of peer-to-peer bitcoin exchanges as opposed to regular—and you can decide for yourself whether or not it may be right for you.
1. It is cheaper than a regular exchange.
Regular bitcoin exchanges are operated by a third party—people who have to be paid. Due to the fact that peer-to-peer exchanges of buying bitcoin are run by computer software, you are not paying a physical third party to complete this transaction for you. As a result, there are little—if any—additional fees to exchange bitcoin in this way. It is no secret that one of the main cons of conducting any sort of monetary exchange on the Internet is the fees that are charged as a result. If we do not feel that it is absolutely necessary, we are going to avoid these costs if at all possible. You may also feel like you are paying someone for a job that you could very well be doing yourself. Considering peer-to-peer exchanges over regular can definitely help cut some—if not all—of these costs.
2. You know who you are making your exchange with (making it more secure).
Some will argue that this is not true, but it is, in fact, true, as long as you have done your research on who you are making the exchange with, and you know they have a good reputation. While you have no information about who you are making your transaction within regular trade, with peer-to-peer bitcoin exchanges you have much more information about them. The information you have access to can range, but it often includes the other party’s IP address, their username, location, and bitcoin wallet address. Although not everyone may be interested in completing their bitcoin exchange face to face, it is also an option for those who are willing to do it for that extra bit of security in knowing who you are dealing with. Even if you do not know someone’s first and last night, having vital information such as their IP address would prove incredibly invaluable in the case of any sort of fraud.
3. You do not need to produce your own identity.
While this may seem like a downside in terms of knowing exactly who are you are making your exchange with, a peer-to-peer system will not ask you for proof of your identity. This is obviously ideal for those who do not like giving away too much of their identity on the Internet, for fear of invasion of privacy, identity theft, etc. A peer-to-peer bitcoin exchange system is actually based out of reputation, where you, therefore, establish trust. This system, which is, again, purely a computer system and not run by people, can refer you to other people who want to conduct peer-to-peer exchanges by their credibility and reputation. You may have heard that a peer-to-peer network has a “built-in reputation system” and this is why.
4. It is usually not necessary to involve a third party.
As mentioned above, peer-to-peer bitcoin exchanges generally do not require the involvement of third parties. Most people consider this a benefit for all kinds of reasons, including lower costs, and avoiding access to your personal information. However, it may be helpful to know that you can involve a third party if you deem it necessary. As with any sort of monetary trade, there may be disputes between the parties, which would require a third party outside of a computer system to act as an arbitrator in the situation, and come up with a solution.
5. You are better protected.
Due to the fact that peer-to-peer exchange websites are run by an intuitive software and not by a third party (physical humans), they cannot be exploited by the government in the same way that regular exchange websites can. This is due to the fact that there is no physical person or authority that the government would be able to impose their restrictions on, essentially leaving you and your bitcoin funds alone.
Although peer-to-peer bitcoin exchanges do have their small drawbacks, these are becoming few and far between. The platforms and software for peer-to-peer exchanges are becoming faster and more secure all the time, making the benefits of this sort of exchange far outweigh the dying negatives!
