Analyzing if Decentralized Exchange Development would make Peer-to-Peer exchange
The business of Decentralized exchange development has reached massive proportions recently as it provides a viable solution to deal with security issues in the absence of third parties. They provide users with trustless trading experience as they are resistant to hacking attacks. Decentralized exchanges also offer the listing of some coins for free to promote trading.
Similarly, we have seen the emergence of Peer-to-Peer exchanges which permit users to directly buy and sell cryptocurrencies with each other. Hence, the big question is whether decentralized exchange development would completely replace Peer-to-Peer exchanges or both the types of exchanges would exist simultaneously in the market.
P2P exchanges are advantageous as they are free from government intervention and regulatory action. It is very simple to use and is highly versatile. Decentralized exchanges need to accept the usage of fiat currencies as cash is still considered as the king despite the advent of online payments. Most of them are permitting the only crypto to crypto trading as of now. They need to offer fiat-pegged tokens to convert tokens into cash easily without the need for a user to trust a centralized payment gateway.
Decentralized exchanges still have to undergo a lot of development processes and lack the ease factor that is widely present in Peer-Peer exchanges. Though their user interface is superior, less tech-savvy users will still find it confusing. Decentralized exchanges involve users to go through cumbersome processes like downloading and installing the software package, creating and backing up a wallet. P2P exchanges are convenient as there are only a few steps like visiting the official website, creating an account, and commencing trading. There are a couple of mobile-based Peer-to-Peer crypto trading applications used widely catering to both Android and iOS users.
Peer-to-Peer exchanges are gaining more users by offering attractive rewards for bringing traffic to their site with an exclusive referral program. It is a great way to earn some extra cash for users by inviting their friends, colleagues, or relatives to join an exchange platform. This creates a huge user base and a large variety of options to buy, sell, and exchange cryptocurrency.
Possessing a plethora of advantages as seen above, P2P exchanges are not fading away in this era of digitized trading. Blockchain-based decentralized exchanges need to work hard to beat the usage of peer-to-peer exchanges.
Peer-to-Peer exchanges are not short of limitations as they rely on centralized web servers to host their platform. There have been incidents where scams have occurred due to glitches in the refundable payment methods taken advantage of by malicious actors. Hence, this has forced Peer-to-Peer exchanges to ask for identity verification from the users before making a deal.
Both decentralized and Peer-to-Peer exchanges have certain benefits as they are resistant to transaction censorship since there is not a single entity in control. They rely on software systems to process trades and execute transactions cutting down overhead costs and eventually reducing the fees charged for the users.
There are no chances of theft or misuse of funds as the coins are not entrusted to any third party. The settlement process is kept transparent and secure by an escrow service that acts as a trusted intermediary. They protect the customers from fraudulent sellers existing in the industry by requiring the respective parties to submit an obligatory deposit before entering into a deal. The deposit will be returned in case the trade goes on smoothly.
Some Peer-to-Peer exchanges also provide the option of preferred trading where the buyer can choose his seller for a more trusted trading experience. Top-notch security mechanisms are ensured in the form of two-factor authentication, SSL implementation, and anti-DDoS protection.
An atomic swap is another additional feature introduced recently in Peer-to-Peer exchanges where conflicts are eliminated if there is a breach of the agreement. They act whenever trades are being completed or ended. Though third parties are considered to be absent in Peer-to-Peer exchanges they can step in to redress disputes among different users. They can strengthen their decision by having full access over the user’s transaction history and banking statements.
Decentralized exchanges too have some shortcomings as they lack liquidity and their tokens can be highly volatile. They will not have value-adding features such as a stop-loss order or a limit order. First-time users may not find it to be user-friendly as they would find it a little overwhelming. Hence, factors like ease of usage, support for digital currencies, transaction fees, privacy, and trading volume would matter while investing resources in decentralized exchange development.
Both Peer-to-peer and decentralized exchanges are most likely to coexist in the same ecosystem and ultimately act as a gateway to complete decentralization in the future.
