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P2P Bitcoin Trade – The Ins and Outs of the Business

May 9, 2023

The decentralized economy is a vast and promising space that is not only characterized by a great degree of freedom of interaction among its participants, but is also teeming with assets open for exchange. The initial concept of the decentralized economy was based on using the ability to interact without an intermediary on a peer-to-peer basis via a universal unit of account, which was supposed to be Bitcoin. The digital currency was designed to be universal and transparent for all to see on the basis of a decentralized ledger – the blockchain, which provided not only transparency, but also security thanks to its unique and vastly innovative mechanism of Proof-of-Work.

Over time, the development of the decentralized economy took on a specific turn, which was not in favor of the original beneficiaries of the Bitcoin project – the users and average participants who were supposed to enjoy transparency and freedom of transacting. The business side of the economy took a genuine interest in the possibilities of using the blockchain for both improving existing processes and extracting profit from the application of the technology in the plane of innovation as a magnet for investments.

By cleverly leveraging the instruments of advertising, marketing, public relations, and the media, both businesses and entrepreneurs alike perverted the concept of decentralization and converted it into an instrument of monetization and enrichment of their own. The users were once again bereft of the original benefits that the blockchain was supposed to have provided and were shackled into new tethers of centralization forged by the projects that emerged on the basis of Bitcoin and its many new derivatives. What was supposed to have become a free environment for the people became merely a digital reflection of the traditional economy, simply based on the blockchain.

Such a turn of events was unfortunate, but inevitable, since the users themselves had allowed themselves to be fooled into thinking that decentralization could be augmented by a foundation of centralized projects. More importantly, the users were lured and seduced by the promise of profits that the projects allowing the sale and purchase of a vast variety of digital assets had spawned. The end of decentralization was finally marked by the arrival of regulators from the government and authorities, who had noticed that potential profits from taxes are slipping through their fingers.

The ensuing regulation of the digital industry was inevitable and is continuing to this day, with such countries as India, China, and others routinely introducing bans on cryptocurrencies and by conducting raids against their operators. Ironically, these countries are experimenting with state-issued cryptocurrencies, since the national banks of many countries have long realized the potential of blockchain as a means of controlling transactions, rather than setting them free to be conducted on a peer-to-peer basis. Just as the blockchain had the power of liberating users, it is now being used to imprison them once again, nullifying any hope of a fully decentralized economy anytime in the future.

Though such events may be unfortunate, they should be viewed from a perspective of opportunity as well, since the blockchain still exists and is gaining greater popularity and adoption around the world with the gradual acceptance of cryptocurrencies as a means of payment by both businesses and governments alike. The emergence and inevitable fielding of digital currencies issued by governments and national banks – the CBDCs, or Central Bank Decentralized Currencies, should be viewed as a major step in the development of the digital economy and an application of its core purpose on a state level. This development can herald not only the general and global acceptance of blockchain as a revolutionary technology, but can also act as a major impulse for the growth of the decentralized economy as a whole, as it will have gained regulatory recognition and a unified framework to avoid fraud.

The Peer-to-Peer Phenomenon

When first launched, Bitcoin had no places to be traded. There were only the miners and the wallets that the mined assets were transferred to. This original, primordial, even primal state of existence of the blockchain is still regarded as the sole real and intended form of its application for the execution of peer-to-peer transactions. The core concept of peer-to-peer operations is to avoid the interference of any intermediaries. This means that no third party can be involved in the process of transfer and all conditions pertaining to it will have to be discussed on an individual basis between the parties to it. Such an approach is the idea of a peer-to-peer exchange. The key advantages of P2P trading are:

- Direct interaction between parties;
- Anonymity;
- Low commissions;
- Directly set pricing.

Originally, any P2P Bitcoin exchange had to be conducted between two wallets holding the assets on the Bitcoin blockchain. But some individuals soon realized that there were users willing to acquire Bitcoin without having to become miners. This led to the development of the first exchanges. Such platforms provided users with the ability to open up wallets of their own that could be used to store Bitcoin and transfer it, for a small fee, to any other wallet at a price, essentially turning the process from transfer into trading. This introduction of a third party eliminated the concept of peer-to-peer trading that had been originally embedded in Bitcoin and marked the beginning of the cryptocurrency trading era.

Since then, dozens of cryptocurrency exchanges emerged on the market, each one vying for the title of the top exchange by offering users extensive functionality, various features, intuitive or streamlined interfaces, lower commissions, additional services, and a plethora of other functions that were either exotic or outright unnecessary. However, the concept of peer-to-peer trading and transacting persisted and continued to be employed by users seeking either anonymity in their trades or an escape from the increasingly centralized approach to digital asset usage.

The answer came with the development of fully decentralized exchanges and peer-to-peer trading platforms, which merely offered participants to a trade a venue they could resort to conduct exchanges of digital assets on a peer-to-peer basis just like before. Such trading platforms have some specific advantages over their centralized counterparts, as they offer anonymity and extended trading options in terms of access to order books and commissions for transfers. Professional traders are increasingly turning to decentralized trading exchanges for their operations, but always warn that such risks as impermanent loss are a problem, as matching engines on such venues are still in need of refinement.

USDT Bitcoin trading is just as available on such platforms, which is ideal for users who wish to trade small amounts of assets at favorable prices, or have bulk orders they wish to purchase or sell on local markets that are far from the reach of major market players. Though it is true that most leading exchanges in the cryptocurrency domain have a presence in almost every country, few realize that the price spread on such localized exchanges is not always in favor of local users. This is where the advantage of P2P Bitcoin trading comes in. Users on such platforms have the opportunity to set their own prices and negotiate the details of the transaction on an individual basis, thus bypassing the rigid requirements of centralized exchanges.

Key Takeaways

The blockchain is an excellent technology with a wide range of applications. However, the original concept of the blockchain that foresaw the direct interaction of users among each other has gradually all but vanished from the market with the development and rise of major centralized platforms like Binance. We are also witnessing how such platforms are hungrily gobbling up smaller exchanges, services, wallets, DeFi platforms, and many other market participants, swelling to gargantuan sizes under the guise of ecosystems. In essence, such moves are nothing short of monopolization and excessive centralization of the market.

In order to avoid the rule of centralized platforms, users can always resort to P2P services, which provide a much-needed respite from the strict and regulated operations on centralized exchanges. Most importantly, P2P exchanges give users an advantage by handing the reins of transaction operation to them and eliminating the interference of an intermediary in the process, thus freeing up individual negotiation and removing any associated intermediary costs.