Throughout bitcoin’s almost-11 years of existence, there has been one clear way to buy and sell bitcoin: traditional bitcoin exchanges. These are the exchanges that link your bank account to their platform and match buyers and sellers via order book. Once buyers and sellers are matched, the platform then acts as a middleman to help the traders complete the transaction—making it extremely and at a certain level, anonymous. These types of exchanges are very popular as they’ve been around for much longer.
However, there are certain problems that come with using this type of exchange. First of all, what happens if you want to buy bitcoin but don’t have access to a bank account (which is true for a lot of people in developing countries)? The unbanked population is still high and without a financial passport, how will they get their hands on bitcoin? They can’t. Another problem that traditional bitcoin exchanges have is the fees. With the platform acting as a middleman in the transaction between a buyer and seller, extra fees are charged for their services.
For a long time, this is how people would normally buy bitcoin.
Enter Peer-to-Peer Bitcoin Marketplaces
Peer-to-peer marketplaces, on the other hand, are generally less popular. Nevertheless, in recent years, there has been a spike in popularity. The rise in popularity can be attributed to the many real-use cases traders are discovering—more on that later.
So what is a peer-to-peer bitcoin marketplace? Just like traditional bitcoin exchanges, buyers and sellers are matched via order book on these platforms. However, unlike traditional bitcoin exchanges, peer-to-peer marketplaces will allow the traders to finish the transaction themselves.
In a way, peer-to-peer bitcoin marketplaces personalize the bitcoin trading experience. Because traders are essentially bartering with one another, it allows sellers to accept any payment method they want. On the best peer-to-peer marketplaces, there are hundreds of different payments to choose from—allowing you to buy and sell bitcoin for pretty much anything you want.
There are also several other features that personalize trading on a peer-to-peer bitcoin marketplace. For example, some platforms allow live chat between traders so that coordinating/negotiating with your trade partner is made much easier. The chatbox will allow buyers to clarify any payment concerns and sellers to verify payments much quicker.
Another feature is the personalization of offers. If you’re a buyer, you can input preferences so that you’ll be shown only the offers that suit your needs the best. It’s the same on the side of the seller. Sellers have the ability to set offer details such as profit percentage (how much they’ll be making on the trade), payment window (how long it will take for the trade to expire), payment method (what payment method you’ll be accepting for your bitcoin), country (where you want your trade partner to be from), and many more.
The nature of trading on peer-to-peer marketplaces allows trades to be more cost-efficient. With platforms barely interfering with trades, fees are much lighter. These platforms also allow you to pretty much buy anything with your bitcoin. Instead of looking for a store or business that accepts bitcoin, you can look for a person who accepts bitcoin as a means of payment. You can, in turn, buy gift cards (usually at discounted prices depending on the gift card) and use those gift cards to buy whatever you want.
Peer-to-Peer Bitcoin Trading as the Perfect Vehicle for Bitcoin’s Benefits
Along with more cost-efficient trading experiences, traders have developed many real-use cases with beneficial applications everywhere around the world.
For example, the current method of sending remittances can often take too long, get expensive, and isn’t always the most transparent. However, bitcoin remittances are now being used as a way to send money abroad. Bitcoin remittances are not only faster since they only take around 10 mins to send, but they’re also cheaper because they circumvent a lot of financial barriers that are usually implemented on traditional means of remittance.
Another example of a real-use case of bitcoin is wealth preservation. Aside from the people trying to keep their finances in check, there are also people who live in countries experiencing economic crises. Countries like Venezuela are experiencing an extremely high rate of inflation (10,000,000% inflation rate as of August 2019), which is slowly deteriorating their fiat currency. People are then looking at bitcoin and other cryptocurrencies to help preserve their wealth.
Along with making payments much easier, these are only some of the real-use cases that are being discovered by traders around the world. Bitcoin is thought of as something that is generally “first-world”, however, its real-use applications prove that it can be useful for developing countries.
With that being said, as bitcoin matures even more as a currency, people will start to find new ways of using bitcoin for more than just investment—and it’s thrilling to think about where it’s going to go next.