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Peer-to-peer transactions are one of the factors that are playing a vital role in increasing cryptocurrency adoption. It is a mechanism that enables users to transfer cryptocurrencies to one another, without interference. Some of the roles it plays in cryptocurrency adoption include:
- It builds trust between cryptocurrency investors at different levels
- It reduces cost
- It builds security
- It ensures that data are not shared with government agencies
- It promotes liberty to set prices
- It gives room for a variety of choices
Trust Building Between Cryptocurrency Investors at Different Levels
Trust is one of the reasons why people with little knowledge of how cryptocurrency works discourage others from adopting it. Most people think that it is a scam. They do not know that transactions on cryptocurrencies are registered on the blockchain. This is unlike what is obtainable with networking groups where data are available on the platforms and can be wiped out. With peer-to-peer transactions, a user ensures that the transaction has been completed before the centralized exchange will release the fund, thereby, bolstering cryptocurrency adoption. Centralized exchanges act as escrow service providers to ensure transparency and trust. Through this, both old and new cryptocurrency investors trust the system.
It Reduces Cost
Peer-to-peer cryptocurrency transactions are cost-effective. Excluding the exchange charges for transfers or withdrawal as the case may be, a user buys and sells at almost the same amount. For example, assuming that a user wants to buy USDT with Indian Rupee on a centralized exchange peer-to-peer platform. At the time of writing, the user will be required to pay 77.95 INR for 1USDT. If the same user wants to sell the USDT to receive Indian Rupee, they will receive the same 79.52 INR for each USDT sold. However, if this is done through local cryptocurrency exchanges, the user will have to buy at a higher price than they can sell at. Hence, peer-to-peer transactions promote cryptocurrency adoption by eliminating unnecessary charges.
It Builds Security
Most centralized cryptocurrency exchanges spend huge funds on the security of their system. The security of funds transferred from one end-user to the other is top-notch. This is because of the enabling of two-factor authentication before a transaction can be completed. This helps users send funds to one another without any fear of a security breach. This has a direct impact on the boost in cryptocurrency adoption around the world.
It Ensures That Data is not Shared with Government Agencies
Most individuals who are in cryptocurrency are retail and short-term investors. Their purpose is to use the volatility of the system to cash out profits once the market rises. With peer-to-peer transactions, this could be achieved without government interference. The decentralized nature of cryptocurrencies makes them not to be controlled by the government. The sale or purchase of funds through local exchanges makes the cryptocurrency investor to expose their data to the government. This is because the government requires the local cryptocurrency exchanges to get licensed with them and also know their customers. The filing of the Know Your Customer (KYO) form, exposes the private details of an investor to the government. In peer-to-peer cryptocurrency transactions, this is not obtainable. Hence, traders find it more appealing to trade with local cryptocurrency exchanges.
It Promotes Setting of Prices by the User
This is what is obtainable with local cryptocurrency exchanges. Rarely are there two exchanges that give the same price for buying or selling cryptocurrencies. The same thing is applicable to peer-to-peer cryptocurrency transactions. A cryptocurrency holder can set their own price which might not be the same for all buyers and sellers. With this, the patient investor could have smaller gains, which could eventually accumulate to a big profit. In this way, peer-to-peer transactions help people earn steady passive income, thereby, increasing the rate of cryptocurrency adoption around the world.
It Gives Room for a Variety of Choices
Most local cryptocurrency exchanges are limited in the number of cryptocurrencies that they transact on. The lack of options has had a huge role to play in discouraging crypto adoption around the world. However, with peer-to-peer cryptocurrency transactions, this issue can be eliminated. This is because a user can decide which cryptocurrency they wish to sell in the peer-to-peer trading platform depending on market forces and execute them. There will be no need to convert to other assets to get cash.
Conclusion
The role of peer-to-peer transactions in cryptocurrency adoption can not be overemphasized. A case example was the heavy downtrend that was seen in the market when the Nigerian Central Bank said that no bank in the country should permit cryptocurrency transactions. The future of the market was restored after most top centralized exchanges started adopting and promoting peer-to-peer transactions.