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P2P Bitcoin Marketplace vs Bitcoin Exchange

Although Bitcoin has been around for 10 years and has made major news headlines, there are still a lot of people that are unaware of what bitcoin is and how it works.

The blockchain cryptocurrency has seen an unprecedented rise in value and popularity over the last decade and continues to be one of the best options for investment and anonymous transactions. 

Bitcoins are not physical commodities; they exist only as code in a system. However, they cannot be manipulated or fabricated.

They are tracked through an online ledger that cannot be tampered with by individuals. As such, bitcoins are secure and anonymous, allowing people to trade goods and cash without the need of a bank.

Recommended: How I became Certified Cryptocurrency Expert

What are Bitcoins?

what is bitcoinBitcoins are primarily rewards that are given to people who manage to solve a cryptographic problem with the SHA-256 algorithm, which focuses on “hashing” a certain value down to 256 bits.

For the operation to be successful, a threshold value is specified that changes according to the number of people mining, which specifies the number of zeros that the hash value should be preceded by. 

There is no option but brute force estimation to tackle this problem, which is why it is computationally intensive to solve such functions. Bitcoins are issued as rewards to anyone who manages to solve these kinds of problems. 

Related: Five benefits of the blockchain outside of Bitcoin & Cryptocurrency!

Bitcoins are not physical commodities, they exist only in the P2P blockchain ledger that tracks the wallet of every bitcoin owners around the globe. They allow people to trade cash and goods without resorting to a centralized system, such as banks.

What is a Bitcoin Exchange?

Bitcoin exchanges like traditional stock exchanges are the place to buy and sell bitcoin controlled by central authority where they will sell you bitcoins and buy bitcoins from you for the current market value plus whatever profit margins set by them.

The process usually involves submitting your ID, so there is little to no room for anonymous transactions. Some of the traditional Exchanges not only offer bitcoins but also Altcoins.

What is a P2P marketplace?

Unlike the computational theory of P2P in which resources are shared, P2P marketplaces here refer to marketplaces in which peers communicate directly rather than with an employee of a centralized exchange through an online platform for purchasing and exchanging bitcoins.

P2P marketplaces allow bitcoin holders to connect with other bitcoin enthusiasts in their locality or around the world via online interaction, after which they can set up a meet and trade cryptocurrency physically or through other payment methods.

It is more convenient than buying and selling through exchanges as you can set your own prices as long as both the transacting parties are okay with it.

You may also want to read: $100 Bitcoin Investment in 2010 Now Worth $80 Million

Which is the better platform?

If you want bitcoin in bulk and you are willing to go through a verification process of scanning your IDs multiple times, sending selfies, and willing to pay whatever margin set by a central authority, exchanges are a good option.

If anonymity and privacy are paramount to you, then peer-to-peer bitcoin trading is the better choice. Also, if you want to buy bitcoin with payment methods other than credit cards or bank transfer, P2P platforms are your only savior as the exchanges rarely make transactions with payment methods other than bank transfer and debit/credit cards.

Advantages of P2P Marketplace over Bitcoin Exchange

Compared to bitcoin exchanges, P2P marketplaces are a relatively new concept. Anonymity has always been something that goes hand-in-hand with bitcoins, however, P2P marketplaces take an extra step to ensure it.

Bitcoins have become a lot more popular than they were 10 years ago. Bitcoin enthusiasts are popping up everywhere, and bitcoins have even become a viable source of investment due to its stable and slightly upward valuation trend.

P2P marketplaces allow you to connect with similar, like-minded enthusiasts in your area and exchange bitcoins with them through physical meetings or other payment methods.

It allows you the knowledge of similar bitcoin enthusiasts around you, and allows you to trade locally and offline as well as through not so popular payment methods.

P2P marketplaces allow you to buy bitcoin with several payment methods. A popular P2P exchange like Paxful for example, allows you to buy bitcoin with 300 different payment methods.

The peer to peer nature makes it possible to buy bitcoin with paypal, Amazon gift card, and several other obscure payment methods as long as both the buyer and seller are willing to accept the form of payment.

These trades are usually bolstered by an escrow service which makes sure to only release bitcoin after the pre-decided obligation about the payment has been fulfilled.

Advantages of Bitcoin Exchange over P2P Marketplace

  • All transactions done in a bitcoin exchange platform is regulated and tracked by the platform itself which mitigates the chance of fraud and allows you to trade bitcoins without any worry.
  • Another big advantage that traditional bitcoin exchanges have over a P2P marketplace is convenience. Since you are transacting with a central authority, you don’t have to go through the escrow process which simplifies things a bit.
  • Another advantage is the uniformity in price. Unlike P2P marketplaces where each seller has a different price, marketplaces usually have a uniform price for all sorts of transactions.

Should you invest in Bitcoins?

Short answer, yes. Bitcoins and other altcoins (such as Ethereum and Litecoins) are some of the wisest investments you can make for yourself. They are valued at an extremely high price (Bitcoin was valued at over $4000 on March 16).

These valuations are stable and do not fluctuate very significantly, with a general upwards trend in valuation.

Take a look: 8 Reasons why businesses should consider accepting Cryptocurrency!

Bitcoins are also slowly gaining more popularity and recognition than before. There are huge mining pools around the world that are dedicated solely to mining bitcoins because people are seeing how much their value can be.

Bitcoin is slowly gaining mainstream attention and with it comes more investment, higher market cap, and higher valuation.

Even not considering the financial aspects, Bitcoin is decentralizing the money which is used to getting choked by the neck and bounced around by governments like their playthings- how cool is that?

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Enstine Muki
 

Certified Cryptocurrency Expert, Problogger and Serial Entrepreneur

Click Here to Leave a Comment Below 2 comments
Ryan Biddulph

Interesting Enstine. I do still own some Bitcoin. I find it neat how this is all in the blockchain, not being a physical commodity. Way cool for folks who love quick movement. Hopefully too, mining will be easier and easier in the future as crypto goes more global.
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Jamiu Oloyede

Enstine,

What a very nice explanation of how to get started with profiting from investment in bitcoin. As of now, I don’t have bitcoin but with time I may invest in the future and this article is going serve as one of my references.

Thank you for writing this and I look forward to your next post.

Jamiu Oloyede.

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