All You Need To Know About P2P Trading.

In the hearing of July 3, Supreme Court refused to grant any temporary stay order on the ban imposed by RBI on the bank authorities, prohibiting them from providing any service to the exchanges dealing with crypto assets in India. Now, the next hearing is on July 20, but exchanges like Zebpay and Koinex have already stopped their INR withdrawal and deposit services. Now, to continue trading, some exchanges have come up with the concept of P2P trading leaving many traders wondering what all this P2P is! So, let's try to understand this stuff.

What is P2P trading?

P2P stands for a peer-to-peer system in which two individuals communicate directly without the intervention of a third party and make transactions with each other.

Let's consider the classical example of Alice and Bob. Suppose Alice wants to pay Bob in INR for Bob to send some Bitcoins back to Alice. Ideally, what they should do is, Alice sends INR to Bob and Bob sends her the Bitcoins. But, things are not ideal in the real world and there may be cases like Bob doesn't send Bitcoins even after receiving the payment or Alice doesn't pay even after receiving the Bitcoins.

The problem of adopting a pure P2P system in the real world would be that Alice would not want to pay until after she receives the Bitcoins and Bob would not want to send the Bitcoins until after he has been paid. So, there is a solution to this - introduce a third party to settle disputes. Such transactions are known as Escrow Transactions.

In Escrow transaction, Bob's Bitcoins will be held with the third party and Alice will make payment to Bob. Once, Bob confirms that he has received the full payment for the Bitcoins, the third party would transfer Bitcoins to Alice's wallet.

This is how the P2P trading on most of the exchanges is going to work. There may be some additional features but the basic concept will remain the same.

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