Cryptocurrency analyst. Founder and editor at btcpeers.com
P2P, or peer-to-peer lending, has been there for quite a while. Its notable appearance was largely attributed to the financial crisis of 2008, which gave a spark to the whole string of off-chain banking services.
Back then, peer-to-peer lending had been seen as a more liberal way of receiving money detached from centralized and highly insecure banking institutions and provided a way to escape the constraints of an injured financial system.
With the arrival of blockchain, P2P came to the next stage of progress, when the lending services are despising the country’s boundaries and embracing all continents in a convenient and accessible money exchange.
The recent wave of COVID-19 has only facilitated the footprint of P2P lending and prepared it to become the next transformational force behind the global decentralized economy.
The idea of exchanging money through P2P platforms is not radically new to the crypto space. Especially, as the global share of Defi augments, more people are now fascinated with the idea of swapping their money in a decentralized manner, which allows them to obtain a necessary degree of freedom from control of public institutions.
Some of the P2P exchanges even leverage blockchain technology, which lays down the foundation for the enhanced security of platforms and an instant execution of transactions.
Throughout the years, P2P exchanges gained special recognition in territories that suffer from discrimination or uncertainty surrounding cryptocurrency in the legal code. They became a way to escape the dominant regime of banking institutions, paving the path for crypto enthusiasts around the world to build connections with the global community and effortlessly engage in exchange of digital assets.
So what’s the principle behind P2P exchanges? In the first place, they act as a medium to bridge the gap between buyers and sellers, and allow them to complete the transaction themselves on the terms they pre-agreed on.
This brings in an essential degree of flexibility, which allows both parties to establish the conditions that work best for mutual benefit. Next, P2P exchanges support a wide choice of payment methods, allowing users to top up their accounts with the help of options ranging from cash to various online payment operators and bank accounts. All together, this enables a substantial degree of personalization brought by P2P exchanges - something which is definitely missing from regular exchange platforms.
Historically, P2P has been used to overcome some of the major obstacles in the banking sector. It allowed users to exchange funds independently while surpassing the hinders of a sluggish banking service and layers of bank bureaucracy. The customer’s citizenship and home country stopped playing a pivotal role too, as it became possible to make cross-border money swaps independent of an actual physical location.
But what is so special about P2P services that makes it so attractive in a crypto context? Primarily, it comes associated with an increased degree of independence from crypto exchanges, which lays at the core of a free non-organizational structure of P2P exchanges. The actual funds exchange that happens outside any centralized organization also provides a simple way to escape numerous KYC procedures laid out by cryptocurrency exchanges nowadays.
Altogether, this opens a doorway to a new degree of control exercised by the owners over their funds. With P2P exchanges, privacy comes in first - the middleman is no longer held responsible for the collection and storage of a user's private data. The fact that the P2P sector acts independently from centralized exchanges also makes it immune to potential frauds and internal malpractices, which in recent years are not uncommon.
P2P exchanges have also paved a path for inclusion for the countries that suffer the inimical legislative stance towards cryptocurrencies. One of the most prominent examples is India, where back in 2018 the Reserve Bank of India (RBI) forbade any local exchanges or other financial institutions to engage in the provision of crypto services. Consequently, this provoked a wave of resistance in a form of P2P lending platforms, which partnered with high net worth individuals (HNWI) to INR to USDT conversion to the local ground for the first time.
Together with other macroeconomic factors, the decaying global economic situation has led to the appearance of a high number of P2P platforms throughout recent years. The sector is best represented by Paxful, the current leader in peer-to-peer marketplace with over 300 payment methods available, and LocalBitcoins.com, the platform dealing with transactions of bitcoin administered within minutes from any corner of the world.
There’s also another project which is rapidly gaining weight - NeuronEx, a P2P exchange that combines a P2P platform with an exchanger allowing the exchange of cryptocurrencies for fiat currencies in any nation around the globe with convenience and offers direct purchase of crypto from NeuronEx.
As of January 2021, users of the platform will be able to use its MasterCard once launched and get 70% off fees when doing purchases compared to other fiat cards. The platform currently supports BTC, ETH, LTC, XRP, EMC, DASH, DOGE, and near to the middle of August, after the launch of the Neuron Wallet, they will add EOS, BCH, BSV, EURT, USDT, CNHT, XAUT. Also, it supports more than 200 payment methods, including debit/credit cards.
The COVID-19 pandemic has drastically changed the economic landscape with a transformative extent comparable only to the 2008 financial crisis. Massive unemployment came as a side-effect of several months of total lockdown, which eventually led to a high degree of financial uncertainty in many households. Now, this imposes restraining circumstances for them to qualify for a bank loan. Instead, what can they do is to effortlessly swap money online – and P2P exchange built a way towards it.
Peer services already start gaining special significance in countries undergoing problems with access to conventional banking, in addition to the post-COVID economic crash. One of such examples is the African continent, which two months earlier became the main driver behind P2P growth, overstepping the Asia Pacific and Latin America. However, the fraction of it is still way below North America, which currently leads the global share of P2P service payments with nearly $30 million in transaction volume.
In the wake of popularity, P2P also gets a stake in compound interest platforms. To quote a price of Chainlink on its dashboard, Kava recently partnered with P2P.org, the non-custodial verification playground allowing investors to compound cryptocurrency while performing a reliable due-diligence examination of digital assets.
Combining these factors all together, it does not sound unrealistic that the P2P service sector is predicted to reach an outstanding height of over $44 billion by 2024, according to research.