Today, we are announcing that Exchangify now supports P2P (peer-to-peer) and Direct exchanges
We also added a category section that aims to do three things:
- Provide a high-level overview of all the exchanges we currently have added, divided by type.
- Provide a high-level overview of all the different exchanges (regular and P2P/Direct) for any given country, along with a short description of the countries’ exchange market (think e.g. largest players, limitations and restrictions etc.)
- Provide a high-level overview of all the different exchanges (regular and P2P/Direct) for any given payment method that is currently available to buy cryptocurrencies with.
As of right now, the section only contains the exchange by type and the exchange by country categories, but payment methods will be added in the near future.
In the rest of this brief post, we will go over the differences between regular, P2P and direct exchanges.
We will also elaborate on a specific filter that we added to the P2P & Direct exchanges page, which is whether an exchange is considered trustless or not.
Regular exchanges with an order book
These are the exchanges listed on our homepage.
In short, they are institutions that bring together users who want to buy or sell a specific cryptocurrency.
Typically, these exchanges have order books, which provide an overview of all the different orders placed by users for any given cryptocurrency pair.
In return for this service, exchanges typically charge a certain trading fee, usually a percentage of the size of the order.
These exchanges can either be centralized or decentralized.
Centralized exchanges process orders using a centralized, private database and users typically have to deposit funds into wallets controlled by the exchange.
Most exchanges are centralized, and the flow is usually as follows:
Step 1: Users send fiat money or cryptocurrencies to the exchange, essentially giving up control over their funds (and trusting the exchange with their money).
Step 2: Users can place orders (typically market or limit orders) and rely on the exchange to execute them. Users do not have to deal with other users directly, as everything is facilitated by the exchange.
Step 3: Users can withdraw cryptocurrencies or fiat money from the exchange back to accounts or wallet they control.
Decentralized exchanges allow users to connect their wallets, and move funds directly from wallet to wallet. The exchange does not process any funds, nor do they have the ability to.
The transfer process is often facilitated by a smart contract, which is open-source, secure and immutable.
P2P (peer-to-peer) exchanges
Peer-to-peer exchanges are exchanges that also bring buyers and sellers together, but in a less automated way.
These exchanges allow users to post certain listings, such as e.g. selling Ethereum at 200 USD, payment by PayPal or buying Bitcoin at 7000 USD, payment by Amazon Gift Cards.
Real-life exchanges are also possibility, which is still one of the most popular ways of exchanging cryptocurrencies without undergoing KYC (know-your-customer).
These exchanges often come with an escrow system, but there are no order books or other automated trading support.
Direct or instant exchanges
These exchanges are different than the previous two since they do not bring buyers and sellers together, but are the primary trading partner of their users.
In practise, this means that these exchanges will hold a certain stock of the cryptocurrencies that they offer, and whenever someone wants to buy that specific currency, they will sell it to them directly.
In case they support fiat, they will also hold a certain amount of the fiat currency so their users can sell their cryptocurrencies to them in exchange for fiat currency.
Direct or instant exchanges provide a very convenient and fast way of buying cryptocurrencies (often with limited KYC) and are excellent for people new to trading in general, as the UI of a real exchange may come across as very intimidating.
The downside is that the fees are often quite significantly higher.
The P2P and Direct exchanges page also comes with a new boolean filter: whether an exchange is trustless or not.
Being trustless refers to the system behind the exchange of funds.
It means that a certain user does not have to trust the creators of the exchange in order to have the guarantee that their funds are safe at any point in time.
In practise, this usually means that the exchange system will be based on for example a smart contract.
A smart contract is transparent, secure and cannot be tampered with.
As a result, the owners or creators of the exchange cannot intervene with the smart contract or your funds at any point in time. Obviously, this assumes properly written smart contract code. Poorly written smart contracts can still endanger user funds due to potential exploits.
A good example of a trustless exchange is Bancor, which uses a smart contract on the Ethereum blockchain for transferring tokens and coins.