Platforms like Bitstamp, Kraken, and others have successfully fulfilled user needs for trading cryptocurrencies for fiat money and vice versa. However, one downside is that centralized corporations govern these exchanges, unlike Bitcoin. It results in requiring the set up of support staff to handle all interactions of users. They also serve as arbitrators in case of conflict resolution. For that, they collect some fees. Thus, members of the Bitcoin community have decided to streamline the market by creating a new alternative. We know it as decentralized p2p (peer-to-peer) exchanges. Built with crypto exchange development services, they are not run by humans but by machines.
What's a Decentralized P2P Cryptocurrency Exchange
Fundamentally, it is a type of crypto exchange that is exclusively controlled and managed by software. It enables market participants to trade directly with others. It does not necessitate the processing of all transactions by any trusted third party. Instead, smart contract-powered escrow mechanisms ensure trusted, transparent, and efficient transaction exchange between traders.
Regular cryptocurrency exchanges act as intermediaries between buyers and sellers. They make a profit through fee collection on transactions. Conversely, decentralized p2p trading interactions between participants are directed exclusively by pre-programmed software, requiring no intermediaries.
Decentralized p2p crypto trading indeed is the epitome of the philosophy of decentralization. Indeed, users can buy and sell crypto assets directly without an intermediary being present on the platform for facilitating exchanges. It does not require government legislation and authorities' control of any sort. Instead, smart contracts manage all tasks by fully automating them. No human interference diminishes the overhead costs greatly.
Also, Read | P2P Crypto Exchange Development | A Compact Guide
Essential Aspects to Consider Before the Development
A business can launch a P2P trading/exchange platform by partnering with an experienced crypto exchange development company. However, it must also consider the following aspects indispensable to ensure the performance of the project.
Thoughtful model of the platform
The security of the properties of traders must be of prime significance. Thus, a platform should provide an escrow security mechanism. Besides, it can be popular with features like buy/sell ad display, offline trading support, and more.
Control of credibility / Reputation management
A lot of spammers feel attracted by the versatility provided by P2P exchanges. Thus, a platform must have a reputation management framework that continuously improves the trading experience for users. It should enable traders to rate each other. Subsequently, it can help find a reliable trader for other users.
Auto-generation of crypto wallets
If a user signs up on the exchange, he/she should be able to create a secure crypto wallet. Undoubtedly, a multi-signature wallet ensures improved asset protection.
Multiple payment options
Providing multiple payment options is an essential aspect in the development of an advanced P2P exchange. Recently, a few platforms have even started offering more than 300 flexible payment options. These payment options vary from bank transfers, wallets online, and gift cards to payments in person and cryptocurrency.
Powerful and efficient matching engine
Cryptocurrencies are a volatile market. An exchange offering a slow matching engine can result in losses for traders. Therefore, during the exchange platform development, ensuring the integration of an efficient trade matching engine is a must.
Also, Read | Entering the Crypto Market with Peer-to-Peer (P2P) Crypto Exchange Development
Must-Have Features
- Efficient matching engine
- Multi-layer security for increased protection
- Instant KYC and AML verification
- Smart-contract powered escrow mechanism
- Atomic swap
- Intuitive admin panel
- Support for multi-language
- Preferred trader selection
- Trusted dispute management
Strengthening Protection with Robust Security Mechanisms
One of the significant attributes of a crypto exchange is security. Make sure to strengthen it with the right security features for P2P exchange development, like:
- SSL (secure sockets layer) certificate implementation
- 2-FA (Two-factor authentication)
- HTTP Parameter Pollution Protection
- DoS (Anti-Denial of Service)
- DDoS (Anti-Distributed Denial of Service)
- Authentication with e-mail/ Google authenticator
Considerations for Preventing Vulnerability to Fraud
A crypto exchange development company must integrate all the necessary protection measures into a platform. It is because of the absence of a central authority for preventing fraudulent activities.
In-person meetings
Some exchange platforms encourage their traders to visit physically and decide on the details of the transaction in person, such as LocalBitcoins. Indeed, it is a more secure forum, but geographical restrictions too frequently limit it.
Privacy Management
To authenticate user identities, you can provide them with options to conduct blockchain-based KYC (Know Your Customer) and AML (Anti-Money Laundering) verification.
Arbitrators
Eventually, upon a conflict between the purchaser and the selling side, an arbitrator takes place. The arbitrator's judgment is final. As a result, the accused party compensates for the default money.
Stack of Technology
Node.js
It is a server-side environment to build an exchange network within a minimum timeframe and without server problems.
Angular
Angular is a front-end framework that provides additional functions for improving the functionality of modules.
Express.js
Express.js is a web application framework that lets developers create or organize their web applications in the MVC (Model-View-Controller) architecture.
PHP
It is a back-end scripting language that even a consumer can easily understand and communicate.
Also, Read | Blockchain P2P Lending Platform
Monetization Models | Decentralized P2P Exchange
You can develop and launch a functional exchange in the market with a P2P exchange development company like Oodles. However, before doing so, you must investigate the possibilities for monetization. Here are a few strategies to consider.
Fee for Trading
The operator can charge a nominal fee for any transaction that utilizes the exchange platform. As higher costs could drive users away, one must carefully choose the trading fee.
Fee for advertising
An ad gives a buyer or seller's listing more exposure. By offering ad posting options, the exchange will assist traders with further conversions. The trading platform, however, can charge them a fee for this service.
Dark Pool Trading Premium Fee
A person is free to opt to exchange anonymously. To allow this, however, you can charge the user an additional fee as an admin.
Also, Read | Analyzing Peer-to-Peer (P2P) Cryptocurrency Exchange Model
Five Efficient Payment Processing Methods
- Credit Card/ Debit Card
- Bank transfer
- PayPal
- Visa/ MasterCard
- Digital coins
Conclusion
In reality, Binance and many other prominent exchanges have prompted crypto traders and users to switch to decentralized P2P exchange platforms in the past. It is because of increasing cyber threats, fraud, and hacks associated with centralized exchanges.
In recent times, the global crypto market has witnessed an increased need for decentralized P2P exchange platform development, as they make the whole process of trading easy and secure. Our experts also suggest that platforms can experience widespread acceptance with a streamlined regulatory and banking structure.
If you are planning to build decentralized P2P crypto exchanges, Oodles can help you provide development support. Also, a free-of-cost consultation is available with our blockchain and crypto exchange development experts to address your business needs. No obligation, just a quick chat to find out if we can help.