The Central Bank of Nigeria (CBN) may have limited the ability of crypto exchanges to provide services, but the directive it gave to banks doesn’t have to stop people from buying and selling cryptocurrencies. For many Nigerians, the next step is to find an exchange that offers peer-to-peer services. Nigeria has a few of these exchanges including Binance, Paxful, Abit Network, and BuyCoins. There are also plans by Bundle, a social payments app for cash and cryptocurrencies, to create a mobile-first peerto-peer platform that will allow users to swap assets with other Bundlers quickly, securely, and simply.
What is peer-to-peer?
Peer-to-peer did not originate with bitcoin or with the cryptocurrency market. The term was popularised with the introduction of Napster in 1999. Napster was a file-sharing application and a set of central servers that linked people who had files with those with requested files. In the case of Napster, the shared content was music. Napster was later shut down in 2001 following an allegation of copyright infringement. But the popularity of peer-to-peer lived on.
When bitcoin was born in 2009, Nakamoto described it as a “Peer-to-peer electronic cash system” which means that users can send and receive bitcoins all around the world without relying on a central server or intermediaries. This is why bitcoin is seen as a decentralised and distributed form of money, maintained by a big network of computer nodes.
Read Also: CBN to issue N507.40bn treasury bills in second quarter
There are now different peer-to-peer networks of which bitcoin and other cryptocurrencies are part.
With the directive from the CBN to banks, non-banking institutions, and other financial institutions to close the accounts of entities involved in the cryptocurrency market, experts say there has been a spike in demand for peer-topeer trading.
Buying peer-to-peer exchanges
Peer-to-peer on exchanges is a process where a coin seller moves his coin to the platform; creates a buy order stating the quantity he is selling and the rate he is selling for and how he intends to receive payment externally. A buyer comes, sees his trade, and chats with him. The buyer proceeds to make payment in the seller’s external bank account as stated and uploads evidence of payment. The exchange debits and locks the coin. The seller confirms payment in his external account and clicks a button notifying the exchange that he has received money, hence the exchange should release the coin to the buyer.
Why peer-to-peer exchanges?
Peer-to-peer trading on exchanges may be new but it is growing in popularity. This is partly driven by the ability to customise your trade and interact with real people.
To be sure peer-to-peer trading does not necessarily require exchanges to be successful. Traders like Ophi Rume, CEO of Cryptopreacher told Businessday that the number of transactions done in the ‘black market’ can compete with the number the exchanges do. In the black market, the liquidity is unlimited and prices can vary widely unlike on exchanges. Transactions on the black market are faster because it is between two individuals but on exchanges, it may be delayed because parties must show proof of the different levels of transactions before it is considered conclusive.
However, exchanges have the biggest advantage of putting in controls that reduce the risks of losing money or becoming a victim of criminals compared to the black market where you are left to your whims.
“It’s the safest option for now because a crypto exchange will never release coin without seller’s confirmations and all exchanges have buttons for dispute resolution which most times leads to both parties printing bank statements,” Gauis Chibueze said founder and CEO of Abit Network, a cryptocurrencytradingplatform that backs the coin Tatcoin. Peerto-peer trading on exchanges offers more flexibility than a traditional cryptocurrency exchange would. For instance, you can pay with pretty much anything a seller will take.
Apart from flexibility, there are also security protocols that protect the traders – escrow. Escrow is a third-party service that holds onto the promised BTC until the seller is paid. Once the seller receives payment, they can then release the BTC from escrow and the trade is complete.
