By Prince Osuagwu
Peer-to-peer transactions are the rave of the moment as far as the crypto market in Africa is concerned. In a survey conducted by Binance, there are three reasons users invest in crypto; 55 per cent said they own crypto as part of a long-term investment strategy, 38 per cent don’t trust the current financial system and 31 per cent see crypto as a short-term trading opportunity.
Binance said it has seen an over 2000 per cent increase in the number of peer-to-peer, P2P users in Africa from January to April 2021.
The Nigerian crypto market recently suffered a setback as a result of a decision by the financial regulator to prohibit banking services from providing support for cryptocurrency businesses. Following that decision, the crypto market has seen a spike as users migrated from crypto-to-fiat exchanges to peer-to-peer exchanges. A report by Luno and Arcane Research found that Nigeria contributes the most volume of P2P in Sub-Saharan Africa with as much as $8 million in weekly transactions.
Binance said the volume of P2P transactions in Africa surged by 386.93 per cent in just four months. The world’s largest and most used crypto exchange saw its P2P user base in Africa grow by 2228.21 per cent within the same period.
Peer-to-peer refers to the process of buying and selling cryptocurrencies directly between users, without a third party or intermediary.
When users buy or sell cryptocurrencies using a traditional exchange, they don’t get to transact directly with the counterparty. Instead, they use charts and other market aggregators to determine the optimal time to buy, sell or hold cryptocurrencies. The exchange organises the transaction on their behalf, and the market price determines the final price at the time of the transaction.
However, P2P trading gives users greater control over who they transact with, the pricing, and the settlement time. While P2P trading comes with a lot of risks, trading on P2P exchanges instead provides a layer of protection for the buyer and the seller. Exchanges like Binance have created a merchant program of verified, trusted users and implemented a feedback or rating system.
Beyond implementing a rating system, Binance says it protects both buyers and sellers by using escrow to secure the cryptocurrencies until both parties have confirmed the transaction. For example, Binance will escrow the bitcoin for a user selling bitcoin for fiat money. Once the buyer sends the fiat and the transaction is confirmed, Binance will subsequently credit the seller, ensuring a safe and secure transaction. If either party is unhappy with the transaction, they can file an appeal to resolve the issue between counterparties or have Binance Customer Support step in.
The safer users feel about P2P, the more confident they are about using the platform. For traders in African countries where a restriction is placed on traditional exchanges, P2P appears a great option available to trade crypto assets and this informs the increasing migration on the continent.