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 percent said they own crypto as part of a long-term investment strategy, 38 percent don’t trust the current financial system and 31 percent see crypto as a short-term trading opportunity.
Binance said it has seen an over 2000 percent increase in the number of peer-to-peer (P2P) users in Africa from January to April 2021.
Nigeria is a major market for Binance. The 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.
According to a note from Binance, the volume of P2P transactions in Africa surged by 386.93 percent in just four months. The world’s largest and most used crypto exchange saw its P2P user base in Africa grow by 2228.21 percent within that period.
To be sure, peer-to-peer refers to the act of buying and selling cryptocurrencies directly between users, without a third party or intermediary.
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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 implement 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 Nigeria where a restriction is placed on traditional exchanges, P2P appears a great option available to trade crypto assets and this informs the increasing migration in the country.
