Today, owners of various assets can directly exchange them in the digital space. Through P2P trading, people buy and sell cryptocurrencies, fiat currencies, services, and various products.
Although P2P platforms do their best to protect the security of sellers’ and buyers’ assets, some risks are still present. In this article, we will discuss the features and functions of cryptocurrency P2P trading and how you can ensure its security.
What is P2P trading?
P2P trading (peer-to-peer) is the decentralized trading of assets between users without the involvement of traditional or crypto exchanges, government or financial institutions, and any other intermediaries.
Peer-to-peer cryptocurrency trading (another name for P2P asset exchange in the digital space) has a number of advantages, but also comes with risks. These include fake payment confirmations, phishing, false transactions, etc.
What role do P2P exchanges play in trading?
Peer-to-peer trading is supported by international P2P exchanges that offer various payment methods and relatively low fees. The purpose of such platforms is to help market participants find each other, create safe transaction conditions and resolve disputes. For this purpose, escrow services, reviews and ratings are used.
Escrow services withhold payments from buyers and transfer them to sellers only after the transaction is confirmed. They ensure that the asset, good, or service is eligible. In case of disputes between users, escrow services act as neutral mediators and help resolve conflicts based on the terms of the transaction and the evidence of both parties.
For example, you want to sell Bitcoins directly for fiat currency. Your BTC will be stored in escrow and will be transferred to the buyer’s cryptocurrency wallet only after it becomes fiat currency and the transaction is confirmed.
If either party has a claim, the problem will be handled by the support team (in case of an appeal while the order is pending).
How to choose a P2P exchange?
Choosing a P2P platform depends on your needs and goals. Before choosing a platform, you should understand what cryptocurrency you would like to exchange, what payment methods to use and what features the platform offers (e.g. multi-currency wallets or certain security features). When it comes to buying cryptocurrencies, there are several important factors to consider:
Security
Pay attention to the security measures provided by the platform. It is important that the platform utilizes two-factor authentication, stores assets in cold wallets, uses data encryption and other tools for strong fraud protection.
Commissions and additional fees
Transaction or withdrawal fees vary between different P2P services and can affect the overall costs of cryptocurrency transactions. You should find out what commissions or fees are charged when using a platform before selling or buying cryptocurrency there.
Ease of use of the service
Pay attention to the interface of the P2P platform: it should be intuitive so that the transaction process is simple and fast. Check for additional features, such as multi-signature. P2P exchange in general should be convenient for you and meet your requirements.
Reputation in the digital space
Check the platform’s reputation and ratings among users. This can give you an idea about the safety of P2P trading with this service. You can also ask for recommendations from other users and experts.
Support quality
Assessing the quality of the support service is an important aspect when it comes to choosing a P2P trading platform. Therefore, it is recommended that you check the availability and efficiency of the support team to ensure that they are professional and courteous.
Regulatory requirements
You should consider the regulatory requirements and legislation regarding P2P cryptocurrency transactions that apply in your country or region. Some P2P platforms may impose restrictions depending on the location of the user.
Choosing the right P2P platform requires careful analysis and matching your needs with the platform’s features. Before you start trading large volumes of cryptocurrency, conduct a test transaction to understand how the platform works and whether it is convenient for you.
Common fraud schemes in P2P cryptocurrency trading
Learning about the most common P2P trading fraud schemes will allow you to take steps to protect yourself.
Fake message proofs
Forging payment proofs is a common method that fraudsters use. They can create fake email receipts to confirm that a payment has been sent and convince you to complete the transaction. In addition, scammers can send fake SMS messages notifying you that a payment has been received.
To protect yourself, it is recommended that you always check the actual receipt of funds to your wallet or bank account before confirming a transaction. Do not rely solely on the evidence provided, such as electronic receipts or SMS messages, as these can be faked. Make sure that the money has actually arrived in your account before taking any further steps.
Intermediary attack, or «man in the middle» attack
The scammer intercepts data exchanged between two parties. The goal of the attack is to gain access to sensitive information: passwords, contacts, or other personal data.
The main methods and scenarios of an intermediary attack:
- Eavesdropping — intercepting information on public Wi-Fi networks or other unsecured Internet spaces.
- Altering data exchanged between two parties. For example, changing the amount of money in a financial transaction or a chat message.
- Impersonation, where one party communicates with the other, mimicking the counterparty in order to obtain sensitive information needed for fraud.
- SSL/TLS connection attack, where a cybercriminal bypasses a secure SSL/TLS connection and accesses data that was sent using that connection.
Monitor your networks for suspicious activity and security features such as firewalls or anti-virus software.
Scheme with parallel orders of equal amounts
Let’s explain how this scheme works with an example: two fraudsters simultaneously open two orders for the same seller, for example, one for 4000 BUSD and the other for 3000 BUSD. The second buyer transfers 3000 BUSD to the seller, and the first buyer informs him that the order is paid. The seller sends the first buyer the coins on the order for 3000 BUSD. The second buyer transfers 1000 BUSD, confirming the payment of 3000 BUSD (he has already received the cryptocurrency + 1000 BUDS), and then requests the transfer of coins on another order. Thus, having confused the seller, the fraudsters received not 4000 BUSD, but 7000 BUSD.
Protective measures: verify the authenticity of the P2P wallet before completing the transaction to make sure you are receiving the correct payment.
Phishing
Phishing is a manipulative practice in which fake profiles are created in order to obtain a user’s personal information or assets through correspondence. For example, scammers may pretend to be support staff from an existing P2P platform and send messages warning you of a possible security threat to your account.
What to do: don’t click on links in such emails until you’ve verified the source. If you receive such an email, contact an official representative of the platform.
General recommendations for safe P2P trading
Before making any type of transaction, check the profile of the counterparty. In the P2P profile, check the seller’s feedback, find out the number of transactions and their completion rate (if it’s below 80%, it means that the counterparty often cancels transactions, and you should be wary of this). Read the advertisement carefully — check its relevance to your needs and capabilities, compare the P2P price with the market price.
If the cryptocurrency you paid for was not transferred to the wallet or was canceled, the counterparty initiated a refund and account blocking occurred, immediately contact the support service and collect all possible data on the interaction with the counterparty.
How to protect yourself from fraud schemes?
Choose reputable and reliable P2P exchanges with advanced risk management algorithms and useful security features (KYC protocols, escrow services, payment automation and the ability to block dubious users).
Avoid communicating with counterparties outside the P2P platform and save screenshots of correspondence on the platform itself.
Carefully check all receipts and money received into your wallet. Counterfeit receipts can be recognized by differences in colors, fonts, text style and alignment, as well as online image analysis tools.
