Peer-to-peer marketplaces are online platforms that enable individuals to trade cryptocurrencies directly with each other, without relying on any third-party intermediaries to process the trades.

The main differences between various peer-to-peer cryptocurrency marketplaces boil down to how they handle custody, the varying degrees of privacy and security they offer, and the fees they charge.

In terms of how they handle custody, peer-to-peer marketplaces can be divided into two categories: custodial and non-custodial.

The distinction between the two is that custodial P2P marketplaces hold the user’s money, while non-custodial ones don’t. This may not sound like a big deal initially, but from a user’s safety and privacy perspective — the implications are enormous.

Custodial marketplaces are notorious security holes. In 2019 alone, hackers stole more than $4.4 billion in cryptocurrency — and all of it from custodial marketplaces. Moreover, custodial exchanges are legally obligated to collect and store KYC information and track and analyze user transactions. Besides the obvious lack of privacy, individuals using these platforms expose themselves to the added risk of identity theft.

Non-custodial marketplaces like LocalCryptos, on the other hand, are completely safe and private. LocalCryptos doesn’t hold your money (fiat or crypto), and doesn’t collect or require any personally identifying information. You’re in full control of your funds, and you’re not expected to trust anyone (including us) with your money. We’ve removed ourselves entirely from the equation; when you trade, you trade directly with other users on the platform, and when you escrow, you escrow ‘on-chain,’ meaning you interact directly with a decentralized and immutable smart contract.

Another thing that separates different peer-to-peer exchanges is how they handle fraudulent activities. The vacuum space created between the finality of crypto payments and fiat payments’ reversibility makes much room for fraud, especially when it comes to peer-to-peer transactions.

To minimize the opportunity for fraud and help settle disputes between users, peer-to-peer marketplaces employ a combination of different strategies that, in most cases, boil down to including obligatory deposits, reputation systems, in-person trade settlements, and third-party mediation.

LocalCryptos takes security and fraud prevention to another level. Besides the usual community feedback and mediation services, it employes a unique on-chain escrow protocol that simultaneously provides a guarantee of funds to the buyer and an abort path for the seller, all without introducing third-party risk into the system.

The last difference between peer-to-peer crypto marketplaces is the fees that they charge their users. Most peer-to-peer crypto marketplaces charge a 1% fee on all transactions plus a $1-$5 fee for withdrawals, depending on the withdrawal size.

LocalCryptos has one of the most competitive rates on the market. We don’t charge any withdrawal fees, regardless of the size of the withdrawal. LocalCryptos charges a 0.25% fee for the maker (the person who placed the offer listing) and 0.75% for the taker (the person responding to the offer).