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Buy Bitcoin with Peer-to-Peer Transactions

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Originally, Bitcoin was created to be exchanged through peer-to-peer transactions.

However, Bitcoin transactions on regular exchanges has become more common.  Here neither of the transacting parties, i.e., the seller or the buyer have any information about each other. Instead, all the requests regarding Bitcoin, like the amount and price are kept in a common ledger known as the ‘order book.

People wanting to buy Bitcoin either browse these order books for a satisfactory order or place a separate ‘buy order.’ It is the exchanges that match the buyer and seller according to the prices and processes of the transaction.

However, the transaction on regular exchanges doesn’t offer the convenience that one finds during a peer-to-peer (P2P) transaction. For this reason, many people are looking for ways to exchange Bitcoin using P2P transactions.

Benefits of peer-to-peer transactions

In a P2P transaction, both the buyer and seller have information about each other at all times. This information can range from the peer’s forum id, user name, IP address, location, or Bitcoin wallet address. Moreover, a face-to-face interaction is also possible.

The P2P medium, also called decentralized exchanges don’t involve a platform and are entirely maintained by software. This software matches a person with a Bitcoin trader as per their requirements. It enables a direct transaction without retaining funds in the platform.

Compared to exchanges, a P2P system will not request any documents regarding identity. Since the platform does not directly oversee the individual funds of each trader, this value is built into their trading history. Traders displaying a credible history generate trust from others. This method of tracking the trading history of users on the peer to peer transaction network is known as their built-in reputation system.

How to carry out peer-to-peer transactions?

To conduct a P2P transaction, one needs to find another Bitcoin enthusiast. There are various bitcoin platforms where a person can register an account and find local Bitcoin traders.

If you are in the US, then you can use Otherwise, platforms like and are also present in the international markets, but many individual restrictions and policies regulate them.

Some P2P platforms like LocalBitCoins allow its users to convert their local currencies into Bitcoins. For that, they invite people to post advertisements regarding their exchange rate and method of payment.

Means of Trade

There are various ways of conducting real trade on different platforms. For instance, LocalBitCoins offers its buyers and sellers two options for trading:

  • Over the Counter Transactions (OTC):

Here buyers and sellers meet face to face to carry out their peer-to-peer transactions. They discuss their trading details and exchange their Bitcoin and local money directly. To carry out the transactions, users choose public places like coffee shops. The payment is done in cash or any other medium and sellers can transfer their Bitcoin into the wallet address of the buyer.

Many people prefer the OTC transaction method, as it enables them to see the trader they are exchanging with. There is also a chance of getting better deals than the standard market rate through negotiations with traders.

The downside of OTC is that planning a meeting can take a lot of time. It can even result in scams if the seller does not release the Bitcoin or the buyer uses counterfeit money.

  • Online: 

Using this method, one can carry out all the steps of the peer-to-peer transaction online. It includes the time starting from the discussion regarding the trading details to the moment of the actual exchange of Bitcoin.

To conduct an online transaction, the sellers take the  first step. They keep their available Bitcoin in an escrow account that they cannot access before the transaction is complete. The purpose of this account is to prevent scams from occurring where sellers don’t release their Bitcoins and accept the payment. Therefore, after the payment is complete, the escrow account directly transfers the Bitcoins into the buyer’s Bitcoin wallet.

Many traders prefer trading online as compared to OTC, since it is convenient and doesn’t require them to reveal their identity. In such a scenario, the traders mostly pay using PayPal or make bank transfers as payment methods.

Transaction fees for peer to peer transaction

For connecting the traders, all P2P platforms charge a small fee from each trader before enabling the transaction.

In the case of OTC, there are no added costs apart from the value of the transaction. Online payment methods include mobile payments, bank transfers, PayPal, Gift Card codes and Credit, and Debit Cards, and more than 50 additional ways to pay.

Among them, Paypal, debit and credit cards charge a higher transaction fee compared to the other modes. The reason for this is to protect the sellers. Bitcoin transactions are irreversible and  payment methods like cards and PayPal deducts the money from the seller’s’ account after the transaction is complete. This may lead to a loss for the sellers. Thus, a high transaction fee is present to offset the potential risk.

Receiving the Bitcoins

Whichever platform you use, the Bitcoins will go directly into the wallet of that platform. In the case of LocalBitCoins, the receiving address is present on the right-hand side of the page and changes following every transaction. This change occurs to protect the privacy of the user. Even though the old addresses remain fuctional, it is not recommended. Moreover, there is a minimum amount of 0.0002 BTC that the LocalBitcoins wallet does not allow.

ID Verification in peer to peer transaction

Different platforms require the user to complete different stages of ID verification. Some don’t need it at all. In some cases, the seller requires the buyer to perform an ID verification to obtain details regarding the trader.

With ID verification, the buyer can get access to greater advertisements and can receive better deals.


A peer to peer transaction provide the traders with the ability to select who they want to transact with. This feature, along with many more benefits is making P2P transaction a preferred method for many Bitcoin users. There are different platforms where a person can carry out a P2P transaction, each with their own rules and regulations. However it is prudent to verify as many details as possible about a peer. If all goes well, a person can do a transaction without the inference of a third party.



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