This episode focuses on how to purchase crypto if you are unbanked or would prefer to use methods other than your debit card or a wire transfer to buy crypto. Lorraine explains why peer-to-peer marketplaces have become popular, especially in emerging markets. She mentions their merits and limitations, and their sign-up process, and highlights a few that are worth considering.
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Peer-to-peer marketplaces
Hi, welcome to decentralized, a podcast on the crypto space, where I'll be talking about the crypto landscape, the crypto infrastructure, crypto assets, and the crypto market, as well as factors that affected my name is Lorraine Mutyaba, and I am the host of decentralized.
A few weeks ago, I read an article on crypto adoption. And in this article, according to the global cryptocurrency adoption index, Kenya was ranked as having the highest peer to peer exchange trade volume out of 154 countries. In the world, Tanzania, Nigeria, Ghana, and South Africa were ranked highly as well.
Some of the reasons for this surge in volume were a), uh, cryptocurrencies were seen as a hedge against inflation and B) they limited and sometimes eliminated remittance costs for many people who use them. So in my book, that is one point for cryptocurrency and zero for crypto skeptics. But the purpose of this episode is not to keep score of anything. It is to shine a light on these peer-to-peer marketplaces whose use has risen exponentially. Over the last couple of years and which are one of the most popular ways of buying cryptocurrencies in Africa and other emerging markets.
If you do not have a bank account, if you do not have a debit card or if you would rather not them on an exchange. Marketplaces are a good option for you. And if you live in a country where the biggest exchanges cannot operate because of regulations, then marketplaces are also a perfect alternative for you, giving you access to the crypto economy.
What are peer- to -peer marketplaces? When I was a university, we had this big board in one of the common areas and people could paste, um, ads for couches and bicycles and mobile funds and kittens. As well. And if you found an ad that appealed to you, you could reach out directly to the buyer, to the seller. And if you agreed on terms in a few weeks, you would be the proud owner of a used couch. So marketplace is a similar to those ad boards and similar to websites like Craigslist and Facebook. What you have are sellers who post ads in which they detail, what kinds of cryptocurrencies they can sell, as well as the payment methods that they accept. Several payment methods are usually accepted from mobile money to Airtel money to bank wires, to MoneyGram and Paypal. It depends on what the seller is comfortable. And you can transact with anyone anywhere in the world. The sellers usually have a reputation or ranking score, which you can use to gauge their transaction history and determine whether it's worth reaching out to a particular seller as opposed to another.
What is the sign-up process like on these marketplaces? So just as you would sign up for an account on an exchange, you can sign up for an account on a marketplace. Depending on the marketplace, you might be asked to fill out a KYC questionnaire. And again, this can vary from the very basic to the very involved. Once your account is verified and approved, you can start posting ads, ads, and you can start responding to ad. The trading fees on these marketplaces are usually nonexistent, or they're quite low in comparison to what you would find on a bigger exchange. Again, you are transacting directly with someone else.
The, the marketplaces provide, uh, a platform where you can post an ad and they also offer an escrow service as well as a dispute resolution service. They do not typically take a percentage. Of what is transacted on the platform, but they do charge escrow fees and they, some of them might charge, um, a usage fee.
There are others that do charge transaction fees. So again, always look at the fee profile to know what you're getting yourself into and how much you will have to cough up when you're transacting or when you're using the platform. Again, this is usually very, very little. Or a very, very small percentage of, um, of what is being transacted. Clearly these have advantages over a larger exchanges, a flexibility when it comes to payment methods, B you can transact with anyone anywhere, C they give you access to the crypto economy. And sometimes you get terms that are much better than what you would find on an exchange. The speeds are quite low in comparison to those on an exchange, a you have to, you have an escrow service, you have to confirm receipt of funds before the, the, the crypto is released. And if there's a dispute, it can increase the time it takes for that transaction to settle. The liquidity on these platforms is sometimes quite low. And if you have a large order to fill, you might have to engage with multiple sellers. That's not to say that order will not be filled, but you might have to engage with multiple sellers as opposed to completing the transaction by just clicking on a button.
And of course there are scams. People are putting up fake profiles with fake reviews. Um, so that's always, that's something you have to look out for. And thankfully there are dispute resolution services you can use if this happens. But I think the biggest limitation of these marketplaces is they do not have a large number of cryptocurrencies and. most of them deal in Bitcoin only, or Bitcoin and a stable coin. Others have a maximum of at least five cryptocurrencies that you can buy on the marketplace. So that's something to, to consider as well.
But what are some examples of these marketplaces? Uh, again, these are not recommendations, but these are some of the biggest ones that I am aware. You have Paxful, which was founded in 2015, it's a Bitcoin marketplace. So you can only buy and sell Bitcoin on that marketplace. Then you have Local Bitcoins, which was founded in 2012. And again, it's a Bitcoin marketplace, so you can only buy and sell. its annual volume is about 2.3 billion. 24 hour volume on Binance is about 76 billion. So as you can see the liquidity and the volume is much higher on Binance, which again offers lots of different cryptocurrencies. I talk about Binance a lot and it's not because I am recommending that you use Binance, but it is the largest exchange in the world and it has the highest volume and also offers the most, um, services of any exchange. That's the only reason that Binance will keep coming up and actually Binance has a peer-to-peer marketplace as well. And, um, Unlike the other marketplaces, you can buy more than one cryptocurrency on that marketplace.
I think you can buy only about five to six different cryptocurrencies, but that's an option for people who might not want to use their debit cards or their credit cards on Binance
In summary, there are various ways that you can buy cryptocurrency because we live in Uganda. Um, you can use some of the biggest exchanges as well as some of the biggest marketplaces, always check to make sure that your country is supported before you use an exchange or marketplace, because there are some countries that unsupported for one reason or another, uh, Which option you use is going to depend on your own preferences, but I encourage you to do your due diligence before you sign up for an account and an exchange or a marketplace because all of them have their own merits, limitations and disadvantages, but that's all I had for you today. Thank you for listening until next time.
Take care of yourselves.