How Bitcoin exchanges work?

'Peer-to-peer’ exchanges are operated and maintained exclusively by software.

'Peer-to-peer' exchanges allows participants of markets to trade directly with each other without a third party.

‘Regular’ cryptocurrency exchanges are companies. They serve as intermediaries between their customers and make a collected profit. The interactions between the counterparties in peer-to-peer exchanges are directed by pre-programmed software. Meaning there is no in-between.

How are trades performed on P2P exchanges?

The exchange software is used to connect buyers and sellers with each other, based on their preferences.

Now let's summerise how a ‘regular’ cryptocurrency exchange works . People wanting to sell Bitcoins typ the amount and the price they want to sell it at. All ‘orders’ are placed in a common ledger, called the ‘order book.’

Bitcoin transactions can take up to an hour. Fiat currencies transfers at a slower rate. To speed up the process of trading, the exchange serves as a trusted intermediary: it settles all trades quickly, even though the transactions might have not been finished.

To remove the need for third party, 'Peer-to-peer' exchanges operate in a different way.

They match the people behind those orders. That is, whenever a matching buy and sell orders are found it connects the buyer with the seller, allowing them to conduct the deal without any intermediaries.

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