As the digital currency sector faces increasing scrutiny from law enforcement and regulatory authorities, are the days of peer-to-peer services numbered?
The enthusiasts that have driven the development of digital currencies such as Bitcoin over the years often did so without the support of commercial solutions to the problems and needs of the community. As more and more companies have entered the digital currency space however, the requirements of those who want to spend, send, or save cryptocurrencies are increasingly well served by these professional offerings.
A trend developing in the digital currency sector therefore is the possibility that the peer-to-peer platforms and systems that have helped grow digital currencies to this point may now be starting to die away, as the slicker – and more rounded – commercial start-ups move in.
The inescapable financial nature of Bitcoin transactions means that issues such as security, compliance with regulations, and reliability, are at the front of many users’ minds. Back in February of this year CoinTelegraph reported about the growing number of scams and money laundering accusations surfacing around the popular LocalBitcoins exchange platform.
The peer-to-peer nature of the service meant that when two Florida based users unwittingly sold bitcoins to undercover police officers, the pair of them were charged with operating an unlicensed money transmission service. Security, and compliance, can only be so effective when the last link in the chain is a private individual on the ground.
With the sector facing increasing interest from both law enforcement and financial regulators, such as in the case of New York's soon-to-be-published BitLicense, the need to meet these rules and regulations becomes more and more important. Both for the service operators, and also for the users themselves.
In the case of exchanges offering the kind of BTC to local fiat currency service that LocalBitcoins established itself in, a growing number of well-organized startups are jumping into the space.
In Europe especially where we see growing popularity for Bitcoin in the non-euro eastern European countries, the small user base means it's not always reliable for users to try and find someone locally who is willing to exchange digital currency for the national currency. This growing need is being met by ambitious startups, rather than through slow organic growth of peer-to-peer services.
We spoke to co-founder Bram Ceelen from the commercially run exchange platform Anycoin Direct, to ask about the advantages of the commercial setup over P2P.
CoinTelegraph: What type of problems can a service like Anycoin Direct solve for digital currency users which are still present in a peer-to-peer service like Localbitcoins?
Bram Ceelen: The advantage of using Anycoin Direct over P2P services like Localbitcoins is that transactions will be completed faster, more cost effectively, and also it reassures you that you know you're transacting with a trusted party.
CT: In terms of the structural differences of your offering compared to a peer-to-peer service, what features make transactions safer for users security wise?
BC: The main reason transactions on Anycoin Direct are safer is that we don't store customers’ funds (coins or fiat) and therefore eliminating the user’s third party risk for the storage of funds.
Regardless of the advantages of the increasingly dominant commercial services however, it also likely that a core of digital currency enthusiasts most excited about the ideal of a distributed, decentralized currency will always opt for the most decentralized solution to their needs.
A shrinking user pool for these peer-to-peer platforms nonetheless may make this an increasingly unattractive option for more practical users of Bitcoin and other cryptocurrencies, further driving the growth of similar commercial options.
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