Peer-to-peer marketplaces have seen an emergence in the bitcoin world over the past few years. On peer-to-peer, there are hundreds of payment methods available. These payment methods span from bank transfers and PayPal to some of the most obscure gift cards you can find on the market. The wide array of payment methods has made it a million times easier to buy bitcoin. The community has also grown exponentially so newbies trying to learn how to earn money with bitcoin are experiencing a learning curve that isn’t as steep as before.

Compared to traditional bitcoin exchanges, peer-to-peer marketplaces add a personalized trading touch to buying, selling, and trading bitcoins. Platforms match buyers and sellers and then they complete the trades themselves. Some may argue that this compromises anonymity since it requires a certain level of verification but also some say that it allows users to be more in control of their money.

With an extra personalized trading experience, scammers must run rampant, right? “Rampant” might not be the right word but there is a chance you’ll be running into scammers. Fortunately, there are several security measures that users can enable for safer trades. First, there are several key indicators of what scammers would look like on these platforms. Some platforms have reputation systems, some have the ability to view past trades, and some have both. Users can also enable 2FA and set up strong passwords to make their account more secure. In addition to those features, most peer-to-peer platforms offer an escrow service that makes trades even more secure.

What is escrow?

The dictionary defines escrow as “a bond, deed, or other document kept in custody of a third party and taking effect only when a specified condition has been fulfilled.” In terms of peer-to-peer marketplaces, escrow is the thing that’s keeping people from running away with your money.

Let’s use the example of buying bitcoins with gift cards. Let’s say that you’re hopping on a peer-to-peer marketplace to buy some bitcoin with your Amazon gift card. You find an offer and start the individual trade. The seller then asks you for your payment details (a.k.a. the gift card code and other relevant information). As soon as you send your code, what’s stopping the seller from just running away with your gift card code? If you’re the seller in this situation and the buyer asks for the bitcoin first before providing payment details, what’s stopping him from running away with your bitcoin? This is where escrow comes in.

Escrow services on peer-to-peer platforms prevent you from being scammed in this sense. They act as a 3rd party that will hold the bitcoins while the buyer makes his or her payment. As soon as the buyer sends all the payment information required, there is usually a button that acknowledges if the payment has been sent. For example, on Paxful (one of the largest peer-to-peer marketplaces in the world), has a “Mark as Paid” button that the buyer will have to press after he or she sends the payment details. After the payment has been marked as paid, the seller will then verify the payment of the buyer (check if the code works, if it can be charged back, etc.) Once the payment has been officially verified, it is the duty of the seller to release the bitcoins from escrow. The trade will then be complete and both the buyer and the seller will have what they came for.

Basically, escrow services are what prevent scammers from getting away with their devious acts. Without it, scammers and rippers (people who rip the value off of gift cards by using the code) would constantly be getting away and peer-to-peer marketplaces wouldn’t be a viable option for buying, selling, and trading bitcoins.

Taking extra precautions

Bitcoin trading through peer-to-peer platforms can be very risky if you don’t know what you’re doing. This means that you always have to be aware and cautious. Although escrow is there to protect you from getting scammed, it can’t hurt to enable all other security features like 2FA and setting a strong password. Taking these extra precautions will, in the long run, make your account and money much safer.

Adding to these extra precautions, be sure to do your research when you trade bitcoin or other cryptocurrencies. Familiarizing yourself with all the different risks and indicators is the difference between keeping your money safe and being scammed. Do research about the platform you’re using – scammer indicators, how to make your account more secure, and how the platform works in general. Take your time on this to minimize the risk of trading. It could save you from losing a buttload of money.