Cut Out The Middleman With Peer To Peer Trading
The term ‘peer to peer’ is most commonly associated with file sharing, but there are other things that use the peer to peer concept too. The idea behind peer to peer systems is that the people who are taking part in whatever transaction is going on (be that a financial one, or the exchange of data), deal directly with each other. There is no centralized server, bank or broker to worry about.
Peer to peer trading has many benefits. In the world of file sharing, it allows companies to save bandwidth (they can allow their customers to share data amongst themselves), and it usually offers faster download speeds for those customers. In the world of finance, it cuts out the banks and brokers, meaning lower fees for customers.
Financial peer services
One popular peer to peer currency exchange is MidPoint. This exchange engages in foreign currency trading
. Midpoint does charge for their service, but the fees are more transparent than those offered by traditional banks. Traders place a request for the currency that they want, and the currency they are willing to pay with. The system matches those traders with others who are interested in buying and selling the appropriate pairs. Instead of dealing with a broker, the trade you make goes directly to a real person.
Currency trading is not the only form of trading that is done in a peer to peer fashion these days. There are many companies that offer peer lending services – matching borrowers with one or more people who are willing to fund their loans. Some of these services, such as Kiva, are operated on an almost charitable basis, helping people in developing countries to find funding to improve their lives. Others serve people who have a specific connection – such as having lived in a particular area or worked a particular job. When the borrower repays their loan, a portion of the interest they pay back goes to each of the people who funded the loan. The interest is usually superior to that you would earn if you had simply put the money in a savings account, so if you trust the borrower to repay the loan this can be a lucrative saving opportunity.
A new industry
Peer to peer trading and investing is a relatively new concept, and there is always some risk when you invest money in the foreign exchange market or loan money to a stranger. However, if you understand the risks and are careful to invest only an amount of money that you can afford to lose, then peer to peer trading makes sense. Dealing with a reputable company that can help to arrange the trades for you offers protection against the kinds of things that can go wrong when you try to broker a person to person trade by yourself, but the peer to peer nature of the trade means that you avoid the extra fees and challenges that come with trading via a traditional broker or banking service.
