'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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I've learned that when trading (buying or selling) in an exchange, such as Bittrex or Binance, one doesn't get charged with network fees. For example, if I'm selling off some Monero for BTC, I'm not getting charged with the BTC Network fees. This confuses me a bit. Does this mean I never really had Monero or BTC in the first place? And the only time I can have any actual coin is if I withdraw from the exchange? Thanks.