Amid the growing attention to financial privacy, peer-to-peer (P2P) trading is getting very popular nowadays. However, just like the other types of trading, peer-to-peer trading also has its own risks, and knowing the respective risks permits the traders to shield themselves against likely losses. Hence, there are some notable precautions that the traders can take while dealing with the peer-to-peer trading.
What Is Peer-to-Peer (P2P) Trading?
Peer-to-peer (P2P) trading in cryptocurrency takes into account the selling and buying of digital assets without requiring a 3rd-party mediator. P2P trading permits sellers and buyers to determine their prices, choose trading partners, as well as decide the exact time of the transaction. It also permits experienced and diligent traders to identify and leverage supportive trading settings to fulfill their requirements.
Marketplaces for P2P crypto trading enable direct cryptocurrency exchange between individual consumers. A key benefit of this type of trading is that no centralized authority controls this trading. In addition to this, the traders are also not dependent on a 3rd-party intermediary. Thereby, the consumers are provided with more control over the funds thereof. Their identities also remain protected during P2P transfers.
However, despite the above-mentioned benefits of the P2P crypto trading, it also has some risks associated with it. Particularly, the most common of them take into account fake payment proof, wrong transactions, man-in-the-middle attacks, chargeback frauds, phishing, and triangulation scams.
Common Scams in P2P Crypto Trading
Fake SMS or Payment Proofs
To defraud the victims in P2P trading, scammers may alter payment receipts by digital means. With this, they attempt to convince their targets about the execution of the transfer. A key example in this respect takes into account the SMS scam. In this scam, the fraudsters create a fake message to notify their targets the payment has been received by them. Keeping this in view, the sellers should stay vigilant to confirm they have already received the payment in their bank account or wallet.
Chargeback Fraud
In such a fraud, the scammer utilizes a chargeback feature. This results in the reversal of their payment once they receive the assets from their recipient. Many a time, the fraudsters try to recompense through a 3rd-party account. In addition to this, several payment methods, such as online wallets or checks, allow for convenient chargeback requests. To counter this, the users need to stop accepting from 3rd-party accounts. Even then, in such a mishap, they should submit their appeal to the respective platform to have a refund.
Wrong Transaction
Just like the chargeback scam, a fraudster may try to take away the asset holdings of the victims by reaching out to their bank. In this respect, they report an erroneous transfer and request a reversal. A few of these fraudsters may even force the victims not to report the incident via scare tactics. In this respect, they sometimes intimidate them by warning that the crypto is illegal. Nonetheless, the victims should not get scared by such tactics. Rather, they should get evidence, like screenshots of the transfer to the criminal, and report to the authorities.
Man-in-the-Middle Scams
A man-in-the-middle scam is marked by a malicious party that comes between a consumer and an organization, application, or even another individual. The respective bad actor pretends to be communicating on the behalf of the counterparty just to take away the victim’s assets or private information, such as private keys. This scam has 3 types that are widely used, including “romance scam,” “E-commerce scam,” and “investment scam.
In the case of a romance scam, the fraudster forges a false relationship with their targets online. Subsequently, after gaining trust of the victim, the scammer loots them by pretending to be in a big trouble. In this way, the scammer manipulates the target into sending crypto or money, or even sharing private keys and so on.
An e-commerce scam takes into account a fraudster who pretends to be operating as an online seller who offers desirable objects at substantially discounted prices. Hence, the scammer requests the victim to make payment in crypto. However, following the payment, the scammer just disappears.
Similarly, the investment scam normally involves a fraudster approaching and effectively convincing the target to invest their funds into a specific enterprise. Nevertheless, being the mediator between the target and the destination of the investment, the scammer directs the funds away from the investment opportunity to steal them. Thus, the investors should not pay heed to the trading requests made via any social network forum. Apart from that, they should also limit their communication with the counterparty to the platform when going to transact or during transaction.
Triangulation And Phishing Scams
In a triangulation scam, there are two scammers involved who take 2 orders from one seller nearly simultaneously. Ultimately, they confuse the seller into releasing relatively more crypto than the amount that has been paid. Analogously, phishing underscores a malicious attack in which a fraudster utilizes a fake profile, deceiving consumers into sending information or assets to them. To avoid a triangulaation scam, a person should check the wallet or bank account to confirm the inclusion of payment. Additionally, to prevent phishing scams, the user needs to trust just the official portal of the service provider. Hence, they should avoid opening unknown links.
Conclusion
To shield the assets, the holders should stay alert about the risks that are linked to P2P transfers. As P2P trading is getting more and more popular, the malicious actors are advancing their defrauding tactics to take away the hard-earned money of the victims without them realizing it. Therefore, staying vigilant against red flags is the foremost requirement to ensure safety. Furthermore, the investors also need to do comprehensive research before choosing a platform for investment.
Frequently Asked Questions
What is P2P trading in cryptocurrency?
P2P trading allows individuals to buy and sell crypto directly without relying on a third-party exchange. Traders set their own prices, choose partners, and decide when to transact. This method offers greater privacy and control but requires caution.
What are the most common scams in P2P trading?
Scams include fake payment proofs like forged SMS messages, chargeback frauds using reversible payment methods, and false transaction reversals. Other risks involve man-in-the-middle attacks, phishing, and triangulation scams that exploit payment confusion.
How can I protect myself when using P2P trading platforms?
Always verify payments in your own account before releasing crypto. Avoid third-party payments, stick to official communication channels, and never click suspicious links. If something feels off, don’t proceed and report the incident to the platform immediately.
