Peer-to-peer (P2P) Bitcoin marketplaces have played a significant role in facilitating cross-border money transfers. However, the future of these platforms hinges on their ability to become permissionless and unstoppable, according to Ray Youssef, co-founder of Paxful. Youssef, together with Nicolas Gregory and Antoine Riard, is spearheading the development of Civ Kit, a P2P marketplace that aims to leverage the Nostr protocol and Lightning Network to create a decentralized platform for censorship-resistant and permissionless trading among peers.
During an exclusive interview with Cointelegraph’s Joe Hall at the Surfin’ Bitcoin conference in Biarritz, France, Youssef discussed the upcoming project, which is expected to release an alpha version by the end of 2023. The white paper, co-authored by Youssef, Gregory, and Riard, outlines the Civ Kit system’s plan to utilize Nostr for its P2P order book and rely on the Bitcoin network as a source of truth for its market ranking paradigm named “web-of-stakes.”
One of the key features of Civ Kit is the implementation of Bitcoin contracts to lock trades, eliminating the need for third parties to mediate disputes. Additionally, market nodes will be incentivized through BTC payments backed by privacy-preserving service credentials. The ultimate goal of the marketplace system, as described in the white paper, is to enable global trade of various items, including fiat currencies, goods, and services.
Youssef pointed out that although P2P marketplaces are popular, they are often overlooked within the Bitcoin ecosystem, which typically focuses on spot or futures exchanges. However, P2P trading, also known as over-the-counter (OTC) trading, where money is exchanged using cryptocurrencies as a clearing layer, is more significant than many users realize. Youssef humorously remarked, “It started with guys on Bitcoin Talk trading, then LocalBitcoins came out, then Paxful came out. Then ‘CZ’ [Changpeng Zhao] stole my shit and launched Binance peer-to-peer.”
Acknowledging Binance’s P2P marketplace as the largest player in the ecosystem, Youssef shared insights from private conversations with Binance founder, Changpeng “CZ” Zhao, who confirmed that the P2P offering remains a top earner for the global cryptocurrency exchange, especially when spot markets struggle to generate significant returns.
The creation of Civ Kit stems partly from concerns about the potential closure of P2P platforms like Binance’s. Youssef emphasized the lack of alternatives available for P2P users who rely on these services to transfer money across borders. He stated, “It’s not about trading; it’s not speculative. They’re literally trying to make the money flow and use their money in ways they couldn’t use before. Peer-to-peer is the only avenue for that.”
Youssef cited the closure of LocalBitcoins in February 2023 and Paxful’s temporary suspension of services in April 2023 due to regulatory challenges as examples of the underlying risks faced by P2P marketplaces. He referred to these circumstances as “Operation Choke 2.0,” an attempt to shut down on-ramps and off-ramps into the crypto space. Youssef underscored the need for P2P marketplaces to be built in a manner that makes them unstoppable and permissionless, highlighting the vulnerabilities faced by both Paxful, based in Delaware, and LocalBitcoins, registered in Finland, despite their different geographical locations.
As previously explored by Cointelegraph, P2P exchanges have encountered significant regulatory scrutiny and uncertainties, specifically in countries like the United States. In response to this challenging landscape, Civ Kit aims to create a decentralized solution that empowers individuals to conduct cross-border transactions without intermediaries.
In conclusion, P2P Bitcoin marketplaces have become instrumental in facilitating financial transactions across borders. However, their long-term viability depends on their ability to evolve into permissionless and unstoppable platforms. The development of Civ Kit represents a promising solution to address the concerns and challenges faced by P2P marketplaces, ensuring the continued accessibility and efficiency of cross-border money transfers for users worldwide.
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