P2P marketplaces need to become unstoppable, permissionless

Peer-to-peer (P2P) Bitcoin (BTC) marketplaces remain an important cog in allowing users to move money across borders, but their future depends on becoming permissionless and unstoppable according to Paxful’s Ray Youssef.

Youssef, alongside Nicolas Gregory and Antoine Riard, is driving the development of Civ Kit, a P2P marketplace that will leverage the technology of Nostr and the Lightning Network to power a decentralized platform allowing censorship resistance and permissionless trading among peers.

Youssef spoke exclusively to Cointelegraph’s Joe Hall at the Surfin’ Bitcoin conference hosted in Biarritz, France about the in-development project that is aiming for an alpha release toward the end of 2023.

According to the white paper co-authored by Youssef, Gregory and Riard, the Civ Kit system will use the Nostr protocol for its P2P order book and rely on the Bitcoin network as a source of truth for its “web-of-stakes” market ranking paradigm.

Trades are set to be locked under Bitcoin contracts to remove reliance on third parties for dispute arbitration, while market nodes will be incentivized by privacy-preserving service credentials backed by BTC payments.

The white paper outlines the aim of its market system enabling global trade of any kind of item around the world, including fiat currencies, goods and services.

According to Youssef, P2P marketplaces are popular but perceived as niche within the Bitcoin ecosystem. While most cryptocurrency users think of spot or futures exchanges and marketplaces when they consider trading, Youssef said that P2P trading — or over-the-counter (OTC) trading of money using cryptocurrencies as a kind of clearing layer — is bigger than users might think:

“It started with guys on Bitcoin Talk trading and then LocalBitcoins came out, then Paxful came out. Then ‘CZ’ [Changpeng Zhao] stole my shit and launched Binance peer-to-peer.”

Youssef admits that Binance’s P2P marketplace is now the biggest player in the ecosystem, noting that private conversations with Binance’ founder Changpeng “CZ” Zhao suggest that the offering remains a top earner for the global cryptocurrency exchange’s business as spot markets struggle to generate big returns.

The impetus for the creation of Civ Kit is partly born over fears of the potential closure of P2P platforms like Binance’s. Youssef said that a real concern is the lack of an alternative for P2P users that depend on these services to move money across borders.

“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 pointed to the closure of LocalBitcoins in February 2023, as well as regulatory challenges in 2023 that led to the temporary suspension of Paxful’s services in April 2023. The marketplace was rebooted more than a month later.

“Fraud is a tremendous concern; regulation is a tremendous concern, and the risks are huge. It’s ‘Operation Choke 2.0.’ They’re trying to shut down all the on-ramps and off-ramps into crypto, into Bitcoin.”

Youssef also stressed that P2P marketplaces need to be built in ways that make them “unstoppable” and “permissionless,” highlighting that both Delaware-based Paxful and Finland-registered LocalBitcoins faced closure despite their vastly different geolocations.

As Cointelegraph previously explored in an in depth follow up, P2P exchanges have faced significant regulatory scrutiny and uncertainty in countries such as the United States.

Magazine: Should we ban ransomware payments? It’s an attractive but dangerous idea