A peer-to-peer (P2P) crypto exchange is a decentralised platform that allows buyers and sellers to trade cryptocurrencies directly without an intermediary. Unlike centralised exchanges (CEXs) like Binance or Coinbase, which act as custodians and control order matching, P2P platforms (e.g., LocalBitcoins, Paxful, or Binance P2P) simply connect users, enabling them to negotiate prices and payment methods independently. Transactions are often secured via escrow services, where the exchange holds the crypto until payment confirmation.

Key differences include:

Control & Privacy: P2P exchanges offer more privacy, often requiring minimal KYC, whereas CEXs enforce strict identity verification.

Payment Flexibility: P2P allows cash, bank transfers, or even gift cards, while CEXs rely on traditional banking integrations.

Custody: CEXs hold user funds, posing hacking or insolvency risks, while P2P traders retain ownership until the trade completes.

Liquidity & Speed: CEXs provide instant order matching with high liquidity, while P2P trades depend on individual sellers, sometimes causing delays.

Regulation & Fees: CEXs face more regulatory scrutiny and charge trading fees, whereas P2P platforms earn through escrow or ads, often with lower costs.

P2P exchanges are ideal for privacy-focused users or those in restricted regions, while CEXs suit traders needing speed and deep liquidity.