Summary
Peer-to-peer (C2C) trading is becoming increasingly popular among cryptocurrency traders, but like any type of trading, C2C trading also carries potential risks. Understanding these risks can help traders avoid potential losses and better understand the trading process. Read on to learn what precautions traders can take, as well as how and when to apply these measures.
Introduction
Peer-to-peer (C2C) cryptocurrency trading refers to the buying and selling of digital currencies without the involvement of a third-party intermediary. C2C transactions support buyers and sellers in setting prices, selecting trading partners, and deciding on appropriate transaction times. In C2C trading, diligent and experienced traders can find and exploit favorable trading conditions to meet their needs.
Cryptocurrency C2C markets facilitate the direct trading of cryptocurrencies between individual users. Since there is no central authority or third-party intermediary, users have greater control over their funds and their identity is protected during transactions.
Despite these benefits, C2C transactions also come with some risks. Users should be aware of the risks before attempting C2C transactions. Common risks faced by traders include false proof of payment, refund fraud, erroneous transfers, man-in-the-middle attacks, triangle scams, and phishing.
Are C2C transactions safe?
As with any type of transaction, C2C transactions involve certain risks, which vary depending on the trading platform and its security measures. While early trading platforms faced higher risks of theft and fraud, many newer C2C trading platforms have greatly improved their security measures.
Today, leading C2C trading platforms typically provide custodial services, implement regular security updates and strict identity verification processes (among other measures) to ensure user security.
However, even with appropriate protection measures in place, all trading activities carry risks, and C2C transactions are no exception.
What are the common C2C scams?
False proof of payment or text message
Scammers may trick you into releasing cryptocurrency by digitally altering receipts to make you think they have paid. One example is a text message scam, where criminals send victims fake payment receipt text messages.
How to avoid this scam: Sellers should only approve a transaction after verifying that payment has been received in their wallet or bank account.
chargeback fraud
Criminals may use the refund function of your chosen payment platform to reverse the payment after receiving your funds. In many cases, they will try to pay through a third-party account. Some payment methods, such as checks and online wallets, are easier to request a refund.
How to avoid this type of scam: Don’t accept payments from third-party accounts. If this happens, an appeal should be filed with the platform and the money will be refunded to the buyer's account.
Wrong transfer
As with chargeback fraud, scammers may report the erroneous transaction to their bank and request a reversal in order to steal your funds. Some scammers may even use scare tactics, such as warning you that selling cryptocurrency is illegal, to discourage victims from reporting the incident.
How to avoid such scams: Don't be intimidated by scare tactics. Systematically collect records of your communications and transactions with the criminals, such as screenshots.
man-in-the-middle attack
In a man-in-the-middle attack, criminals intervene in a user's communication with an application, organization, or another person, impersonating the other party to communicate with the user in order to steal assets or sensitive information (such as private keys). The three main categories of man-in-the-middle attacks include dating scams, investment scams, and e-commerce scams.
Marriage scams. In dating scams, scammers pretend to be dating the victim online. After gaining the victim's trust, they manipulate the victim into helping solve their financial problems, wire money or cryptocurrency, or share sensitive information such as private keys. Once they have achieved their purpose, all contact will be terminated.
Investment scams. In investment scams, criminals approach and convince victims to invest in a business. As the "middleman" between victims and investment opportunities, scammers can allocate users' funds at will under the guise of "investment."
E-commerce scams. In e-commerce scams, scammers pose as online sellers selling quality goods at discounted prices. They insist that victims pay cryptocurrency into their wallets. After the payment is made, they disappear without delivering the promised goods.
How to avoid this type of scam: Do not respond to transaction requests on any social networking platform. Before and during the transaction, both parties communicate only on the official platform.
triangle scam
In a triangle scam, two criminals place two orders from the same seller at almost the same time to confuse the seller into releasing more cryptocurrency than was actually paid.
For example, buyer A places a cryptocurrency order worth 5,000 BUSD (order A), while buyer B places an order worth 6,000 BUSD (order B).
Subsequently, buyer B transfers 5,000 BUSD to the seller, and buyer A marks order A as paid. The seller releases the cryptocurrency to buyer A, thereby completing order A of 5,000 BUSD. Buyer B then transfers 1,000 BUSD to the seller and provides proof of payment of 5,000 BUSD (obtained from buyer A) plus 1,000 BUSD, forcing the seller to release the digital assets under order B.
After the dust settled, it turned out that the seller had released 5000+6000=11000 BUSD worth of cryptocurrency, but had only actually received 6000 BUSD.
How to avoid this type of scam: Always double-check your bank account or wallet to confirm that you have actually received all the money you are due from a pending C2C transaction.
Phishing
Phishing is a malicious attack. In phishing, scammers use false profiles to trick users into sending assets or information. For example, criminals may impersonate customer service representatives of C2C platforms to gain access to private information or encrypted accounts.
How to avoid this scam: Scammers may send false security alerts related to your account via email or text message. When viewing information, do not click on unknown links before verifying the source. You should only seek help through official C2C trading platforms.
How to identify risks
Before trading
View C2C advertising materials. Vet any potential counterparty before trading with them. Some things to note when viewing C2C materials are:
Number of transactions: C2C counterparties with few transactions may not necessarily have problems, but high transaction volumes may indicate that the counterparty is more reliable.
Order completion rate: If the other party's order completion rate is below 80%, please reconsider whether to proceed with the transaction, as this may indicate that the trader frequently withdraws transactions.
Advertiser or user feedback: Few positive reviews or a large number of negative reviews may indicate a higher risk transaction.
Look at the ad carefully. Evaluate each C2C ad to determine if it meets your needs and goals. Consider price, quantity, accepted payment methods, restrictions (such as transaction amounts) and other terms and conditions. For example, if the C2C price is too different from the market price on other trading platforms, then the advertisement is more suspicious.
When trading
Be wary when communicating with C2C buyers. Some red flags include:
Buyers are urging you to release your cryptocurrency.
The buyer asks for non-essential information.
The buyer can no longer be contacted.
The buyer borrows money from you.
The buyer paid less than the amount agreed upon in the order.
The buyer paid more than the amount agreed on in the order.
Buyers require communication outside the C2C platform.
The buyer requested payment through a third party.
Be vigilant when communicating with C2C sellers. Some red flags include:
After you pay, the seller asks you to cancel the order.
The seller requires communication outside the C2C platform.
The seller requires the transaction to be conducted outside the C2C platform.
The seller requires you to pay an additional processing fee.
after transaction
Red flags when communicating with C2C buyers include:
You did not receive the corresponding assets after payment.
The buyer is paying a bad check.
After receiving payment from the buyer, your bank account is disabled.
The buyer initiates a refund request through their bank after you send the cryptocurrency.
Common ways to prevent scams
Trade on a trusted platform
Choose a leading C2C platform with strong security features. Common features include:
Risk management features. If the platform enforces specific requirements before trading, it will help reduce invalid, unreliable or low-quality ads. Even better, the platform uses advanced order matching logic to match users only with trusted traders and verified advertisers, and uses risk management algorithms to monitor suspicious activities.
Some optimized algorithms can even limit the trading activities of potential criminals. Additionally, withdrawal limits or delayed withdrawals help protect user funds.
Know Your Customer (KYC) protocol. If a C2C platform has a KYC protocol, it can help beginners find reliable trading partners through user identity verification. In this way, beginners can trade with verified advertisers with reliable transaction records and sources of funds.
Custody Services. Escrow services allow buyers and sellers to securely exchange goods or assets. A reputable third-party institution (usually a C2C platform) is responsible for handling the exchange of funds between the two parties to ensure the safety and fairness of the transaction.
Customer service. Although C2C transactions usually do not require middlemen, the customer service team of the C2C platform can intervene when users encounter transaction problems.
Automatic Payments. With the new automatic payment method, C2C platforms can automatically release cryptocurrencies in custody accounts without manual intervention. Buyers can receive newly purchased assets immediately, and sellers do not need to manually check payments for each order or manually release assets.
Block function. You can block suspicious users through the block function. If you have had an unpleasant trading experience with a user, you can block that user. After being blocked, the user will not be able to trade with you again.
Communicate only through the platform
Avoid contacting potential counterparties on questionable websites, and be wary of overly attractive prices. In addition, if communication is through external channels, it is easier for scammers to raise false disputes and deny the existence of the transaction.
Verify transactions carefully
Always carefully verify all counterparty information when trading. Carefully check all receipts and transaction records to ensure information has not been tampered with through digital means. Here are some tips for spotting fake proof of payment:
text overlapping
inconsistent colors
Inconsistent layout
inconsistent size
You can also use free image forensic tools online. Search for "fake image detector" or "image forensics tool" for related information.
Take a screenshot
Keep records of all correspondence and transactions in case an appeal needs to be lodged.
Post targeted ads
If you have established a cryptocurrency network, make sure your ads are only targeted to the people you want to trade with. Hide your ads and only share them with specific people, such as people you know and trust, or users with whom you have successfully transacted before. Hiding ads is also very helpful if you want to make large deals.
Block suspicious people
Proactively block users who have had bad transactions with you to prevent fraud and other behaviors that affect your trading experience.
File a complaint
If you encounter a problem, please contact customer service and file a complaint. Please provide all transaction-related evidence so that customer service can better assist you.
in conclusion
To protect your assets, it is important to remain alert to the potential risks associated with C2C transactions. This includes understanding the terms and conditions of any agreement, staying alert to red flags, and using a platform with strong security features.
Be vigilant when participating in any C2C transaction and contact customer service if you have any concerns. By staying alert and taking the necessary precautions, you can fully enjoy the benefits of C2C transactions.
Further reading
What is peer-to-peer trading and how is it used?
Peer-to-Peer Network Explained | Binance Academy
Why and how to do your own research when investing in cryptocurrencies (DYOR)
Five Risk Management Strategies
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