What is a Peer-to-Peer Payment System (Is Peer-to-Peer Trading Illegal)?
What is a Peer-to-Peer Payment System? The lightning network of Bitcoin is one o
What is a Peer-to-Peer Payment System? The lightning network of Bitcoin is one of the best applications of blockchain technology. In the past few years, Bitcoin transaction fees have almost doubled, ranging from $3000 to $15000. This has led many people to see Bitcoin as a new store of value, as this cryptocurrency has the characteristics of “decentralization” and unique functions.
Despite its many advantages, due to its complexity and non-scalable advantages, most people still cannot use it for everyday payments, because the flaws of peer-to-peer systems make them difficult to be accepted or adopted, especially when it comes to financial risks. (Bitcoinist)
Therefore, when discussing Bitcoin’s peer-to-peer payment method and why people need it, it often raises some doubts.
For an idea, we should first understand how peer-to-peer technology helps reduce the costs and entry barriers of traditional financial institutions and provide more choices. For example, if a user wants to collect payments from merchants using a credit card, they can purchase a card through bank transfers, and then use a credit card or debit card (Visa card). This is done to reduce friction between intermediaries, improve efficiency, and shorten cross-border settlements.
To solve this problem, Bitcoin supporters have proposed a peer-to-peer model: “Everyone is different, but everyone wants the same amount. That’s why I often say that every dollar exists in a separate address.”
However, as time has passed, this method has also been improved: Bitcoin only allows those who have private keys to send and receive funds without intermediaries. In some cases, Bitcoin also limits the number of third-party entities involved. These operators must comply with regulations to continue operations, and they cannot guarantee the security of customer assets.
According to data from Blockchain.com, since 2017, Bitcoin’s main sources of demand include custody services such as BinanceSmartChain and GeminiTrustCompany. The platform now allows users to purchase Bitcoin at lower prices instead of buying directly. In addition, the company is also working on alternative solutions, including a fully centrally managed network, known as a distributed ledger network.
The core protocol of Bitcoin was created by Bitcoin developers. Although the Bitcoin community initially believed that its concept was simple, in the next few months, more and more people began to believe that it was a reliable way to store digital wealth.
In about the next year, the “centralized” payment structure may change, but not many companies are willing to take on such responsibilities. Bitcoin supporters claim that this type of system can allow companies to easily handle all transactions. “Decentralization” (scaling) is a very important feature because anyone can complete transactions without intermediaries.
Is Peer-to-Peer Trading Illegal?
Recently, the Beijing Local Financial Supervision and Administration Bureau issued an announcement on “Handling the Operating License of Peer-to-Peer Trading Venues”, which prohibits virtual currency-related businesses such as Bitcoin, Litecoin, and Dogecoin from being conducted with payment methods such as “cash”. According to reports, the above regulations are formulated and issued based on relevant national laws.
Enterprises engaged in digital currency trading within China belong to illegal financial activities, and their actions may constitute money laundering, fraud, and other criminal offenses. The “Notice on Preventing Risks of Token Issuance Financing” (Silver Release [2020] No. 24) jointly issued by the central bank and seven other ministries on June 16, 2018 pointed out, “Internet companies raise funds by providing network services to the public without participating in any form of services.” This action is seen as restricting the use of virtual asset trading platforms for transactions. The “Notice” clearly states that the mixing of virtual currency with fiat currency is only a technical means rather than a practical application of technology. “Therefore, in some cases, using virtual currency for over-the-counter trading is illegal.”
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