Peer to peer in its simplest form in the world of cryptocurrency is basically two people exchanging crypto-to-crypto or crypto-to-fiat money with one another. Atleast that's how it was originally intended. But as we know things evolve over a period of time.
When you throw a 3rd party or escrow into the mix and it changes the equation. It loses it's basic property of being completely decentralised. It's not necessarily bad for any of the parties involved, while infact it can encourage more people to use this as an option.
But in the purest sense of the term Peer-to-peer exchanging is not the same with a 3rd party involved. I don't have a term to describe what to call P2P with presence of an escrow so we'll just call it P2P.
In the Indian context all P2P exchange services including Localbitcoins are all using some type of escrow service. WazirX infact plans to have strict KYC measures in place as well. This will ensure security for most, but anonymity in transactions are lost with KYC procedures.
What can be done differently?
With decentralized exchanges you can build true p2p systems but when you throw FIAT currency such as the Rupees or Dollars into the mix then it complicates matters.
Unless ofcourse if it were possible to publicly verify a FIAT transaction, perhaps on a blockchain type of tracking system in place, then maybe it can be done. But this could be hard to do especially since central banking is a closed system. Data of each and every bank is their own and not accessible by anyone else.
But it might be possible to do it if there was a way to shield identities of senders and receivers and make this data public. However, I don't think any bank would do this just for the sake of decentralising.
Looking further into this I found this video on blockchain oracles. If Banks have oracles perhaps true p2p might be possible. I can't speak more on 'oracles' as a subject but im open to discussion on how they can solve the issue of a 3rd and enable crypto-fiat decentralised type of exchanges.
However, as far as India is concerned there are a few options for exchanging cryptos for INR so we needn't be too worried now. Hence, as it stands P2P is largely a misnomer as every exchange service that calls itself P2P in India has different strategies of its own to reach the ultimate goal of transferring value from one customer to another.
P2P transfers also carries the risk of tax burden which I will address at a later time.
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