Paxful’s Ray Youssef said that peer-to-peer bitcoin (P2P) markets are still an important part of allowing users to move money across borders, but their future depends on becoming permissionless and unstoppable.
Along with Nicolas Gregory and Antoine Riard, Youssef has driven the development of CivKit, a P2P marketplace that will leverage technology from Nostr and the Lightning Network to power a decentralized platform, allowing peer-to-peer censorship and permissionless transactions.
Youssef spoke exclusively with Cointelegraph’s Joe Hall at the Surfin’ Bitcoin conference in Biarritz, France, about the ongoing project, which is targeting an alpha release by the end of 2023.
according to white paper The CivKit system, co-authored by Youssef, Gregory and Riard, will use the Nostr protocol as its P2P order book and rely on the Bitcoin network as the source of truth for its “stake network” market ranking paradigm.
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Transactions will be locked under Bitcoin contracts to remove reliance on third-party dispute arbitration, while market nodes will be incentivized by privacy-preserving service credentials backed by Bitcoin payments.
The white paper outlines the goals of its market system to enable global trade of any kind of item, including fiat currencies, goods and services, anywhere in the world.
According to Youssef, P2P marketplaces are popular but considered a niche market within the bitcoin ecosystem. While most cryptocurrency users think of spot or futures exchanges and markets as reasons for them to consider trading, Youssef said that P2P trading, or over-the-counter (OTC) currency trading using cryptocurrency clearing layers, is bigger than users think:
“It started with people trading on Bitcoin Talk, then LocalBitcoins came along, then Paxful came along. Then ‘CZ’ (Changpeng Zhao) stole my stuff and launched Binance peer-to-peer.”
Youssef acknowledged that Binance’s P2P marketplace is now the largest player in the ecosystem, noting that private conversations with Binance founder CZ suggest that the product remains a global cryptocurrency exchange as the spot market struggles to generate large returns. The top source of income for the business.
The impetus for creating CivKit stemmed in part from fears that P2P platforms such as Binance might shut down. The real concern, says Youssef, is the lack of alternatives for P2P users who rely on these services to move money across borders.
“It’s not about trading. It’s not speculation. They’re actually trying to get money flowing and use their money in ways they couldn’t before. Peer-to-peer is the only way to do that.”
Youssef noted that LocalBitcoins shut down in February 2023, and regulatory challenges in 2023 caused Paxful’s services to be temporarily suspended in April 2023. More than a month later, the market restarted.
“Fraud is a huge concern. Regulation is a huge problem and the stakes are huge. It’s Operation Choke 2.0. They’re trying to shut down all crypto and bitcoin entry and exit.”
Youssef also emphasized that P2P marketplaces need to be built in a way that is “unstoppable” and “permission-free,” emphasizing that Delaware-based Paxful and Finland-registered LocalBitcoins are both facing closure despite their vastly different geography.
As previously covered in-depth by Cointelegraph, peer-to-peer exchanges face intense regulatory scrutiny and uncertainty in countries such as the United States.
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