No one in the middle collecting a cut or holding a kill switch. Which also means no one in the middle catching you if something goes wrong.
Peer-to-peer (P2P) describes any system where participants transact directly with each other rather than through a central coordinating authority — the term entered popular use through file-sharing networks, but its more consequential modern form is P2P lending, where individuals fund each other’s loans directly. Research on peer-to-peer lending platforms found something specific and non-obvious: ordinary individual lenders, using only soft, informal signals about a borrower, predicted default risk more accurately than the borrower’s own official credit score — a real information advantage from direct, relationship-based evaluation that a centralized intermediary’s standardized scoring doesn’t capture.
The trade-off is symmetric: removing the central party also removes whatever standardization, recourse, and seamlessness that party was providing. A P2P system pushes both the informational advantage and the risk of mismatched, uncoordinated behavior back onto the participants themselves.
Source: Iyer, R., Khwaja, A.I., Luttmer, E.F.P. & Shue, K., “Screening Peers Softly: Inferring the Quality of Small Borrowers,” Management Science, 2016.