Peer-to-Peer Networks
What Is Peer-to-Peer (P2P)?
A peer-to-peer (P2P) network in computer science is a collection of devices that stores and shares files collectively. It is as though each node (participant) were a separate person. Nodes typically have equal power and execute the same functions.
The word "peer-to-peer" in financial technology refers to the trading of cryptocurrencies or digital assets via a dispersed network. Direct trading between buyers and sellers is made possible by a P2P platform, which eliminates the need for intermediaries. A P2P lending environment may also be provided via websites in some situations.
The first file-sharing systems were developed in the 1990s, and P2P architecture quickly became popular for a variety of reasons. A significant component of the blockchain sector is based on peer-to-peer (P2P) networks. Web search engines, streaming platforms, online marketplaces and the InterPlanetary File System (IPFS) web protocol are all examples of distributed computing applications that use them.
How Does P2P Work?
A distributed network of users maintains a P2P system. As a result, they don't have a central administrator or server because each node has its own copy of the files, which serves both the client and the server for other nodes. Consequently, files can be downloaded from other nodes or uploaded to other nodes by each node. When comparing P2P networks with typical client-server systems, which download files from a central server, this is what sets them apart.
Connected PCs and Macs use P2P networks to share files they have on their hard drives. Software applications that facilitate the exchange of data allow users to search for and download files from other devices on the network. It is possible for a user to become a source of a certain file after downloading it.
Nodes that operate as clients receive files from other nodes on the network. As a server, they are the source from which other nodes can obtain files. However, in actual reality, both functions can be carried out simultaneously (e.g., downloading file A, and uploading file B).
The more people using a P2P network, the faster and more efficient it becomes because each node stores, transmits, and receives files. P2P networks are also highly resistant to cyberattacks because of their distributed architecture. P2P networks, in contrast to traditional models, do not have a single failure point.
Peer-to-peer systems can be categorized based on their architecture. P2P networks can be divided into three categories: unstructured, structured, and hybrid.
Unstructured P2P Networks
The nodes in unstructured P2P networks are not arranged in any particular way. The participants engage in sporadic verbal and nonverbal exchanges. High churn activity is not a problem for these systems (i.e., several nodes frequently joining and leaving the network).
As a result of this, unstructured P2P networks use more CPU and memory resources than their structured counterparts. If just a few number of nodes are able to provide the needed content, this might lead to a flood of searches on the network.
Structured P2P Networks
While structured networks may be more efficient, they tend to present higher levels of centralization, and usually require higher setup and maintenance costs. Other than that, structured networks are less robust when faced with high rates of churn.
Hybrid P2P Networks
Some parts of the peer-to-peer network architecture are incorporated into traditional client-server networks in hybrid P2P networks A central server, for example, could function as a bridge between peers.
In general, hybrid models tend to perform better than the other two types. There are significant gains in both efficiency and decentralization that can be achieved by combining the best features of each technique.
The Role Of P2P In Blockchains
Satoshi Nakamoto, the man who created Bitcoin, called it a "Peer-to-Peer Electronic Cash System" at the beginning. Bitcoin is a cryptocurrency that was designed to function like a digital form of money. A P2P network known as blockchain manages a distributed ledger that may be transmitted from one user to another.
Bitcoin and other cryptocurrencies can be exchanged throughout the world without the need for intermediaries or a central server thanks to the P2P design of blockchain technology. A Bitcoin node is also available to anyone who want to participate in the verification and validation of blocks.
So, there are no banks in the Bitcoin network that handle or record transactions. As a result, the blockchain serves as a digital ledger that is accessible to the general public. As it stands, each node stores a copy of the blockchain and compares it with other nodes to ensure that the data is valid. Inaccuracies and harmful behavior are swiftly rejected by the network.
It is possible for nodes in bitcoin blockchains to play a range of different functions. Full nodes, for example, validate transactions against the system's consensus rules to ensure the network's security. As each full node has a current copy of the blockchain, they can contribute to verifying the distributed ledger's genuine status as a group effort. However, it is important to note that not all complete validating nodes are miners.
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