What is Peer To Peer & How does it Work? Listen to the explanation

In cryptocurrency and other technologies, there is a term called peer-to-peer, abbreviated as P2P. What is P2P? Read more here!

What is peer-to-peer (P2P)?

Peer-to-peer (P2P) networks in computer science consist of a group of devices that collectively store and share files. Each participant (node) functions as an individual peer. In general, all nodes have equal power and perform the same tasks.

In financial technology, the term peer-to-peer refers to the exchange of cryptocurrencies or digital assets over a distributed network. This allows buyers and sellers to trade without the need for intermediaries. This method is also found on websites that connect lenders and borrowers.

The popularity of P2P began in 1990 and has now become the core of most of the cryptocurrencies that make up much of the blockchain industry.

How Does P2P Work?

P2P systems are maintained by a distributed network of users without a central administrator because each node maintains a copy of the files and acts as both a client and server for other nodes. This is what allows nodes to download or upload their files from other nodes.

The essence of Peer to Peer itself is a device system where clients can download files from a centralized server. On a P2P network, shared files are stored on the hard drive. Using software applications designed to facilitate data sharing, users can ask other devices on the network to find and download files. Once a user downloads a particular file, they can then act as the source of that file.

It can be said that a node can act as both a client and a server which makes it a source for downloading files by other nodes. These two functions can work simultaneously.

P2P networks tend to be faster and more efficient as their user base grows. Additionally, distributed architecture makes P2P systems highly resistant to cyberattacks. In contrast to traditional models, P2P networks do not have significant weak points.

Category: System Peer-to-Peer

Peer-to-Peer systems themselves are differentiated based on their architecture. The three main types are referred to as unstructured, structured, and hybrid P2P networks. Understand more below.

Unstructured P2P Network

Unstructured P2P networks do not exhibit a specific organization of nodes. Participants communicate randomly with each other. This system is considered resilient to high change activity.

High change activity means there are many nodes that frequently join and then leave the network

Although easier to build, unstructured P2P networks may require higher CPU and memory usage as search requests are sent to as many peers as possible. This tends to flood the network with questions, especially if only a few nodes offer the desired content.

Structured P2P Network

In contrast, structured P2P networks have an organized architecture, allowing nodes to search for files efficiently, even if the content is not widely available. In many cases, this is achieved through the use of hash functions that facilitate database searches.

While structured networks may be more efficient, they tend to exhibit a higher degree of centralization and typically require higher setup and maintenance costs. Additionally, structured networks are less robust when faced with high spin rates.

Hybrid P2P Network

Hybrid P2P networks combine the conventional client-server model with some aspects of peer-to-peer architecture. For example, the design may contain a central server that facilitates connections between peers.

Compared to the other two types, hybrid models tend to show better overall performance. Typically, they combine some of the key advantages of each approach, achieving significant levels of efficiency and decentralization simultaneously.

The Role of P2P in Blockchain

The role of P2P (Peer-to-Peer) architecture has an important role in blockchain technology, especially in the context of Bitcoin and other cryptocurrencies. This Peer to Peer design allows direct digital money transfers from one user to another via a P2P network, facilitated by blockchain.

The P2P architecture inherent in blockchain technology enables the global transfer of bitcoin and other cryptocurrencies without relying on intermediaries or central servers. Individuals can set up Bitcoin nodes to participate in verifying and validating blocks.

The blockchain will record all activity and nodes will store a copy of the blockchain, ensuring data accuracy through comparison with other nodes, thus quickly rejecting any malicious activity or inaccuracies.

Advantages of Peer to Peer Networks

P2P networks offer better security compared to traditional client-server setups. The blockchain's distribution over a large number of nodes makes it practically immune to the Denial-of-Service (DoS) attacks that plague many systems.

Most nodes must reach consensus before data is added to the blockchain, making it nearly impossible for an attacker to change that data. This is especially true for large networks like Bitcoin. 

Smaller blockchains are more vulnerable to attacks because one person or group can ultimately control most of the nodes (this is known as a 51 percent attack).

As a result, distributed peer-to-peer networks, combined with majority consensus requirements, provide a relatively high level of resilience against malicious activity. Apart from security, the use of P2P architecture in cryptocurrency blockchains also makes them censorship-resistant by central authorities. 

Weaknesses of P2P Networks

Even though it has many advantages, P2P also has the following limitations.

The blockchain must be updated on each individual node rather than on a central server, adding transactions to the blockchain requires enormous computing power. While this provides increased security, its efficiency is greatly reduced and is one of the main obstacles regarding scalability and widespread adoption. 

Another drawback is the attacks that may arise during a hard fork event. Because most blockchains are decentralized and open source, groups of nodes are free to copy and modify the code and split off from the main chain to form new, parallel networks. 

Hard forks themselves are normal and not a threat. However, if certain security methods are not adopted properly, both chains can become vulnerable to replay attacks.

Additionally, the distributed nature of P2P networks makes them relatively difficult to control and regulate, not only in the blockchain realm. Some P2P apps and companies are involved in illegal activities and copyright infringement.

Those are some important things to learn about Peer to Peer or P2P networks. Apart from blockchain itself, P2P systems are also widely used by other technologies. 

Also read:
Get to know the types of nodes and their functions in crypto.
How does blockchain work?
What is Bitcoin and How Does It Work?
What is Danksharding and its features
? What is a Crypto ETF and what are its advantages?

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile; prices can change significantly from time to time, and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.