What Does P2P Peer-To-Peer Network Mean? How Does P2P Network Work 2023

In the field of financial technology, P2P generally refers to virtual currency or digital currency transactions carried out by distributed networks. A P2P platform allows two parties to transact directly without intermediaries. Some websites can also provide a P2P transaction environment for both borrowers and lenders. The P2P architecture works in a variety of scenarios, but it really took off in the 1990s around the world, when the first file-sharing programs came out. Peer-to-peer networks are at the heart of most virtual currencies today, accounting for a large portion of the blockchain industry. However, it is also used in various other distributed computer programs, including: web search engines, streaming media platforms, online marketplaces, and its InterPlanetary File System (IPFS) network protocol. So, what exactly is a P2P peer-to-peer network? How does it work? Below, let’s take a look.

What does P2P peer-to-peer network mean?

Peer to Peer (P2P for short) networking is a vital part of how blockchain applications work, and why it is so robust and secure. Here, we’ll discuss what P2P is and why it’s such a huge improvement over the centralized systems we’re familiar with today.

In a P2P network, clients use and provide the basics of the network at the same time, although providing resources is entirely voluntary. Each peer (a “peer” is computer software on a network) is called an equal and is generally called a node. Peers can issue a portion of computing resources (such as disk storage, processing power, or network bandwidth) directly to other participants without any centralized coordination by servers or stable hosts.

While all nodes are the same, they can fill different roles within the blockchain ecosystem, such as miners or “full nodes“. In the case of a full node, the entire blockchain is copied into a single device, which is connected to the network. This means that information stored on the blockchain cannot be lost or corrupted, since doing so would mean destroying every full node on the network. Therefore, as long as there is a single node with a copy of the blockchain, all records will be consistent, thereby providing the possibility of rebuilding the network.

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P2P peer-to-peer networks are completely different from the traditional client-server model common today because there is no centralized point of storage. Instead, information is continuously recorded and exchanged between all participants on the network. This is also different from the centralized server model, which reduces the rate as more people are added, because the P2P network can actually increase its efficiency by adding a large number of devices or nodes to the network.

This method of passing information is a huge improvement, since the data is not stored at a centralized point and thus cannot be easily hacked, used or lost.

The absence of a central point of storage means no core authority is required, so no party can control and use the network to further its own agenda. Instead, customers become the true owners of their personal data, as long as they maintain it accurately. It’s a daring process to sidestep today’s centralized systems, where social media becomes the owner of all the data uploaded by customers, or businesses providing payment platforms decide when they can view your own funds, preserving your power to freeze money as they see fit.

How does P2P network work?

The P2P system is essentially maintained by a distributed network of users. Typically, they have no intermediate administrators or servers, since each node owns a copy of the file — both as a client and as a server for other nodes. In this case, each node is able to download files from other nodes or upload files to them. This is how P2P networks differ from traditional client-web server systems, where client devices download files from a central server.

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In a P2P network, connected devices share files stored on their hard drives, and users, using software applications designed to negotiate information sharing, query other devices on the network to search for and download files. Once a user installs a document, it becomes the source for that document.

Because each node stores, transmits, and receives files, P2P networks typically become faster and more efficient as the consumer base grows (network effect).

We can classify P2P systems according to their architecture.

1. Structured P2P network

In a structured P2P network, overlays are organized into a specific topology, and the protocol guarantees that any node can efficiently search for files/resources in the network, even if the resource is extremely rare.

The most common structured P2P network uses a distributed hash table, where a combination of consistent hashing is applied to assign ownership of each document to a specific peer. This allows peers to use hash tables to search for resources on the network.

2. Unstructured P2P network

Unstructured P2P networks do not have any specific node organization. Random communication between participants. These systems are said to be robust to high churn activity.

Although unstructured P2P networks are easier to create, they can require higher CPU and memory usage as search queries are sent to as many nodes as possible. This tends to flood the network with views, especially if a small number of nodes provide the desired content.

3. Composite P2P network

The hybrid model is the fusion of P2P mode and client-server mode. A common hybrid model is to have a central server that assists nodes in finding each other. There are many hybrid models, all of which weigh between the centralized performance provided by a structured server/client network and the node quality provided by a pure point-to-point structured network. The current hybrid model has better properties than a purely unstructured network versus a purely structured network, because some functions, such as search, do require centralized functions, but benefit from the decentralized aggregation of nodes provided by the unstructured network.

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Speaking of this, I believe everyone has a certain understanding of what is a P2P peer-to-peer network and how it works. In general, the P2P system architecture can be developed and applied in many different ways, and it is the key to the blockchain that enables digital currency. By distributing transaction books in a large node network, the P2P system architecture brings security, decentralization and anti-verification.

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Puneet Kantiwal

Puneet Kantiwal is an experienced professional in the field of blockchain and cryptocurrency technology. With a strong background in computer science and programming, Puneet Kantiwal has been involved in the crypto space since its early days. He has worked on various projects related to blockchain technology, including the development of smart contracts, decentralized applications, and blockchain-based platforms.

Learn More →

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