Peer-to-peer (P2P) network

If you are a little familiar with the world of cryptocurrency, you may have heard the term “Peer-to-Peer” or “P2P”. Many people are unsure of what a peer-to-peer network actually is and how it works in practice.

Here we will explain everything you need to know about Peer-to-Peer or P2P networks!

What is a Peer-to-Peer (P2P) network?

A Peer-to-Peer or P2P network is an organized interaction where many different computers interact equally. You can consider P2P as the alternative to client servers, where one computer is responsible for performing the services.

In other words, in a Peer-to-Peer network there is no central server, but rather a decentralized model for communication. The various computers connected to the P2P system are often referred to as nodes.

A Peer-to-Peer server allows users to share data or transfer funds without having to rely on central servers.

The resources that exist in a Peer-to-Peer network are spread across one or more client processes that are managed locally.

How does a Peer-to-Peer network work?

If you download files from the web, you will usually search the website, and this page then provides the link needed to download the file. In that case, the website will function as a server, while your (recipient’s) computer is a client.

In the above example, the server will produce data while the client is receiving data. This is a model of the server / client type.

In a Peer-to-Peer network, the process is different. To be able to download files or anything else in a P2P network, you must first download software. This software creates a virtual network consisting of other computers that have similar software.

If you need a specific file, the P2P network will collect the file into fragments from the other systems that are connected and already have the file. P2P is often used in BitTorrent protocols, but also in blockchain technology and cryptocurrency.

Peer-to-Peer Cryptocurrency Network

Cryptocurrency is among the resources shared across Peer-to-Peer networks. For example, let’s take a look at Bitcoin. This popular cryptocurrency is developed on a decentralized network, and transactions are completely independent of any central bank.

A Peer-to-Peer network allows users to trade and sell Bitcoin without any third parties. Bitcoin is based on a blockchain that ensures that the digital currency functions as a distributed database.

This database is spread across nodes in a Peer-to-Peer network. In the blockchain, all transactions will be logged in blocks that are produced at regular time intervals.

Why use Peer-to-Peer networks?

The main reason why people use Peer-to-Peer networks rather than, for example, client / server functions, is because they want a decentralized system. No third party has centralized power over file sharing or transactions.

Another reason why many people prefer P2P networks is that the networks are highly scalable. It is easy to add new nodes since you do not need to make key configurations in any central server.

The network is also difficult to take down. If one node should disappear, the other nodes will still communicate and work. All nodes must be removed for the network to disappear.

Is a Peer-to-Peer Network Legal?

Yes! It is perfectly legal to use Peer-to-Peer networks. At the same time, it is the case that someone uses the smart technology for illegal file sharing or the like. As you know, piracy and BitTorrents are not legal.

When it comes to cryptocurrency, the case is different. Peer-to-peer networks are used here to ensure fast and secure transactions without any third party. So it is not a question of illegal file sharing.

The technology is in itself legal, but can thus be used for less legitimate things by some.

Different types of crypto

There are a number of different types of cryptocurrencies on the market that use Peer-to-Peer technology. Among these we find Bitcoin, which is based on blockchain technology and a cryptographic P2P protocol.

Ethereum is another cryptocurrency that uses P2P, or more specifically dvp2p. There are many different Peer-to-Peer protocols.

We can also mention Litecoin, which is a P2P currency with open source code. In short, all cryptocurrencies use some form of P2P protocol, but this protocol may be somewhat different from crypto to crypto.

There is no standardized P2P protocol for blockchains. A number of different protocols have therefore been developed, and these are used by different cryptocurrencies.

Why does cryptocurrency use P2P?

The reason why cryptocurrency is based on Peer-to-Peer is that the currency is decentralized – in contrast to, for example, traditional currency. Ordinary currency is usually controlled by a state bank, while cryptocurrency transactions are verified by the users themselves.

When Bitcoin was first launched, as the market’s first crypto, the creators had seen the need for a currency that was decentralized and fast. It should be possible to transfer money across national borders faster than before, and with less cost.

Cryptocurrencies do not use third parties in the form of banks or the like, which makes transactions lightning fast. This would not have been possible without Peer-to-Peer technology. P2P has really revolutionized the way you can transfer money.

It will be exciting to follow the development further. Perhaps more and more industries and services will adopt P2P technology in the years to come, thanks to all the benefits?

Do you want to buy cryptocurrency?

Peer-to-Peer technology is used in many contexts, and means that a number of computers or nodes function as equivalent servers / servers in a network. The technology is used in blockchains and cryptocurrencies, among other things.

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Bitcoin is the best known example of cryptocurrency based on Peer-to-Peer and blockchains. Bitcoin was also the first cryptocurrency to come on the market, but today there are many cryptocurrencies to choose from.

Peer-to-Peer technology has probably come to stay, and is used today in both crypto and Bluetooth. The possibilities are many.

If you want to buy cryptocurrency, there are several secure crypto exchanges you can check out. eToro and NBX are among these, and the platforms are registered with Finanstilsynet. Buy cryptocurrency and see how a Peer-to-Peer network works in practice!

FAQ

[sc_fs_multi_faq headline-0=”h2″ question-0=”Hvorfor heter det «Peer-to-Peer»?” answer-0=”Teknologien heter Peer-to-Peer (eller likemann-til-likemann) fordi alle datamaskiner i nettverket er likeverdige.” image-0=”” headline-1=”h2″ question-1=”Når benyttes Peer-to-Peer-nettverk?” answer-1=”Peer-to-Peer-nettverk benyttes ikke bare innen kryptovaluta og blokkjeder, men også for fildeling og Bluetooth – for å nevne noe.” image-1=”” headline-2=”h2″ question-2=”Hva er forskjellen på klient/server og Peer-to-Peer?” answer-2=”Klienttjenere er én sentral datamaskin som sender ut data til mottakere (servere). Ved Peer-to-Peer vil alle datamaskiner fungere likeverdig og fungere som både servere og tjenere.” image-2=”” count=”3″ html=”true” css_class=””]