Peer-to-Peer refers to a method of connection and communication between devices on a network where terminals with no differences in functionality connect directly with each other on an equal level and use each other’s data and functions. In addition, it refers to systems and software that use such a method. The P2P became known as a tool for file sharing and is now also used as a communication method for LINE, a Social Networking application used by everyone.
In this article, we explain how P2P works, different types of P2P, its advantages, examples of how it is actually used and its relationship with blockchain.
Table of Contents
What is P2P (Peer-to-Peer)?
P2P is an abbreviation for peer-to-peer. It is a system where data is exchanged directly between end devices (peers), with no central authority or institution. The concept is not limited to crypto-assets (virtual currencies). Still, it is part of the network models of data that the Internet represents.
The transactions with cryptocurrencies (virtual currencies) are carried out based on the P2P network, allowing transactions and transfers with cryptocurrencies (cryptocurrencies) to be made easily. However, the number of users is increasing. The P2P is a network technology prerequisite for crypto-assets (cryptocurrencies) and will increase in various other areas in the future.
Generally, when you visit a website on the Internet, you access a specific management server. By contrast, P2P mechanisms involve direct access and data exchange between user terminals. Thus, communications applications such as LINE and Skype are typical practical examples of the P2P model.
The P2P model for crypto-assets (virtual currencies) is realized through blockchain. There is a central authority such as a central bank or various financial institutions for exchanging legal tender and general financial instruments. In the case of cryptographic assets (virtual currencies), however, the Blockchain, which is a chain of transaction histories (=blocks), administers encrypted data and is therefore considered secure even without a central authority.
Previously, P2P was mainly used in the field of information processing but is now applied in various fields, including financial and distribution, beginning with cryptographic assets (virtual currency) introduced in 2008.
Three types of P2P exist!
There are several types of P2P, each with its own communication method. This section explains each communication method compared to the P2P mechanism described earlier.
Pure P2P
Known as pure P2P, this technology has the same structure as traditional P2P. It builds a P2P network where clients are only connected to each other and exchange information.
Hybrid P2P
The technology refers to networks that use servers in P2P networks. Different from the client-server variant, the clients exchange information with each other. Servers used in this technology store data about clients.
Supernode P2P
In Supernode P2P, several nodes with excellent processing capacity and stable communication lines are selected from the network to manage the information of the connected nodes and distribute the load by sharing the management with other supernodes.
Pros and cons of P2P Networks
P2P trading has several advantages that centralized mechanisms do not have. It should not be forgotten; however, there are, naturally, disadvantages.
An advantage is that the volume of data processing can be distributed, allowing for fast processing. Moreover, when more users connect to the network, a central server is not overloaded and loses performance.
As a result, even when people from all over the world access the system, as with crypto-assets (virtual currencies), issues such as server crashes do not occur, nor do access speeds decrease. As a result, no expensive investments in equipment such as communication lines and servers are required. The network can be built and operated securely at a low cost.
Moreover, even if a disruption, such as a virus infection does occur in a particular terminal, its impact on users is minimized. On a network with a central server, all users cannot communicate with each other if that server fails. At the same time, with P2P, communication can continue even if one terminal fails, so long as access to other terminals is possible.
On the other hand, a disadvantage is the quality of the information exchanged. Historically, many copyrighted works, like music and movies, were also shared through file-sharing programs. Naturally, copyright law does not allow uploading copyrighted material without the rights holder’s permission.
There are also problems with manipulation and falsification of the exchanged data. In P2P form, it is difficult to implement these risks in a controlled manner. With blockchain, cheating is prevented by the methods described below.
The differences between client-server type and P2P type
Here we summarize the differences between client-server type and P2P type: Since we explained P2P technology and the benefits of P2P, you probably have an idea of the differences.
In the client-server type, the server is the data manager. All information is managed centrally through the network structure. Since all information is managed in one place, server load cannot be distributed. The disadvantage is that the server can fail, but because the location of the data is clear, there is a lower risk of data loss, and it is more secure.
In the P2P variant, the load can be distributed over the network by decentralizing data management, enabling faster processing speed and no downtime. The decentralization of data reduces the load and ensures anonymity. Still, it makes it more challenging to determine the location of the data.
Compared to client-server systems, p2p is more speed-oriented than security-oriented. The clear difference between p2p and client-server systems is the simplicity of data management and processing speed.
P2P application and usage examples
Up to now, we’ve explained the basics of P2P technology. In the following, we’ll explain four use cases where P2P technology is used. The P2P technology is used all around us, with P2P even being used in the applications and software on the device you are currently viewing on this website.
LINE, an application for social networking
As we mentioned at the beginning of this article, P2P technology is used in the social networking application LINE. Ever shared photos or videos with your friends on LINE? The P2P technology is used for this data-sharing mechanism.
While LINE manages account information such as user IDs, the files can be shared among users without going through LINE servers. Since there is no need for a large server, the LINE application can be used for free.
Bitcoin Cryptocurrency
Bitcoin, a virtual currency mentioned at this article’s beginning, also uses P2P technology. Statistics of transactions (transaction history) issued when bitcoins are transferred are mined to calculate a hash value.
This data is then written to a block (distributed ledger) in the blockchain. At that point, data is distributed using P2P technology. The benefit of P2P technology is that the recorded data is preserved even if a node disappears.
Skype social networking application
The social networking application Skype, which lets users make calls and share files in the same way as LINE, uses P2P technology for data communication.
Account IDs and other information are managed on a server on the Skype side, and the nodes can find users based on the information stored on the server.
Following Microsoft’s acquisition of Skype, it switched its communication method from P2P technology to cloud-hosted services, so it currently does not use P2P communication methods.
µTorrent
Lastly, we will discuss the ‘µTorrent’ software that uses P2P technology. µTorrent is a well-known software for sharing files between users.
It is a beneficial software that allows users to share their recorded videos, etc. With this software, the users can share their videos with others. Though, copyright infringement problems have also been reported in the media, as P2P’s anonymity can be exploited to illegally download movies and music.
The Relationship Between P2P and Blockchain
P2P networks for cryptographic assets (virtual currencies) use a mechanism called blockchain to avoid problems such as data tampering.
A Blockchain is a “distributed ledger” in which transaction histories are linked together. Taking Bitcoin as an example, the blockchain’s reliability is confirmed by users who spend about 10 minutes performing complex calculations on each chunk.
The process is called “mining,” so the mechanism for verifying trustworthiness through mining is called “proof of work” (PoW). As a reward, bitcoins are given to the person who performs the calculations and approvals.
This system compensates for the weaknesses of P2P by making it impossible to approve without deliberately performing complex calculations. Suppose you wanted to manipulate the transaction data in the blockchain. In that case, you could do so with a computer (CPU) whose computing power is superior to that of other users (miners).
But this would require rewriting more than half of the entire blockchain in a short time – about 10 minutes. In every block, the compressed value of the data is calculated and passed on to the next one. So, when you want to forge a block, you must also forge the subsequent or earlier data.
Suppose only part of the data is rewritten. In that case, the renegade block becomes meaningless the next time it is approved because there is no relationship between the renegade block and the previous block. It’s not practical to get the machine power to rewrite the entire blockchain in a short period, so fraud is basically prevented.
There is, though, an issue with PoW. That is that only those who have the capital to use large amounts of machine power with large amounts of electricity are actually able to mine. This can harm the environment, plus there is a risk that such large capital can manipulate the blockchain and “approve” fraudulent transactions (this is referred to as a “51% attack”).
The purported solution to this problem is “Proof-of-Stake” (PoS), which is a system that changes the ease of mining depending on the number of crypto assets (virtual currencies) held; in PoS, more crypto assets (virtual currencies) held, the easier the mining! PoS is a system where the more crypto assets (virtual currencies) you hold, the easier it is to mine.
Also, as soon as mining is successful, the level of “ease of mining” decreases. PoS has been adopted by several currencies, among them Ethereum.
P2P networks in crypto-assets (virtual currencies) are only possible through implementing the blockchain mechanism.
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