If you are interested in Bitcoin in particular and the virtual currency market in general, you must have encountered the term peer-to-peer many times. In fact, peer-to-peer has been around since a very early age and if you look closely, you will see that it is very close to everyday life. Let’s find out what peer-to-peer is and its application in virtual currency.

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What is a peer-to-peer

?Peer-to-peer, or peer-to-peer network (P2P), is a technological term that refers to a peer-to-peer computer network or a peer-to-peer network. For conventional networks, computer operations are often based on a centralized server.

Meanwhile, in a Peer-to-peer network, the operation of the computer network will mainly be based on the bandwidth of the participating clients, not all on one server.

In the simplest case, a peer-to-peer (P2P) network is created when two or more computers are connected and share data without going through a separate computer.

A P2P network can be an Ad Hoc connection – a wireless technology that allows network nodes to communicate directly with each other over wireless transceivers. A P2P network can also be a fixed infrastructure linking half a dozen computers in an office area.

It can also be a larger network, using special protocols and applications to establish direct relationships between users on the Internet.

The only requirements for a computer to join a peer-to-peer network are an Internet connection and P2P software. Popular P2P software programs include Kazaa, Limewire, BearShare, Morpheus, and Acquisition. These programs connect to a P2P network, like “Gnutella”, and allow the computer to access thousands of other systems on the network.

Once connected to the network, P2P software allows you to search for files on other people’s computers. Other users on the network can also search for files on your computer, but it’s usually limited to a folder you’ve shared.

While P2P networking makes file sharing easy and convenient, it also leads to software copying and illegal music downloads. Therefore, to be safe, you should only download software and music from legitimate websites.

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In the Client – Service platform (the most basic foundation of the Internet) – usage performance decreases as more people join the network. This explains why the network often slows down as more and more people access the network at the same time. Unlike the Client-Service platform, the performance of the peer-to-peer network increases as the number of participants increases.

Classification of peer-to-peer networks

A peer-to-peer system maintained by a distributed network of users and without a central administrator or server; because each node stores a copy of the files and each node acts as a client and server for the other nodes. Therefore, each node can download files from other nodes or upload files to other nodes. This is what differentiates peer-to-peer networks from more traditional client-server systems, in which client devices download files from a centralized server.

On a peer-to-peer network, connected devices share files stored on their hard drives. Using software applications designed to mediate data sharing, users can query other devices on the network to find and download files. Once a user has downloaded a file, they can act as the source of that file.

In other words, when a node acts as a client, they download files from other nodes on the network. But when they act as a server, they are the source from which other nodes can download files. However, in practice, buttons can perform two functions at the same time (e.g. download file A and upload file B).

Since each node is responsible for storing, transferring, and receiving files, peer-to-peer networks tend to operate faster and more efficiently as their user community grows larger. In addition, their distributed architecture makes P2P systems very resistant to cyberattacks. Unlike traditional models, the P2P network has no single point of failure.

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We can classify peer-to-peer systems according to three main architectural styles as unstructured, structured, and hybrid peer-to-peer networks.

Unstructured peer-to-peer network

Nodes on an unstructured P2P network are not organized in any particular structure. Participants randomly communicate with each other. These systems are considered to be strongly resistant to user abandonment activities (where some nodes frequently join and leave the network).

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Although easier to build, unstructured P2P networks may require higher CPU and memory usage because search queries are sent to the highest number of peers possible. This tends to flood the network with queries, especially if there are only a small number of nodes providing the desired content.

Structured Peer-to-Peer Network

Buttons On a P2P network there is an organized architecture that allows nodes to efficiently search for files, even when the content is not widely available. In most cases this is achieved through the use of hash functions that allow database lookups.

While structured networks can be more efficient, they often exhibit a higher degree of centralization and typically require higher setup and maintenance costs. In addition, networks are less robust when faced with high user abandonment rates.

Hybrid peer-to-peer (P2P) network

Hybrid P2P networks combine a traditional client-server architecture with some aspects of a peer-to-peer architecture. For example, the network may design a central server to create connections between peer computers in the network.

Compared to the other two architectures, hybrid models often exhibit higher operating performance. They combine the main advantages of each method, providing a significant degree of efficiency and decentralization.

P2P Application to Cryptocurrency Transaction

Peer-to-peer networks have many applications, including P2P (decentralized transaction) Cryptocurrency trading. These are transactions that are run exclusively by software, allowing market participants to trade directly with each other without the need for a third party (like a bank/financial institution).

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Companies will build P2P Cryptocurrency trading platforms to make it simpler for users to make transactions, and charge a fee each time they make a transaction.

Thanks to P2P Cryptocurrency, the limitations in Bitcoin transactions are eliminated. In cryptocurrency trading, the need to exchange virtual currency into cash is increasing, leading to support for exchanging virtual currency from online exchanges such as BTC China, Kraken and Bitstamp.

However, these transactions are controlled by third parties. These companies guarantee transactions, arbitrate when disputes arise and charge fees for each small transaction.

Thanks to software-driven decentralized peer-to-peer trading, the market can eliminate the existence of third-party companies and still be able to trade efficiently with each other, even faster and simpler. a lot of.

Benefits of P2P in virtual currency trading

Anti-centralization of transaction rights

Also known as anti-transaction control. P2P transactions will not be controlled by an authoritative agency or organization, the interests of the participants in the transaction are preserved. Even if one part of the system stops working, the rest remains unaffected.

Low cost

There is no need to pay 3rd parties when transacting because the P2P system is controlled by software.

High Security

The government has not yet had the power to impose regulations on personal information authentication for P2P transactions, so the privacy of transaction participants is still secure.

High Security

The P2P network does not hold coins in each transaction, but allows the participants to transact directly with each other, so you will not worry about losing money during the transaction.

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However, P2P trading also has some disadvantages such as long transaction time and low liquidity.