Introduction

Peer-to-peer networks are a type of distributed network application that was first deployed for commercial in the 1980s. However, the concept was introduced to the public in 1999 when college student Sean Fanning created Napster, a music-sharing service.

The service quickly became a center for the unauthorized sharing of copyrighted songs, but two years later, Napster was shut down by lawmakers because of a lawsuit from the American music industry. This gave rise to a new generation of P2P services that wanted to advance the development of decentralized networks.

Today, the P2P model is employed in web search engines, online marketplaces, streaming platforms, the P2P blockchain, and the IPFS (Interplanetary File System) web protocol. However, the P2P model is also at the core of blockchain technology and has found a new use with cryptocurrencies.

What are Peer-to-Peer(P2P) networks?

A Peer-to-Peer (P2P) network is a decentralized communication model of decentralized communication between two peers, also known as nodes, that can communicate with each other with no central server. Unlike the seeder/leeches (or client/server) model in which a seeder makes a request and a leech serves the request, the P2P network model allows each party to act as a seeder and leeches. The network, once created, can be used by participants to share and store files without the help of an intermediary.

How do P2P networks work?

A Peer-to-Peer (P2P) model is maintained by a distributed network of computers. These computers do not have a server or a central administrator, as each node has a copy of the files – acting as both a server and a client. Therefore, each node can upload files to other nodes or download files from them. These nodes use their own hard drives to store their data instead of a central server.

Since each node has common capabilities to store, transmit, and receive files, P2P networks are faster and more efficient. Unlike traditional architecture, in which a single point of failure exists, a P2P network has a distributed architecture that makes it extremely resistant to cyberattacks.

Types of peer-to-peer networks

Peer-to-peer networks can be classified according to their architectural differences. The three major categories are described below.

Unstructured peer-to-peer network

In an unstructured peer-to-peer network, nodes connect and communicate randomly. Since nodes frequently join and leave the network, these systems are best suited for high churn activity. For example, a social media platform deployed on an unstructured P2P network can use it efficiently, as users can often choose to join or leave the network.

Such a network is easy to build; However, they require high CPU and memory usage as the search queries are sent across the network. Thus, if only 5% of computers have what you are looking for, it may take a while.

Structured peer-to-peer network

Structured networks are organized in a way that allows nodes to be searched efficiently, even if the data is not widely available. In most cases, these networks implement a distributed hash table (DHT), which enables nodes to discover data using hash functions. While structured networks can route traffic efficiently, they require higher setup and maintenance costs and be more centralized.

Hybrid peer-to-peer network

Hybrid network combines peer-to-peer and client/server models on a single platform. The network uses an index server that contains data on the locations of resources at the center and uses this server for searches. The centralization functionality provided by a structured network and the node parity functionality provided by an unstructured network make trade-offs on hybrid networks.

Comparatively , this type of network performs better than its counterparts because some search queries require a centralized functionality, but can benefit from a decentralized network.

Peer-to-peer network access on blockchain

The concept of blockchain was popularized in 2008, in the proposals form for bitcoin, a virtual currency developed to address the age-old problem of trust. Bitcoin creator Satoshi Nakamoto defined it as a "peer-to-peer electronic cash system" built to digitize P2P without banks.

The underlying blockchain technology leverages the power of P2P networks and provides a shared and trusted ledger of transactions. As a distributed ledger technology, blockchain records transactions as an immutable time-stamped digital block that shows sender, participants and receive.

No centralized authority manages the blockchain network and only taking part participants can validate transactions between each other. The technology allows people and institutions to rely on output without relying on participants. This new form of distributed data storage and management functions as a digital ledger that publicly records all transactions and activities.

Where does the blockchain store transaction data?

The data on a blockchain is structured differently than on a typical database. Whereas a database stores information stored in tables, a blockchain divides its data into blocks. These blocks have a certain fixed storage capacity to connect each transaction that takes place on the network. Once a block is filled, a new block is added to the previously filled block to add new transactions, creating a chain of blocks called a blockchain.

Blockchain is decentralized and therefore not stored in a centralized location. Instead, they are stored in nodes or computers that take part in the network. Each node has a copy of the blockchain, or transactions that are performed on the network. Thus, the system is supported by every single node taking part in the network.

What is P2P Crypto Exchange?

P2P crypto exchanges allow users to buy or sell directly with another user. Unlike centralized exchanges where you have to complete KYC to process an order, most P2P exchanges allow you to send/receive cryptocurrency without asking you for identity verification. Exchanges based on the P2P model have no single point of failure, like centralized exchanges do.

How do P2P exchanges work?

A user can register registration with the exchange without having to go through identity verification. Registration simply requires an email address and a password. After registration, a user can go through different purchase, payment options and sales posted by the individuals on the user platform.

Each offer has a different payment option, a different rate of return, and usually a minimum or maximum purchase amount. A buyer may select an offer and contact the seller to set up the transaction. If you are a seller, you may choose to accept the accepted payment method and any fees included. Typically, P2P crypto exchanges use an escrow account to deposit cryptocurrency or other collateral from users to ensure the security of the platform.

Popular P2P Exchanges

Paxful

Paxful is a P2P marketplace that connects bitcoin buyers and sellers. The exchange offers over 300 ways to buy bitcoin, including but not limited to bank transfers, online wallets, gift cards, cash payments, debit/credit cards, crypto, and assets. Although Paxful is trusted by over three million users worldwide, its integrity should not be confused with vendor integrity.

Exchange is only one market. Before doing business, pay attention to the reputation of the seller. However, the exchange offers a secure escrow service for bitcoin transactions, making it harder to be scammed. You will also need to verify your Paxful account with ID in order to use it.

Fee: 1% for sellers; no charge for buyers

LocalBitcoins

LocalBitcoins is a P2P crypto exchange that allows buyers and sellers to communicate directly instead of manually matching up. Its vendors offer a wide range of payment options such as PayPal, wire transfer, SEPA, Skrill, and the platform secures business using measures such as escrow service, login guard, and 2FA (optional). Starting in 2019, LocalBitcoins will require you to present some identity verification in order to interact with (trading, buying, sending) varying amounts of bitcoin.

Fee: 1% for sellers: nothing from buyers

Binance P2P

Binance P2P is a marketplace that connects buyers and sellers in the Binance ecosystem. The exchange provides an escrow service to protect its users and supports trading using WeChat, Alipay, bank transfer and QIWI. Unlike other P2P exchanges, Binance requires you to complete identity verification before you can start trading. This platform supports Bitcoin, Binance Coin, Ethereum, EOS and Tether. Supports a wide range of cryptocurrencies, including a wide range of support.

Fee: Zero fee for both buyers and sellers

HODL

This P2P non-custodial cryptocurrency exchange provides direct service to buyers and sellers without holding their funds. Instead, HODL HODL uses multisig escrow to protect its users from scammers. The exchange offers its users over 215 payment methods. Its services are available worldwide, with US only. Except, users do not have to go through KYC or AML procedures, as they can make an offer by simply registering.

Fee: 0.6% of the contract amount, ie 0.3% per user

Bisq

Bisq Originally known as "Bitsquare", Bisq is a desktop program that needs to be downloaded before it can be used. HODL Similar to HODL, Bisq also allows users to register for accounts without verifying their identity with KYC. Every transaction on Bisq requires a security deposit from both sellers and buyers to ensure fair trade. Users can make security deposits through various methods, including Perfect Money, OK Pay, Alipay and Zele.

Fees: Fees vary with the transaction

WazirX

Wazirx is the first cryptocurrency exchange in India that allows Peer-to-Peer transactions. There are three co-founders of this company, they are Nischal Shetty, Sameer Mhatre, and Siddharth Menon. These three are from programming background.

WazirX has many features, such as real-time open order books, charts, trade history, deposits and withdrawals, so that any user can trade in crypto currency. Along with this, user-friendly and easy-to-use user interface UI has been provided to the users so that they do not face any problem to use this platform.