Introduction

Most people associate peer-to-peer networking services with the crypto industry, but the reality is that the P2P service had a use case way before the crypto industry got introduced to the masses. It was first introduced in the 1980s as a substantial way of developing databases for government organizations.

Later on, a popular music app by the name of Napster was launched in 1999 by a college student where people could share or add copyrighted songs.

But there was a dilemma, with the service being unauthorized and decentralized, it was shut down two years later, and the American Music association was behind the initiation of the lawsuit.

The service died down, but it did give rise to a more sophisticated approach to sharing data on the internet that doesn’t necessarily have to involve the overseeing done by centralized authorities.

This P2P model is today benched into online marketplaces, web search engines as well as P2P blockchains. But it is more profoundly active within the crypto landscape, and it has seriously propelled the cause of the DeFi space as well.

What is a P2P Network?

In simpler words, a P2P or peer-to-peer network brings into account the decentralized communication taking place between two distinctive computing nodes that are known as the peers. The communication takes place in real time without any need for a central server.

However, there is a stagnant difference between the conventional P2P service and the P2P networking model employed in the crypto landscape. In the conventional P2P model, you would find seeders and leechers that require an intermediary to communicate with each other.

The seeder is the client that makes a request for the transfer of data, and the leecher is the client that fulfills the request. In the modern P2P model, each party has the ability to function as a seeder as well as a leecher.

It means that the network can act independently, with each individual performing the duties of a seeder or leecher as necessary. This cuts out the need for any intermediary to chime in whatsoever.

Working Mechanism of P2P Networks

To understand the working of the P2P networks, take into account a scenario where internet-based communication is taking place between two or more nodes without a centralized server body. Each and every node involved in the communication does have a complete copy of all the files shared to date.

This allows them to work as a server as well as a client in real-time. Every node involved can download as well as upload data for others to interact with whenever the need to do so arises. All these nodes have their own individual hard disks for the sake of storing all the data rather than relying on a centralized server for computing and storage.

As each and every node acts as the computing unit and has the capability to store files these P2P systems are much more efficient and capable of transmitting data at faster rates rather than a centralized system.

Because of the distributed architecture that these P2P systems have they don’t have a single point of failure like their centralized counterparts.

Different Types of P2P Networks

There are practically three different types of P2P networking systems that are prevalent in the outside world based on their architectural assembly. Following are some of the types of P2P networking systems;

Structured P2P Network

As the name suggests, the P2P networking systems are pretty organized, meaning that the nodes are able to search for data in a much more efficient manner. This happens even if the data itself is not readily available.

In the majority of cases, these networking systems are able to establish a DHT or distributed hash table.

This allows for the scanning of the data based on the hash functions that were selected at the moment. As these networks are able to scan for the data in a sophisticated manner, therefore it requires a much more efficient setup and a centralized maintenance command.

Other than that, it works exactly as a P2P networking system would but is much more established.

Unstructured P2P Network

As the name suggests, it is a haphazard assembly of different nodes that can connect with each other and communicate as well but in a randomized fashion.

These nodes are not obliged to remain present within the network as the nodes can join in and disconnect whenever they want to. This makes these systems best ordained for high-traffic activity.

A more suited example of this type of network would be the bundling of a social media site or network.

Since it would allow for the optimal performance of the network itself, and the users could also join in and leave whenever they want to. These types of networks are pretty easy to establish as there is not much happening there.

But on the contrary, these networks demand a high-frequency CPU as well as RAM usage because whatever query joins the network is routed to the entire assembly.

It means that if you are searching for something specific and there is only a 20% throughput available for the present P2P network rather than 100%, then it is definitely going to take a while for the results to be searched and established for you.

Hybrid P2P Network

A hybrid networking system brings into account a P2P system along with a client/server system that works on a single platform.

There is present an index server that is linked to all the potential nodes of the network and is in charge of depicting the data of the locations that act as the resources. Not only this, but the server is also used for the completion of the searches as well.

The structured P2P network brings centralized functionality to the table, while the unstructured P2P system is responsible for the execution of the searches and making trade-offs over the hybrid network.

The main significance of this network is that it brings benefits to both the centralized and the decentralized P2P counterparts. This allows for increasing the efficiency of the search execution and increasing the overall throughput of the network.

Use of P2P Networks in the Blockchain World

Blockchain technology became a worldwide hit mainly in 2008 with the introduction of Bitcoin as the first-ever cryptocurrency. It does sound a bit odd that the first ever real-world application of the blockchain world would have to be tied with finance in the shape of cryptocurrency and not something else, but it isn’t a coincidence.

It was necessary to check out the validity of the blockchain technology’s merit, and nothing was more well suited for the job than to test run the whole thing on a monetary scale.

The main reason behind the development of this technology was to address the decades-old issue of trust in a dedicated business or otherwise commodity-oriented transaction.

You can’t rely on the vendor to release the product for the money that you have paid, and similarly, the vendor can’t trust you to release the payment once the supplies have been shipped. That is why Blockchain technology was created specifically to address these issues.

Complete Immutability

At the very core of blockchain technology is the fundamental of P2P networking. It provides a shared and distributed assembly of data that is otherwise labeled as a ‘ledger’.

In terms of Bitcoin or other cryptocurrencies, for that matter, this ledger is of the transactions that have taken place right from the genesis block to the very recent transaction that has been confirmed by the network of miners.

All the transactions are completely immutable in their doing and are digitally timestamped. Therefore there is no confusion as to when a particular transaction took place, the amount transacted, and the parties involved. No party can play any shady games of denying the processing of the payment or vice versa.

A Completely Decentralized System

There is no authority out there that directly or indirectly controls the blockchain network and the users who take part in the authentication of the transactions have the autonomy of verifying transactions taking place over the network.

And to clear it out, the word of any miner is not taken for granted, as even when they have authenticated a specific transaction, other miners must also verify the details and reach a consensus to verify the results of the miner who first authenticated the transaction.

Blockchain technology has allowed for the development of a new business paradigm in which the participants don’t have to trust each other and can still move forward with whatever business arrangement they are involved in.

This decentralized system allows for the processing of the transactions in real-time while at the same time making all the data available in a very public fashion.

How is Transaction Data Stored?

You would think that at least the data over a blockchain network is stored in a typical sense as it does on a standard database, but that is not the case here.

Tables are used in a conventional database for the sake of storing data, but for blockchain-oriented databases, all the data is stored in the form of blocks. Each and every block does have a standard storage capacity.

Once a block gets filled, and it can’t accommodate the newer transactions a new block is developed and is linked to the previous block so a persistent stream of data could be developed.

All of the blockchain systems out there are completely decentralized, which means that these don’t have a centralized control space or command of sorts and all the data is stored in the computers and nodes that partake to form the infrastructure of the network. This eradicates a single point of failure as each node has a complete summary of all the transactions that have ever taken place and thus is more secure as compared to a centralized database.

Introduction to P2P Crypto Exchanges

A P2P crypto exchange is a platform that allows the merging of a standard network featuring thousands of different nodes that can interact with each other such as completing a buy or sell order with another potential node on the network.

These decentralized systems are completely different from the centralized exchanges that don’t need customers to declare their personal information, neither do they perform any kind of KYC checks before processing these transactions.

Another important segment that you need to understand about the P2P crypto exchanges is the fact that there is no single point of failure as opposed to the centralized crypto exchanges.

Working Mechanism of P2P Crypto Exchanges

As explained earlier, for the sake of registering with a dedicated crypto exchange, you don’t need to declare your identity, nor do you have to go through any strenuous verification process as well.

You only have to provide your email address for the sake of registration and develop a strong password that you can use later on for the sake of signing into your account.

After that, you are able to browse through tons of different buy and sell orders out there that are published by various individuals. Each order offers crypto at different rates and with different payment options as well. Also, at times, there is going to be a dedicated purchase amount limitation amount as well.

The seller can post a dedicated amount on which he is comfortable letting go of the merchandise, and the buyer can surf through the available offers and then contact the seller to go through with the transaction, whichever they liked the best.

The P2P crypto exchanges usually take into account the setting up of an escrow account in which money in the form of crypto or collateral can be placed, and then the exchange can go through once the conditions for a pertaining transaction are met.

Top P2P Crypto Exchanges

Paxful

It is the most elegant P2P crypto exchange out there that makes matches of Bitcoin buyers with sellers. The exchange is responsible for offering more than 300 different payment methods for the sake of buying Bitcoin. Some of these methods include gift cards, cash payments, bank transfers, and whatnot.

The exchange is not responsible for the trade or anything like that; it is merely a platform for the sake of arranging a meeting with the Bitcoin buyers and sellers. Before buying anything, make sure that you check out the authenticity of the seller in question and only make the trade afterward.

LocalBitcoins

LocalBitcoin is another P2P exchange out there that allows sellers and buyers to meet each other in a direct fashion rather than through matchmaking services.

The sellers out there allow tons of different payment options to the buyers so that at the end of the day, you do have access to a lot of different payment options and can choose whatever you see fit.

There are other associated benefits with this specific P2P exchange, such as second-factor authentication along with escrow service and whatnot.

Binance P2P

This is yet another enthralling P2P exchange out there that allows Bitcoin buyers to meet with Bitcoin sellers. You can opt for directly meeting with the concerned parties or allowing the service to match you with the sellers or buyers.

There are also tons of different payment options that have been integrated into the exchange and you can use them as per your desire.

Unlike many other P2P exchanges out there, you do have to confirm your identity with the service before using it as it is a measure put into practice by the exchange to rule out any bad actors from the play.

HODL HODL

This is a non-custodial peer-to-peer crypto exchange that is opted to provide direct service to the buyers and sellers without having the need to hold their funds at any step of the way.

The service doesn’t hold the funds of the providers themselves, but they do use an independent escrow service to make sure that each and every transaction takes place with utmost perfection and keeps into account the security-oriented aspects of the trade.

There are more than 215 different payment options that you can use, and also you don’t have to perform any security checks while availing of the service, such as the KYC or ALM, as it is not required with this particular exchange.

All you have to do is to punch in your email address and choose a strong password for the sake of logging into your account, and as soon as you are done with it, you can browse the platform in its full entirety.

The fees that are charged by the buyer or the seller do vary from time to time; hence it is recommended that you check out the website for authentic information on that.