The term peer-to-peer (P2P) comes up a lot when you’re researching crypto or blockchain. But what’s it all about?
A P2P network describes two or more computers sharing data with each other directly, without the need for a central server.
They can be used in a variety of ways, depending on the sector. Let’s take a look at where it all began, and the role they play in decentralising crypto.
Today, P2P networks are most commonly associated with cryptocurrencies. But that’s not where they began - their original use was actually file sharing.
One of the very first P2P networks, Internet Relay Chat (IRC), was developed in 1988 and was used for sharing text and chatting.
Inspired by this new technology, college student Shawn Fanning created the controversial music sharing service, Napster, in 1999. Napster hosted a centralised server in which users could share media files.
Being centralised, however, meant that it was much easier to shut down - which it was in 2001, following lawsuits from 18 different record labels. Napster’s demise led to a rise in P2P networks that could operate without central servers.
Data sharing across decentralised networks was the next logical step in the P2P evolution, and it was well underway by the time Bitcoin was invented in 2009.
Today, the P2P model is implemented in a number of different areas, but blockchain is arguably the best-known example.
Satoshi Nakamoto famously introduced Bitcoin as a “peer-to-peer electronic cash system” in the 2008 whitepaper. The system in question works by each computer on the P2P network holding an identical copy of the ledger of transactions (i.e. the blockchain), which allows the direct exchange of assets without the involvement of a central authority.
P2P networks protect each party’s privacy, as well as add an extra layer of security, thanks to its use of cryptography.
Storing data across a P2P network means greater security than a centralised network, since there is no single point of failure. The lack of central authority also means that costs are reduced and transactions are quicker, due to the elimination of redundant steps along the way.
We’re no strangers to P2P payments here at Wirex. One way you can witness them in action is by using the newly-introduced Send Money to Contacts feature.
You can instantly send money to your contacts in the Wirex app for free, simply by syncing your address book. That’s all it takes to make quick and easy payments, with no unnecessary steps slowing you down.
Have you given it a go yet? And do you think the P2P model has achieved all it set out to? Let us know your thoughts below!