Peer-To-Peer

Peer-to-peer (P2P) networks refer to a decentralization-based network communications model consisting of several devices known as nodes that collectively share and store files where every node serves as a single peer. Blockchain’s P2P architecture allows for the transfer of cryptocurrencies globally without needing an intermediary.

Unlike traditional network mechanisms, P2P creates an ecosystem that involves computers connected via only one single server computer. This network model enables nodes to work as the server and the client. It gives them the same power and makes them complete identical tasks in the network. A key component of P2P networks is data storage.

• Peer-to-peer refers to a network architecture that allows participants to carry out transactions without requiring a middle-man, central server, or an intermediary.
• There are various benefits of P2P Networks. For example, they offer protection from DoS attacks, and there’s no need to trust an intermediary that might make changes to the data.
• A key disadvantage of peer-to-peer is that there might be the presence of certain nodes within the network that support unethical behavior. Such nodes are called leechers.
• A noteworthy difference between peer-to-peer and client-server is that the latter has a dedicated server, unlike the former.  

Peer-to-peer refers to a network architecture that involves a connection of at least two devices sharing resources. It can serve as the permanent infrastructure connecting over twelve computers in a region covering a small area amidst the traditional official environment. Moreover, this type of architecture enables the transfer of digital currencies worldwide without intermediaries.

There is no central point in P2P blockchain networks. Instead, every peer or node is interconnected. A mesh network featuring a ‘topology’ links all network nodes. Moreover, there is no hierarchy.

Generally, such networks do not have any distinguished server to authenticate users. All devices within a peer-to-peer network manage their security. This makes opening a different user account for every device the user would require crucial.

Often, users store their files on their devices. In an ideal scenario, such devices are computers. They are responsible for ensuring that a proper backup of the files exists for data recovery. Moreover, these devices usually run client software and servers within a P2P network and can make resources available to users on the same network.

Let us better understand the role of such networks in blockchains.

#1 - Transfer Of The Digital Assets

• All user-initiated transactions get broadcasted to the entire peer-to-peer network.
• Each node receives the transaction and completes the verification procedure per the transaction record held by it.
• Transaction becomes a part of the blockchain post successful verification.
• The system’s decentralized nature prevents transaction failure.

#2 - Validation Of Transaction

• Every node plays a role in adding blocks to the blockchain.
• Nodes compete against each other by solving complicated mathematical problems on the basis of the consensus mechanism they use for validating transactions.
• The node that adds blocks gets rewards in the form of the blockchain’s native cryptocurrency.

#3 - Facilitation Of Efficient Transactions

• The nodes within the network communicate directly, making transactions more efficient and faster.
• Every peer or node can act as a serve, preventing bottlenecks if the total number of clients surges. This allows for faster transfer of the digital assets even if clients increase.
• Since there is no central authority, the cost distribution occurs across the system.

#4 - Security

• Decentralization eliminates the chance of single-point failure.
• The consensus mechanism ensures the addition of valid transactions only.
• Digital signatures with cryptographic methods secure all transactions.
• All nodes make the same copy of the ledger, which helps keep track of all transactions, making it challenging to conceal illegal activities.   

Some key characteristics of P2P networks are as follows:

• Decentralization: This feature makes the network architecture more resilient. Moreover, it makes these networks less prone to attacks or system failures because there isn’t any single failure point.
• Anonymity:  This network architecture can offer a high degree of anonymity. This is because nodes do not require identifying themselves from the other nodes that are part of the network. Hence, P2P can be advantageous for users who want to stay anonymous while communicating with others or accessing resources.
• Security: Based on the specific execution, P2P networks could be less or more secure than centralized networks. Since this system lacks a central or focal point of control, it might quickly bounce back from attacks like denial of service (DoS).
• Autonomy:  These networks provide greater autonomy because the users have more command over their resources, and they get to select the resources that they wish to keep private and share.
• Scalability: These networks feature high scalability. They can shrink or expand dynamically as the nodes leave or join the network, meaning P2P networks can accommodate several nodes without impacting performance. Moreover, they can continue working even if a few nodes go offline.
• Resource Sharing: Nodes of this network can share resources like files, processing power, and bandwidth with the other nodes within the same network. This means users are able to access a broader range of resources that they could not have accessed if they were on their own.
• Network Topology: It is possible to organize such networks in different topologies, for example, pure P2P networks, upper-peer networks, and hybrid P2P networks. Note that the choice of topology depends on three factors — the application’s specific requirements and the network’s complexity and size.

Given below are the components of P2P networks:

#1 - User Datagram Protocol

The User Datagram Protocol (UDP) transmission protocol represents the IP/TCP network model. Note that computer applications are able to send messages to the other hosts through an IP network utilizing UDP without any obligatory preliminary message for choosing a specific data transmission protocol.

#2 - Decision-Making Module

Conceptually, the consensus algorithm’s description is given below:

• Generation of a list comprising nodes taking part in a specific round, per Delegated Proof of Stake (DPoS) technology.
• Building a chain consisting of pools based on Byzantine Fault Tolerance (BFT) technology and validating within one round.
• Node’s Application Programming Interface (API)

#3 - Data Storage

Such platforms utilize LevelDB to store data. This is a replicable, high-performance NoSQL system written in C++. It has a key-value database that Google developed and connects to any application in the form of a shared library, offering the chance to store ordered data sets where the mapping of arbitrary binary values and keys occurs.

Data storage takes place in Sorted String or SS-tables in the form of key-value pairs. A set of these tables establishes a log-structured merge (LSM) tree. Such trees have multiple storage levels.

#4 - Smart Contract Processing Module

Such a module gets contracts from desktop wallets and stores the same in the relevant data storage at particular addresses. Then, a contract constructor executes them. Following that, people get a signal from any decision-making module for implementing a specific portion of that contract and the values concerning the input data.

Simply put, the execution of a particular Java method takes place, and the storage of the data with regard to global variables occurs for every contract in the storage. Note that the new token creation function is also available to users. Its interaction with the network occurs through the application programming interface, providing a code.

Let us look at a few peer-to-peer examples to understand the concept better.

Example #1

Suppose Sam is browsing the internet looking for a specific piece of content. He must have a peer-to-peer program installed on his device to generate a virtual P2P network. Once this is established, Sam receives the file he wishes to download using the internet in bit units of bits, which come from various devices within the network that have the exact file on them already. Simultaneously, the file shifting from Sam’s device to the other computer systems within the network occurs.

Example #2

Suppose cryptocurrency ABC operates on a blockchain that uses peer-to-peer network architecture. The network has no administrator who monitors all the transactions carried out by the users. Instead, peers within the network cooperate amongst themselves to manage the cryptocurrency and handle deals.

Example #3

In September 2023, a renowned Web3 technology organization launched a peer-to-peer cryptocurrency market on its OKX Wallet, allowing users to buy and sell cryptocurrency in a decentralized market through a P2P structure. This solution significantly minimizes the possibility of transaction slippage.

One can see this reduction in other decentralized exchanges operating through Automated Market Makers(AMMs). The P2P cryptocurrency market users can buy and sell all cryptocurrencies while being exposed to a minimized slippage risk across a total of six chains — Optimism, Arbitrum, Polygon, Ethereum, Binance Smart Contract, and Okex Chain.

Let us look at the benefits and limitations of P2P architecture.

#1 - Advantages

• One cannot take down the blockchain since if one peer is down, the others remain present.
• Conventional client-server systems, these networks provide better security.
• Distributed P2P networks protect blockchains from malicious activities when they pair up with any majority consensus requirement.
• DoS attacks cannot impact such networks.
• Since blockchain utilizes a P2P network, users do not need to trust any third party that can modify the crucial data.

#2 - Disadvantages

• In the case of distributed ledgers, update is necessary on all nodes.
• While such networks offer increased security, they minimize efficiency significantly. This results in hindrances with regard to mass adoption and scalability.
• One can often find that a large number of users within a network consume resources that are shared by the other nodes in the same network while not offering their resources. These free-riding nodes, known as leachers, often support immoral and unethical behavior.
• Another key disadvantage of peer-to-peer is that a lot of power is necessary for adding transactions.

The differences between peer-to-peer and client-server networks are as follows:

• Conventional client-server architecture has a dedicated server, while a P2P network does not.
• Unlike P2P networks, client-server architecture includes specific clients.
• P2P networks are decentralized, while client-server network models are centralized.

This has been a guide to what is Peer-to-Peer. We explain its examples, comparison with client-server, advantages, characteristics, and components. You can learn more about it from the following articles –

• Genesis Block
• Verge
• Coin Mixer