The history of P2P and its eventual mainstream acceptance is thanks to Napster. In 1999, the file-sharing application made it possible to store music or film files across multiple computers. The peer-to-peer architecture allowed millions of internet users to connect, and form groups. Users could then perform as user-created virtual supercomputers, file systems, and search engines,
What is Peer-to-Peer Network?
The idea of a P2P network is to create equal peer nodes that together serve as both “clients” and “servers” to other nodes on the network. Network participants then record and interchange information. The network model is different from the traditional client-server model where the exchange of information is to and from a central server. No central storage point eliminates the need for a dominant authority. This means no single individual can use the network to own or control it. If users secure it, they become the true owners of their data.
Some P2P services don’t involve a buy and sell transaction. However, they connect individuals to collaborate on joint projects, communicate and share information without intermediation.
When a third party is not involved in a transaction, there is an increased risk the provider may not deliver, the service may be of lower quality or the buyer may default. To mitigate such risks, transaction costs and prices are lower. This is done by creating businesses that facilitate P2P transactions.
Today, online merchants provide the lion’s share of P2P services. Popular examples include:
- AirBnB – property owners can lease all or a section of their property to short-term tenants.
- Open-source software – the software code can be modified or viewed by anyone.
- Uber – riders and car owners have a shared platform that offers a uniform service for taxi rides.
- Etsy – producers of homespun goods and other crafts can sell their goods directly to the public.
- BitTorrent – the anonymous file-sharing platform allows users to meet and swap media and software files.
- eBay – interested buyers can access a private marketplace with different private vendors.
- Spotify – you can stream real-time audio content on-demand using P2P networking.
Peer to Peer Trading in Blockchain
Blockchain can reduce the inefficiencies in share settlement as peer confirmation settle shares. There’s no need for auditors to verify trades, a custodian to confirm the number of shares held or a clearinghouse. Eliminating the middleman from the back office means lower record-keeping costs, as well as lower trading costs on the platform.
Unlike the current settlement of three working days, peer confirmation of trades allows for almost instantaneous settlements. For this to happen, blockchain requires participants to already have the money and shares to exchange. Shares would be a more liquid investment and the higher liquidity will translate into more investment into your shares.
The evolution of the P2P network and its central role has seen it cut inefficiencies within blockchain technology. Blockchain has made the domineering third party irrelevant as users can deal with each other across a secure decentralized network. Although each peer participating in the network is open to viewing, blockchain conceals participants’ data through cryptography.