Thanks to the evolution of technologies, peer-to-peer or P2P is one of the expressions that has become fashionable. But what is meant by 'peer-to-peer'?
Is it a network? A platform? A communication system?
Peer-to-peer or P2P is a network in which two or more PCs share files and access devices such as printers without the need for a separate computer or server software. In other words, it is a decentralized platform that directly connects the different parts of a transaction without the intermediary of a third party.
According to the Wikipedia definition: 'Peer-to-peer is a model of computer network close to the client-server model but where each client is also a server. “
The P2P network differs markedly from the client/server network, where certain machines are designated as servers to meet the needs of the client machines. We can classify peer-to-peer systems according to their architecture.
The three main types are called unstructured, structured and hybrid P2P networks.
There are two peer-to-peer techniques:
- The centralized technique that lets one or more servers direct each computer to those that have the file it is looking for,
- Decentralized technology without a fixed server. Each computer acts as a mini server, which distributes the responsibility, especially in the case of illegal sharing of protected documents. One of the peculiarities of this type of network is to offer relative anonymity to users.
The system was popularized by the Napster file-sharing system, originally released in 1999. In practice, two users of a peer-to-peer system often need data from a third computer.
For example, the famous Napster file-sharing service has always been called 'peer-to-peer network', but its use of a central server to store the public directory has made it both a centralized and peer-to-peer system.
In the case of Napster, the content shared was music. So when someone was looking for a file, the server would search for all available copies of that file and present them to the user. The files were transferred directly between the two private computers. However, because this process was taking place on a central server, Napster was held liable for copyright infringement and was shut down in July 2001.
User-to-user, peer-to-peer is intended to be the opposite of a central system that initiates and controls everything, therefore implies that each party can initiate a session and has equal responsibility.
Peer-to-peer services are based on the following technologies:
- File sharing: a client that owns a file (such as a movie, for example, or any document) makes it available to other clients via a download platform (it then becomes a server). It can also simultaneously download other files shared by other clients (servers). The downloaded file snippets are immediately shared with other computers until the file is complete.
- Facilitate and accelerate exchanges between several computers in a network: peer-to-peer increases download speed and reduces the load on the central server.
- Overcome transaction costs related to trust, application and information asymmetries that have traditionally been resolved through the use of trusted third parties.
- Offer their users services such as payment processing, buyer and seller information, and quality assurance.
Widely used in the early 2000s for illegal downloading, the term Peer-to-Peer is coming back into fashion with blockchain and bitcoin.
Peer-to-peer has become widespread and P2P networks are at the heart of most cryptosystems, constituting a large part of the blockchain industry. Allowing for services such as payment processing, peer-to-peer in financial technology generally refers to the exchange of cryptocurrency or digital goods over a distributed network. There are therefore P2P platforms that allow buyers and sellers to execute transactions without the need for intermediaries.
With the renaissance or new use(s) of P2P, new expressions have emerged such as:
- crypto-currency exchange platform
- P2P exchange of cryptos
What interests us today is the term P2P exchange platform for crypto-currency.
First of all, it is worth recalling what the blockchain is, the recording technology behind the Bitcoin network. 'The blockchain is a decentralized and distributed public registry,' it is a series of unchangeable, time-stamped data records that is managed by a group of computers that do not belong to any one entity. Each of these data blocks is secured and linked to the others using cryptographic principles. The blockchain is therefore like a digital public ledger that records online transactions.
Blockchain technology was invented to govern the bitcoin with which products and services can be purchased.
There are three main ways to obtain Bitcoins and other cryptos:
- Buy using 'real' money.
- Sell goods and let people pay you with Bitcoins.
- Undermine using a computer.
Taking into account the definition of the peer-to-peer network above, a decentralized P2P exchange works totally dependent on the software that powers it. All aspects of the exchange are managed and maintained by this platform and there is no need for a third party to facilitate exchanges or build trust.
P2P exchanges operate on a decentralized mechanism and allow buyers/sellers to trade without intermediaries or third parties.
A P2P exchange provides a secure and flexible trading platform for crypto-merchants by offering advantages such as:
- Robust security mechanism: users own the crypto-assets
- Cost-effective transactions: The cost charged for processing transactions on a P2P exchange is operationally lower than on other crypto exchanges.
- High resistance to transaction censorship: Transactions on P2P crypto trading platforms are not affected by government rules and regulations.
- Global trade: P2P encrypted trading platforms can break global borders.
It is also important to note that encrypted trading differs from crypto currency wallets, which typically allow you to buy and sell a small range of popular digital assets (such as Bitcoin and Ethereum), which you can then send to another exchange to trade other digital assets such as altcoins.
After discovering and learning more about peer-to-peer exchange, you will probably be looking for the best platforms to exchange your cryptocurrency. P2P crypto exchanges or decentralized crypto exchanges are currently in their infancy, their volume is much lower than that of exchanges, but they usually do not have KYC (identity verification) and their rates can be much lower than those of exchanges. According to a consensys article in January 2018, 99% of cryptos transactions still pass through centralized exchanges. There are more than 300 exchanges of digital assets in the world but the most popular are currently:
- Bitvalve: Offers a non-restrictive way to buy/sell and exchange your favorite cryptos in a Peer to Peer way, from anywhere in the world and acting as a Trusted Escrow at the same time, thus securing both sides of the trade.
- Paxful: Based in Wilmington, Delaware, it was launched in 2015 and has been providing this service worldwide since then. Paxful has over 300 payment options to buy and sell Bitcoins, such as Wire Transfer, their online wallet like PayPal, Amazon Pay.
- Localbitcoins: Founded in 2012, this Finnish company was the most popular P2P exchange in the run-up to 2017. You can pay by Paypal, cash deposit, bank transfer.
- Binance P2P: Binance's P2P interface is simple and pleasant to use. You can buy or sell: USDT/BTC/BUSD/BNB/ETH/EOS. In addition, you can make transactions using Wechat, Alipay, bank transfer or QIWI.
- Cartam.World: Free P2P exchange platform, allowing the exchange of items for cryptocurrency.
P2P has been around longer than Bitcoin and the blockchain. This system is interesting to explore and it continues to evolve and attract new followers. Worldwide, the market for P2P crypto exchanges is growing and the number of transactions is increasing.
In the case of Africa, the year 2020 has seen an acceleration in the adoption of crypto, with the emerging continent now the second largest trading region.
For example, Nigeria was the first country to experience growth on the continent in 2020, with weekly P2P volumes of between $5 and $10 million, followed by Kenya and South Africa, each with between $1 and $2 million per week.
Russia, Venezuela and the United States are the largest markets for P2P markets. Approximately 3,593 BTCs were exchanged for Russian Roubles (RUBs) on Localbitcoins in March 2019, making it the largest P2P market in terms of trading volume. Venezuela was the second largest domestic Localbitcoins market during the week of March 2, 2019, generating 1,953 BTCs of trade.
In the Americas, 1,807 BTCs were exchanged for dollars in March 2019, representing $9.67 million in trade. Thus, the United States was the third strongest P2P market in the week of March 02, 2019.
In March 2019, China was the fifth largest P2P market, with 839 BTC trades for Chinese Yuan (CNY), equivalent to 21.8 million CNY (over $3.24 million).
Trade between the British pound (GBP) and the BTC was the seventh largest market on Localbitcoins the week of March 02, 2019, with 806 BTC trades or 2.37 million GBP ($3.1 billion).
Peer-to-peer is now a large part of the cryptocurrency and blockchain industry. While this system has been around for some time, the P2P crypto exchange market is growing and the number of transactions is increasing. The choice between the best decentralized exchange platform and centralized exchange is entirely based on the user's desire. Most cryptos transactions still go through centralized exchanges, but this trend is expected to be reversed in the coming years.
Written by Laetitia Harson, Project Manager
Cartam: Free Marketplace for Cryptocurrency Users
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