Bitcoin has stormed its way into the financial market and changed it forever. But what’s more interesting is its underlying technology. Do you know that cryptocurrencies like Bitcoin transactions work through Peer-to-Peer Technology? Do you know what it is? To explain in short, peer-to-peer technology means sharing various data, information, etc., without the need of any central authority.
As said above, peer-to-peer technology is the prominent feature of cryptocurrency or digital currency. This network is used for sharing any file or information. In this system, every user is similar to the equivalent network owner. Therefore, the main purpose of Bitcoin was to eliminate the centralized system or governing body.
Furthermore, encryption of the data on the ledger adds to the security feature. So, the transaction recorded in the P2P network is very tough. Hence, it is not possible to overwrite any exchange of cryptocurrency.
Comparing Centralised Exchange with Peer to Peer
First of all, there is no need for identification for the Peer-top peer process in Cryptocurrency. As a result, the user’s identity remains protected all the time. Along with, that various P2P exchanges allow you to buy cryptocurrencies through cash or another mode. Overall, it always maintains privacy.
Moreover, you need to understand that not every Cryptocurrency is Peer-to-Peer. Yes, several cryptocurrencies use centralized systems as per the rules and regulations of different countries. Therefore, the governments retrieve these exchanges for gathering information about the transactions. It means privacy protection is neglected. That’s why Bitcoin uses Peer-to-Peer technology to give the best privacy.
What are the Different Types of Peer-To-Peer Technology?
There are mainly three different kinds of Peer to Peer technology. They are as follows.
Structured Peer-to-Peer Network
In the structured P2P technology, the several nodes interact together. This interaction is possible through the organized structure. Hence, it is important to search different files for essential use. Along with that, hash functioning is deployed for the structured P2P network.
However, the Peer-to-Peer network is extremely efficient. But, this system also uses some centralized processes due to its organized structure. Therefore, it means that it needs higher costs for set-ups and maintenance. It is also a great robust solution to a blockchain transaction.
Unstructured Peer to Peer Network
Secondly, the unstructured peer-to-peer network is opposite to the structured one. In this technology, there are no organized nodes. Hence, this is why this technology is best when there are various activities. So, what’s the difference?
Other than that, there are some drawbacks of unstructured peer-to-peer technology. The consensus mechanism that runs Bitcoin transaction is a highly energy consuming process. Hence, for that, the hardware should be capable to power the increasing transactions. Therefore, every node will interact with one another at any time. Hence, unstructured Peer-to-Peer has its usefulness and drawbacks for various virtual currencies.
Hybrid Peer-to-Peer Network
As you can understand from the name, this technology is a mixture of structured and unstructured peer-to-peer technology. This technology is extremely useful for various networks which need P2P features along with a centralized system. Additionally, hybrid peer-to-peer technology is highly efficient compared to the other P2P technologies.
Various Advantages of Peer-to-Peer Technology in Virtual Currency
Therefore, now you can understand that Peer-to-Peer technology has various benefits for Blockchain. Firstly, the architecture of cryptocurrencies such as Bitcoin remains secure. Along with that, it doesn’t have any central point.
Secondly, the data written in this technology cannot be changed in any way. So, if the network is bigger, then the chances of altering become less. The Blockchains use the peer-to-peer structure to perform independent tasks without needing any central authority.
On the other side, banks have complete authority over the information about your transaction. Along with that, they also restrict the users to do any transaction as they want.
Wrapping it up !!!
From the above discussion, you can understand that peer-to-peer technology will remain in this market for a long time. They find several applications. Currently, this process is largely used by the cryptocurrencies like Bitcoin, Ethereum, etc. Henceforth, the main motive is to provide better security for the users. Also, if you are looking for trading in Bitcoin, don’t forget to download the crypto trading. Now begin your trading journey!