BITCOIN TRANSACTIONS HAPPEN ON PEER-TO-PEER TECHNOLOGY
Mr. Satoshi Nakamoto defines Bitcoin as the digital currency to make transactions on peer-to-peer technology, which is still confusing for some of us. Here is a deep study that makes you understand bitcoin transactions.
Computer Network vs Blockchain Network
A network is a group of devices interconnected with others through a cable or over the internet to share information and data. The centralized client-server model is the most commonly used network with a single server that controls the whole network. This server controls all tasks, stores all data and information.
Where the blockchain network is different as it is decentralized, there is no point in recording or storing data instead all the information is constantly recorded and transferred among the participants in the network. These participants are known as peers. And, the network is also called a peer-to-peer network.
What is peer-to-peer technology?
A Peer-to-Peer network is a way of communicating directly between two parties with no third parties in between.
For example, if A wants to send a message to B normally over the internet, the message will leave from A and go to a server which further pushes the message to B, here the server is the third party. In peer-to-peer transactions, A can directly send the message to B without any third-party intervention.
Once a connection is established between two devices, each device becomes both its server and receiver making it easier and more efficient for communicating the messages.
The first well-known use for peer-to-peer technology was Napster. Napster allowed you to create files on your computer. It was beneficial as it created a digital library of every individual for sharing.
Later, Bitcoin was created which boosted up the use of peer-to-peer technology. The benefit of peer-to-peer technology is that you have complete control over your data. No central authority stores or records your data for further or any other use. It safeguards your data from data tampering, criminal use, exploitation, or loss.
What is the use of peer-to-peer technology in Bitcoin?
Bitcoin is a decentralized digital currency with which you can transfer money directly to the receiver without any intervention of any central bank or authority, just like cash in real life.
Bitcoin can be traded using bitcoin trading. Bitcoin uses blockchain technology; so for every transaction, there is a new block created.
These nodes keep the transaction details open to all in the network without knowing who made those transactions.
Trading in Bitcoin through different exchanges had a risk of fraud and hacking, so traders prefer trading directly through peer-to-peer, which one can directly sell their Bitcoin to a buyer without any need of exchanges in between.
All the miners who validate the transactions in Bitcoin use a peer-to-peer network for mining as it has no special servers for authentic users and because of this independent nature, a new account needs to be created for every computer that enters the network. With the help of decentralization and encryption, peers have more security.
What are the advantages and disadvantages of peer-to-peer technology?
Peer-to-peer computers are easy to set up, especially for a small business having not more than 10 computers; they won’t be able to afford server-based solutions. The disadvantages of which are poor security, lack of centralized backup facilities, and file storage. With the use
of peer-to-peer technology, no data can be recorded for further monitoring or sold for later use.
Not using the peer-to-peer network and continuing using the traditional networking of storing data with the server, there is a risk of data being stolen or sold to third parties for malicious purposes.
A benefit of using a peer-to-peer network is you can control your data and have the complete privacy. On the other hand, when you use normal services, there is a central server that holds your data. So they control your data and pose the chances of misusing it. With the control of your data in your hand, you know who sees your data and where it is being used. It ensures security as the data is stored on your device, so criminals cannot take down a server to get your information. With the information in your hand and the internet being a free source of information, you know where you have to put your data and choose which platform to support your data. It is the best technology for startups as their research and
ideas are secured.