Machine Consensus eliminates the middleman.
Instead of a single trusted third party with authority (single vote) validating transactions through their servers, a peer-to-peer network of computers running the blockchain protocol validates transactions by consensus (majority vote). As a result, the blockchain protocol formalizes pre-defined consensus rules for validating transactions on a peer-to-peer network, as well as hard-coded governance rules for managing and auto-enforcing transactions of all network participants.
P2P networks, short for peer-to-peer, are a type of distributed network application that was first used for business purposes in the 1980s. The concept was first introduced to the general public in 1999, when Shawn Fanning, a college student, created Napster, a music-sharing service.
The service quickly became a hub for the unauthorized sharing of copyrighted songs, but after a lawsuit from the American music industry, Napster was shut down by lawmakers two years later. As a result, a new generation of peer-to-peer (P2P) services arose to fill the void and promote the growth of decentralized networks.
Web search engines, online marketplaces, streaming platforms, P2P blockchains, and the IPFS (InterPlanetary File System) web protocol all use the P2P model today. The P2P model, on the other hand, is at the heart of blockchain technology and has found a new application with the rise of cryptocurrencies.
Peer-to-Peer Network vs. Client-Server Network
The Usenet, the first implementation of a peer-to-peer network, was created in 1979 by Duke University graduate students Jim Ellis and Tom Truscott. Usenet is a peer-to-peer communication system that allows users to share messages and news without relying on a central server or administrator. It was created as a rival to the ARPANET, the first version of the internet as we know it, which was owned by the US military. The academic community and early computer hobbyists were the only ones who used it.
P2P networks did not become mainstream until Shawn Fanning created Napster in 1999. Napster was a peer-to-peer file sharing and downloading service that allowed users to share and download music. It blew up in popularity and took the entertainment industry by storm. It had over 20 million users by the year 2000.
The music industry, on the other hand, was not pleased with Napster’s disruptive, royalty-free model, and launched a series of lawsuits and campaigns that eventually resulted in regulators shutting it down in 2001. Nonetheless, Napster paved the way for other P2P file-sharing networks to flourish in the 2000s, including LimeWire, Kazaa, Morpheus Gnutella, and BitTorrent.
The P2P model evolved from file-sharing networks to a revolutionary application in value transfer using peer-to-peer blockchain technology. In 2009, Satoshi Nakamoto, a pseudonym, launched Bitcoin, ushering in a new era of cryptocurrencies. Bitcoin became the face of a new breed of peer-to-peer (P2P) applications.
Unlike other peer-to-peer (P2P) systems, Satoshi wanted to create a system of nodes that would store a linked and ever-growing transaction record that could not be changed or revised. P2P networks are the foundation of the peer-to-peer blockchain technology that allows for the creation of cryptocurrencies. Their decentralized architecture is safe and secure, and it does away with the need for third-party intermediaries.