
Understanding Peer-to-Peer (P2P) Networks
What is a Peer-to-Peer (P2P) Service?
A P2P service is a decentralized platform where two individuals interact directly, without a third-party intermediary. These services utilize technology to reduce transaction costs associated with trust, enforcement, and information asymmetry, traditionally managed by trusted third parties. Common P2P services include file-sharing platforms, cryptocurrency exchanges, ridesharing services, and online marketplaces, each offering services like search, rating, payment processing, and escrow. Examples include Venmo for payments, Bitcoin for decentralized transactions, and Airbnb for homesharing.
These platforms enable the direct exchange of goods, services, or information, leveraging technology to facilitate peer collaboration. However, removing intermediaries introduces certain risks, such as the potential for fraud or miscommunication. To mitigate these risks, P2P services often include mechanisms like buyer and seller ratings, escrow services, and transaction guarantees.