Instead of a governing body or central organization (like a bank) managing transactions, Bitcoin is run by a network made up of thousands of computers running some software that handles the sending and receiving of bitcoins.
This network of computers is called the Bitcoin network.
Before we dig deeper into the details of the actual Bitcoin network, let’s take a step back first and review what a “network” is.
What is a network?
What’s a network? Or more specifically, what’s a computer network?
A network is just a bunch of computers linked together allowing them to exchange data with each other.
There are two basic ways a network can be arranged:
1. Client-Server Network
The first type of network is known as a “client-server network”.
A client-server network is when there is one centralized computer (called the “server”) that acts as a hub to which other computers (called “clients”) are connected.
Data is requested by computers known as “clients” (such as PCs or even smartphones) and are served by computers called “servers”.This is the type of network configuration used by banks and popular payment apps like PayPal, Venmo, Apple Pay, and Google Pay.
In conventional digital banking, your laptop or mobile phone acts as an electronic “client” interacting with a central server operated by your bank.
This “hub-and-spoke” network configuration is highly efficient but it’s fragile since the server is a “chokepoint” and becomes a centralized single point of failure (“SPOF”).
If the server goes down, the entire network goes down.
2. Peer-to-Peer Network (P2P)
The second type of network is known as a “peer-to-peer network”.
Where’s the “server”? There is none.
Instead of “servers” and “clients”, computers are simply known as “nodes” since they can function as both client AND server.
A peer-to-peer network, also known as a P2P network, is created when two or more computers are connected and exchange data with each other without going through a separate “server” computer.
In a P2P network, computers are able to “talk” to each other directly.
Instead of a “hub-and-spoke” configuration, a P2P network is structured like a “spider web”.
A popular example of a P2P network is the internet itself.
For folks with a tad bit of gray hair, you may have remembered a famous music-sharing software called Napster. Napster deserves credit for popularizing the use of software that runs on a P2P network. BitTorrent is another one.
In a peer-to-peer network:
- Everyone is connected to each other, so it’s a network.
- Everyone on the network is equal, so they are all considered peers.
Each peer is equal to the others, and each peer has the same rights and duties as the others. Peers are both clients AND servers at the same time.
What the heck does this have to do with Bitcoin?
Remember…Bitcoin runs on a computer network which is known as the Bitcoin network.
And it’s configured as a peer-to-peer (P2P) network!
Why is this important?
In the next lesson, I’ll explain why. 🤔