Financial Background: “Peer-to-Peer” Networks

Bitcoin operates on peer-to-peer networks. This is different from the fiat currency issued by the government because there is not one single issuer. There is instead a group of computer nodes that form a connected network. Individuals using this peer-to-peer technology are each independently keeping track of all transactions, which makes it next to impossible to cheat and manipulate. Bitcoin transactions remove the need for third-party intermediaries such as banks, brokers, or even governments. Peer-to-peer networks allow users to participate in transactions directly with one another. There is no need to worry about whether the other party will follow through on the deal. The “trust” element that was a major challenge in earlier trading eras is now solved because every user is in control of their transactions.