Peer-to-Peer Network Architecture

Bitcoin is a peer-to-peer network built on top of the internet. In the early days of Bitcoin the network had a flat topological structure, where users were capable of running full nodes which performed all of Bitcoin's main functions: transaction creation, transaction validation and mining (see bitcoinv0.1). However, as the network has grown, the requirements needed to perform different functions on the network have evolved and nodes have become more specialized. The 3 main functions are now performed largely by separate entities.

Peer-to-peer is a term often misused and misunderstood within the blockchain space. On the one hand the role of transaction validation and mining cannot be dominated by a single entity as the network would cease to provide any cryptographic or game theoretic advantages to existing centralized digital money systems. One of the main barriers to scaling is the extreme burden created by forcing all users to perform all functions