What Is a Peer-to-Peer (P2P) Service?

A peer-to-peer (P2P) service is a decentralized platform that allows two people to communicate directly with one another without the need for a third party to intervene. Instead, the buyer and seller use the P2P service to trade directly with one another. Search, screening, rating, payment processing, and escrow are some of the services that the P2P platform may offer.
Peer-to-peer services encompass a wide range of activities, from basic buying and selling to those associated with the sharing economy. Some peer-to-peer services don’t even need users to make a payment; instead, they connect people together to collaborate on projects, share information, and communicate without the need for a middleman. These types of peer-to-peer systems can be run for free or can make money by advertising to users or selling their data.
When a third party is removed from the transaction, there is a higher risk that the service provider will not deliver, that the service will not be of the quality expected, that the buyer will not pay, or that one or both sides will be able to exploit asymmetric knowledge. This additional risk adds to the transaction costs of a peer-to-peer (P2P) transaction. P2P services are frequently established with the goal of making these transactions easier and lowering risk for both the consumer and the seller. The service may be paid for by the customer, seller, or both, or it may be provided for free and monetized in some other way.

In a P2P network, the “peers” are computer systems which are connected to each other via the Internet. Files can be shared directly between systems on the network without the need of a central server. In other words, each computer on a P2P network becomes a file server as well as a client.

A P2P network can be an ad hoc connection—a couple of computers connected via a Universal Serial Bus to transfer