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P2P file sharing allows users to access media files such as books, music, movies, and games using a specialized P2P software program that searches for other connected computers on a P2P network and locates the desired content. The nodes (peers) of such networks are end-user computer systems that are interconnected via the Internet.
Peer-to-peer file sharing technology has evolved through several design stages from the early networks like Napster, which popularized the technology, to the later models like the BitTorrent protocol.
Several factors contributed to the widespread adoption and facilitation of peer-to-peer file sharing. These included increasing Internet bandwidth, the widespread digitization of physical media, and the increasing capabilities of residential personal computers. Users were able to transfer either one or more files from one computer to another across the Internet through various file transfer systems and other file-sharing networks.
The act of file sharing is not illegal and peer-to-peer networks are used for legitimate purposes. The legal issues in file sharing involve violating the laws of copyrighted material. Most discussions about the legality of file sharing are implied to be about solely copyright material. Many countries have fair use exceptions that permit limited use of copyrighted material without acquiring permission from the rights holders. Such documents include commentary, news reporting, research and scholarship. Copyright laws are territorial- they do not extend beyond the territory of a specific state unless that state is a party to an international agreement. Most countries today are parties to at least one such agreement.
In the area of privacy, recent court rulings seem to indicate that there can be no expectation of privacy in data exposed over peer-to-peer file-sharing networks. In a 39-page ruling released November 8, 2013, US District Court Judge Christina Reiss denied the motion to suppress evidence gathered by authorities without a search warrant through an automated peer-to-peer search tool.
Peer-to-peer file sharing became popular in 1999 with the introduction of Napster, a file sharing application and a set of central servers that linked people who had files with those who requested files. The central index server indexed the users and their shared content. When someone searched for a file, the server searched all available copies of that file and present them to the user. The files would be transferred directly between the two private computers. A limitation was that only music files could be shared. Because this process occurred on a central server, however, Napster was held liable for copyright infringement and shut down in July 2001. It later reopened as a pay service.
Napster and eDonkey2000, which both used a central server-based model, may be classified as the first generation of P2P systems. These systems relied on the operation of the respective central servers, and thus were susceptible to centralized shutdown. The second generation of P2P file sharing encompasses networks like Kazaa, Gnutella and Gnutella2, which are able to operate without any central servers, thus eliminating the central vulnerability by connecting users remotely to each other.
The BitTorrent protocol represents a special case. In principle, it is a filesharing protocol of the first generation, relying on central servers called trackers to coordinate users. However, it does not form a network in the traditional sense. Instead new, separate networks of coordinating users are created for every set of files, called a torrent. Newer extensions of the protocol removes the need of centralized trackers, allow the usage of a decentralized server-independent network for source identification purposes, referred to as the Mainline DHT. This allows BitTorrent to encompass certain aspects of a filesharing network of the second generation as well. Users create an index file containing the metadata of the files they want to share, and upload the index files to websites where they are shared with others.
Peer-to-peer file sharing network certainly has several important advantages over conventional client-server model because the file sharing in peer-to-peer works differently compared to client-server network.
In a peer-to-peer network, tasks are distributed across all connected nodes. This flexibility serves as an advantage over conventional client-server networks, where a central server carries out important tasks such as allocating memory, storing files and responding to incoming connections. In the conventional system, a server failure can result in all connections being shut down, whereas peer-to-peer systems can accommodate for faults by redistributing tasks between working nodes, even when an individual node fails.
Peer-to-peer file sharing networks perform better when a large number of users participate. Conventional server-client networks tend to perform slower when a large number of users connect to a server at the same time. This is because the server has to handle all the users' requests simultaneously, hence individual response is sacrificed. Peer-to-peer performance increases with the number of users participating, because every client can be a server as well.
Peer-to-peer file sharing is also efficient in terms of cost.ref The system administration overhead is smaller because the user is the provider and usually the provider is the administrator as well. Hence each network can be monitored by the users themselves. At the same time, large servers sometimes require more storage and this increases the cost since the storage has to be rented or bought exclusively for a server. However, usually peer-to-peer file sharing does not require a dedicated server.
There is still ongoing discussion about the economic impact of P2P file sharing. Norbert Michel, a policy analyst at the Heritage Foundation, said that because of "econometric and data issues, studies thus far have produced disparate estimates of file sharing's impact on album sales."
In the book The Wealth of Networks, Yochai Benkler states that peer-to-peer file sharing is economically efficient and that the users pay the full transaction cost and marginal cost of such sharing even if it "throws a monkey wrench into the particular way in which our society has chosen to pay musicians and re-cording executives. This trades off efficiency for longer-term incentive effects for the recording industry. However, it is efficient within the normal meaning of the term in economics in a way that it would not have been had Jack and Jane used subsidized computers or network connections".
The economic effect of copyright infringement through peer-to-peer file sharing on music revenue has been controversial and difficult to determine. Unofficial studies found that file sharing had a negative impact on record sales. It has proven difficult to untangle the cause and effect relationships among a number of different trends, including an increase in legal online purchases of music; illegal file-sharing; drops in the prices of CDs; and the extinction of many independent music stores with a concomitant shift to sales by big-box retailers.
The MPAA reported that American studios lost $2.373 billion to Internet piracy in 2005, representing approximately one third of the total cost of film piracy in the United States. The MPAA's estimate was doubted by commentators since it was based on the assumption that one download was equivalent to one lost sale, and downloaders might not purchase the movie if illegal downloading was not an option. Due to the private nature of the study, the figures could not be publicly checked for methodology or validity, and on January 22, 2008, as the MPAA was lobbying for a bill which would compel universities to crack down on piracy, it was admitted by MPAA that its figures on piracy in colleges had been inflated by up to 300%.
A 2010 study, commissioned by the International Chamber of Commerce and conducted by independent Paris-based economics firm TERA, estimated that unlawful downloading of music, film and software cost Europe's creative industries several billion dollars in revenue each year. Furthermore, the TERA study entitled “Building a Digital Economy: The Importance of Saving Jobs in the EU's Creative Industries” predicted losses due to piracy reaching as much as 1.2 million jobs and €240 billion in retail revenue by 2015 if the trend continued. Researchers applied a substitution rate of ten percent to the volume of copyright infringements per year. This rate corresponded to the number of units potentially traded if unlawful file sharing were eliminated and did not occur. Piracy rates of one-quarter or more[vague] for popular software and operating systems have been common, even in countries and regions with strong intellectual property enforcement, such as the United States or the EU.
In 2004, an estimated 70 million people participated in online file sharing. According to a CBS News poll, nearly 70 percent of 18- to 29-year-olds thought file sharing was acceptable in some circumstances and 58 percent of all Americans who followed the file sharing issue considered it acceptable in at least some circumstances.
In January 2006, 32 million Americans over the age of 12 had downloaded at least one feature length movie from the Internet, 80 percent of whom had done so exclusively over P2P. Of the population sampled, 60 percent felt that downloading copyrighted movies off the Internet did not constitute a very serious offense, however 78 percent believed taking a DVD from a store without paying for it constituted a very serious offense.
In July 2008, 20 percent of Europeans used file sharing networks to obtain music, while 10 percent used paid-for digital music services such as iTunes.
In February 2009, a Tiscali UK survey found that 75 percent of the English public polled were aware of what was legal and illegal in relation to file sharing, but there was a divide as to where they felt the legal burden should be placed: 49 percent of people believed P2P companies should be held responsible for illegal file sharing on their networks, 18 percent viewed individual file sharers as the culprits, while 18 percent either didn’t know or chose not to answer.
According to an earlier poll, 75 percent of young voters in Sweden (18-20) supported file sharing when presented with the statement: "I think it is OK to download files from the Net, even if it is illegal." Of the respondents, 38 percent said they "adamantly agreed" while 39 percent said they "partly agreed".
In early June 2002, Researcher Nathaniel Good at HP Labs demonstrated that user interface design issues could contribute to user inadvertently sharing personal and confidential information over P2P networks
In 2003, Congressional hearings before the House Committee of Government Reform (Overexposed: The Threats to Privacy & Security on File Sharing Networks) and the Senate Judiciary Committee (The Dark Side of a Bright Idea: Could Personal and National Security Risks Compromise the Potential of P2P File-Sharing Networks?)  were convened to address and discuss the issue of inadvertent sharing on peer-to-peer networks and its consequences to consumer and national security.
Researchers have examined potential security risks including the release of personal information, bundled spyware, and viruses downloaded from the network. Some proprietary file sharing clients have been known to bundle malware, though open source programs typically have not. Some open source file sharing packages have even provided integrated anti-virus scanning.
Since approximately 2004 the threat identity theft had become more prevalent, and in July 2008 there was another inadvertent revealing of vast amounts of personal information through P2P sites. The "names, dates of birth, and Social Security numbers of about 2,000 of (an investment) firm's clients" were exposed, "including [those of] Supreme Court Justice Stephen Breyer." A drastic increase in inadvertent P2P file sharing of personal and sensitive information became evident in 2009 at the beginning of President Obama's administration when the blueprints to the helicopter Marine One were made available to the public through a breach in security via a P2P file sharing site. Access to this information has the potential of being detrimental to US security. Furthermore, shortly before this security breach, the Today show had reported that more than 150,000 tax returns, 25,800 student loan applications and 626,000 credit reports had been inadvertently made available through file sharing.
The United States government then attempted to make users more aware of the potential risks involved with P2P file sharing programs through legislation such as H.R. 1319, the Informed P2P User Act, in 2009. According to this act, it would be mandatory for individuals to be aware of the risks associated with peer-to-peer file sharing before purchasing software with informed consent of the user required prior to use of such programs. In addition, the act would allow users to block and remove P2P file sharing software from their computers at any time, with the Federal Trade Commission enforcing regulations. US-CERT also warns of the potential risks.
Nevertheless, in 2010, researchers discovered thousands of documents containing sensitive patient information on popular peer-to-peer (P2P) networks, including insurance details, personally identifying information, physician names and diagnosis codes on more than 28,000 individuals. Many of the documents contained sensitive patient communications, treatment data, medical diagnoses and psychiatric evaluations.