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Peer-to-peer (P2P) technologies developed rapidly in different directions with various applications and routing mechanisms. However, the lack of standardization in functional architectures of the P2P systems makes their performances far from optimal. This trend also restricts the interoperability amongst the systems, and limits the exploitation of the edge-Internet resources and tangible benefits for Internet users. Inspired by the TCP/IP model, this paper introduces PARM: a physically-aware reference model for overlay internetworking. PARM is a layered model that enables a more modular communications approach to solve P2P problems and to optimize systems more efficiently. Simulation results indicate that PARM helps to produce better performance overlays with desirable features such as decentralization, self-organization, and minimal delay penalty.