Centralized vs Decentralized
If you’ve actively been following the crypto world and blockchain in general, I’m pretty certain you’ve come across debates based on centralized and decentralized systems. However, blockchain technology may deem the centralized systems as outdated. If you’re new to the blockchain, it can be an uphill task to differentiate between centralized vs decentralized. You don’t have to worry though, on this post we’ll take a deep dive on this topic and shade some light on your end. Read along!
What is Centralization?
In your day-to-day activities, you’re probably using or have encountered a centralized system. For instance, social media platforms such as Facebook work on the basis of a centralized system. YouTube also operates from a centralized dynamic as well.
Nonetheless, this still doesn’t explain what a centralized system is but from a basic point of view, they’re systems that all data and functions are controlled from a central point. For example, when you’re using Facebook, the company has total control of all aspects and features of the app plus who is allowed or not allowed on the platform. Not only is the company in control of all functions but also a third party is set in place to verify data. This is seen when you’re sending a message on Facebook, it has to been verified then transferred to the recipient by the platform.
Another application of a centralized platform can be seen in emails. Once you send an email, the service provider knows the contents of the email and the time sent. The information is held privately without an identifier, but on the other hand, the email service retains a copy of the information.
All in all, centralized platforms store information with your consent. This is the reason why you are asked to fill in your personal information when creating an account on platforms such as Gmail, Yahoo, and Facebook.
So, what’s the basis of these explanations?
I’m not discouraging you from using these platforms, the point I’m trying to put across is that centralized systems are more susceptible to hacking since most of the information is stored on centralized servers. For instance, back in 2015 yahoo experienced one of the biggest hacks which resulted in the exposure of personal information from millions of accounts. Moreover, centralized systems are much similar to an organizational structure where the final decision lies among a few individuals.
On the positive side though, a centralized architecture is cost-efficient in terms of support and maintenance. This is because they are pre-planned and the cost rarely exceeds the budget unless scalability is brought into the picture. Lastly, in a centralized system, an organized chain of command is clearly defined, whereby the subordinates in an organization are able to acknowledge those in authority and roles can be easily delegated.
Now that you’ve fully understood the concept behind centralized systems, let’s take it up a notch and discuss more decentralized systems.
A decentralized system is a new type of technology since it came into playback in 2009 when bitcoin was introduced. It also introduced blockchain technology which makes decentralization possible. In this architecture, if you send bitcoin to another user, it doesn’t pass through a centralized authority. For this reason, most transactions in a decentralized platform are verified by the use of a census algorithm.
This means that the system is open and transparent since anyone can verify the transactions when needed. Anyone or machine that connects to this network is referred to as a node. In most cases, there are thousands of nodes on a network that are capable of receiving and sending funds to each other. For example, a decentralized energy network is a place where people can buy energy on a network independently without the need of paying a middleman. This is thanks to blockchain technology which ensures everything runs smoothly between the nodes.
Pro and cons of a decentralized system
Decentralized platforms are more secure and less likely to be manipulated or altered. The blockchain records all transactions in a public ledger which means if changes need to be made then all participants need to come to a general decision. Nonetheless, if one node is altered, it will be pinpointed by the other nodes to have incorrect information. This is made possible by the use of cryptography. It has proved helpful in critical transactions such as the trading of NFTs.
Despite having a handful of benefits, a decentralized system isn’t short of flaws. First and foremost, a decentralized architecture is costly to set up due to the need for a system that can communicate automatically. Decentralized systems and cryptocurrency are also volatile, this is seen especially when prices begin to fluctuate. Lastly, it can cause conflict more so if an organizational structure is not properly maintained.