November 2, 2018 Knowledge Center

Understanding Decentralization in Terms of Blockchain Technology

One of the words that come to mind when describing blockchain technology is decentralization. The idea represents a network that has no central governing body. Instead, the network works through peer-to-peer interaction without any third party mediating in between them.

To have an in-depth understanding of what decentralization is in the context of the blockchain, we need to have a look at centralization.

Decentralization and Centralization Defined

According to Wikipedia, decentralization is “the process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group.”

A decentralized setting has multiple points where the action happens, while a centralized setting has one focal point.

In a centralized network, all data and activities pass through the central hub. Nothing is deployed or accepted without going through this hub. Facebook and Google are two examples of a centralized platform.

In a decentralized network, information and activities pass through multiple points that connect with each other. LimeWire and BitTorrent exemplify a decentralized platform.

The Significance of Decentralization

How important is decentralization? Why do companies and individuals pursue it?

A lot of reasons are at play regarding the demand for a decentralized solution. There are many ways to create one as well. Blockchains that are made to host several other services like Ethereum and NEO also have their version of achieving decentralization on the same platform.

No matter how it is designed, the primary goal of decentralization is to give each user in the network an equal foothold and complete immunity from any internal or external influence.

One of the things most people think when talking about blockchain is the physical decentralization or precisely the number of computers that operate within a corporate network.

Are there thousands of computers around the world with the blockchain running on their machines or is it just a handful of nodes?

If the network has more nodes, with greater geographic diversity, the blockchain becomes more decentralized. However, decentralization is not just about the physical aspect–it is also political.

Many entities are involved in decentralization to make it work correctly, such as the miners who process and verify all transactions that take place in the network. Each entity is important; therefore, it is difficult for one group to be more important than the other and it is impossible to favor one group over the other.

The Advantages of Decentralization

1. No More Central Authority to Control Everything

Presently, governments and companies handle all the money and information in circulation. It’s usually not a problem, but there are instances where these organizations have breached the trust of the users and sold the precious data to advertisers. Also, the data, at times, go to waste because the organization has no use for it.

2. Less Risk of a Single Point of Failure

A single point of failure takes place during outages, which significantly affects productivity. For example, when Google experiences technical difficulties, they have to shut down their servers and you cannot access your email or files on Google Drive at that particular period.

It is what usually happens in a centralized network. But in a decentralized platform, even if a single node shuts down, the other nodes are not affected and continue to perform. Consequently, it does not affect your productivity.

3. Decreased Censorship

No matter how connected we are to the Internet and with each other, governments still have the power to prevent their citizens from accessing social media and control the use of other services. In a decentralized network, there is less censorship because data or information is sent and received on a peer-to-peer network.

4. Development Is Dynamic

Decentralized platforms are open source, where everybody has access to the code which they can develop to make it better and more vibrant. Better tools and products are created as a result of this significant collaboration, and it also presents excellent business opportunities.