What is Decentralization in Blockchain?

Decentralization, according to many investors, is a major aspect of all cryptocurrencies. When you think about it, the decentralization concept has made Bitcoin the safest, most trusted, and most sought-after money on the market. Despite this, only a tiny percentage of the population today understands what decentralization is, what its primary characteristics are, and what benefits it provides.

What is decentralization?

Decentralization in blockchain refers to the transfer of authority and decision-making from a centralized entity (person, organization, or group thereof) to a distributed network.

Decentralized networks are designed to reduce the amount of trust that members must have in one another and to prevent members from abusing power or authority in ways that undermine the network's functionality.

Is it necessary for a blockchain to be decentralized?

A controlled or decentralized blockchain is both possible. The phrases decentralized and dispersed, on the other hand, should not be used interchangeably.

A blockchain is naturally distributed (i.e., numerous parties hold copies of the data) but not decentralized. Permission less or public blockchains and permission-based or private blockchains are the two sorts of blockchains.

Because each node in the network has a complete record of every data published on the blockchain, public blockchains are now decentralized. Bitcoin is a popular example of a decentralized blockchain.

Private blockchains, on the other hand, are centralized. Because the network size is managed and the amount of access to nodes is controlled by a single organization.

Decentralization should be done only when it is necessary. It is not necessary for a blockchain application to be totally decentralized. Any blockchain solution must meet the needs of the user, which may or may not involve certain decentralization levels.

Why is decentralization important?

Decentralization is not a new concept. When building a technology solution, three main network architectures are commonly considered: centralized, dispersed, and decentralized.

While decentralized networks are widely employed in blockchain technology, a blockchain application cannot simply be categorized as such. Rather, decentralization should be gradually expanded to all aspects of a blockchain program.

Decentralizing resource management and access in an application can result in better and more equitable service. Although decentralization has certain disadvantages, such as lower transaction throughput, the advantages of improved stability and service levels exceed the disadvantages.

Types of decentralization in blockchain

Before we can comprehend the many sorts of decentralization in blockchain, we must first comprehend the various levels of decentralization in general. Decentralization levels are covered further down.

Fully Centralized − A system in which the whole system is controlled and managed by a single central authority. Take, for instance, the banking system.

Semi-decentralized − A system in which the entire system is controlled and managed by numerous intermediaries.

Fully Decentralized − A system in which no middlemen are used to govern or administer it. Take Bitcoin, for example.

Architectural Decentralization − This sort of decentralization is concerned with the number of physical computers in the system. And how many PCs can it withstand malfunctioning at the same time?

As a result, architectural decentralized blockchains are ones in which the same blockchain is run by various systems. The blockchain will now be unaffected even if one machine crashes. Bitcoin is a well-known example of decentralized blockchain architecture.

Political Decentralization − This sort of decentralization refers to the number of people or groups in charge of or managing the computers in a system.

Bitcoin, for example, is politically decentralized since it is not owned by any organization or individual. The Bitcoin protocol is used by all nodes in the Bitcoin network.

Logical Decentralization − This sort of decentralization is concerned with the representation of the system's interface and data structures. Bitcoin, for example, is not theoretically decentralized since it has a single agreed-upon state and operates as a single system.

Decentralization's Advantages

Following are the advantages of decentralization −

Provides a trustless environment − No one has to know or trust anybody other in a decentralized blockchain network. In the form of a distributed ledger, each member of the network owns a copy of the exact same data. If a member's ledger is tampered with or corrupted in any manner, the majority of the network's members will reject it.

Increases the accuracy of data reconciliation − Companies frequently share information with their partners. This data is then changed and kept in each party's data silos, only to be resurfaced when it's time to transfer it downstream. Each time data is converted, the possibility of data loss or inaccurate data entering the workstream increases.

Points of vulnerability are reduced − Decentralization can help to mitigate sources of vulnerability in systems when single actors are overly reliant. Systemic failures might result from these flaws, such as the inability to provide promised services or inefficient service owing to resource exhaustion, recurrent outages, bottlenecks, a lack of appropriate incentives for effective service, or corruption.

Distributes resources more efficiently − Decentralization may also aid in resource distribution optimization, ensuring that promised services are delivered with improved performance and consistency, as well as a lower risk of catastrophic failure.

Transparent − Because decentralized blockchains are available to the public, they are transparent. The blockchain is open to everyone with an internet connection. Each participating node keeps a single copy of the data.

Full Control − With decentralization, the blockchain's members or users have complete authority over the activities. Because there is no central authority, all of the blockchain's data, control, and power are in the hands of its users.

Immutable − The data contained in a blockchain in a decentralized blockchain is nearly hard to alter. Because each alteration must be confirmed by each node in the blockchain network, this is the case.

Secure − Decentralized blockchains are far more secure than centralized blockchains because they employ encryption to protect data. Furthermore, the data in the current block requires data from the preceding block to be cryptographically confirmed.

Disadvantages of decentralization in Blockchain

Following are the disadvantages of decentralization −

Cost − In an organization, decentralization might be costlier than centralization. Because it necessitates the development of communication-automation systems and technologies.

Conflict − decentralization should only be employed when the consumers' needs are met. Because disputes might arise if users do not properly preserve decentralization.

Volatility − Cryptocurrencies built on a decentralized blockchain are extremely volatile. This is due to the fact that cryptocurrencies, or possibly the entire technology, are relatively new to the market. As a result, a large number of individuals are investing in them.

Crime − This is due to the fact that everything is done on the network anonymously, which might lead to exploitation or misuse.