Hey Vicigers! As someone who may be new to the bitcoin or blockchain world, in your research you may have stumbled upon the term centralized & decentralized once or twice and it’s all so confusing. With all that research comes a thought of which is better? Centralized or Decentralized?
The good news is that you won’t have to continue looking since we are going to explain the terminology to you! Now, before we go into the good and the bad, we need to first acquire a grasp on these two different systems.
What does Centralization mean?
First we go into centralization. A centralized system concentrates on central power, meaning that in this system there is a central authority that is responsible for every planning, decision-making, and control over every single piece of information that goes in and goes out.
If you know what Web2 is, Web2 is a great example of a centralized system. In Web2, we have social media platforms such as Facebook, Instagram, Twitter, and others. These platforms are all controlled by one author. This means that every piece of data information, transaction, or exchange that is transmitted has to be verified or agreed upon by a third party.
We can use Instagram as an example. You want to post a cute picture of your pet on Insta, but before you can do that, you must first have an account, right? When you create the account, you are giving Instagram your personal information like your name, date of birth, and other personal data.
At this moment, you now think about the information that Instagram has on you. What this means is that you now must trust Instagram to keep all of your information safe and private. With this, your data is not so safe and it is possible to be hacked. But we’ll get into that later. Now let’s take a look at what decentralization means.
What does Decentralization mean?
Decentralized systems allow information to flow in all directions, not just one or two. This is where decentralization occurs. When information is communicated, it will be documented, and it will be recorded in a manner that is both transparent and comprehensive.
In that system, any piece of information that is distributed must first have authorization from all of the users who are participating in it. Because control is distributed fairly to everyone in the system, no middleman is needed. See the distinction between centralization and decentralization?
Decentralization was first made possible by blockchain technology. This time we can use cryptocurrency as an example. When we want our crypto coins or tokens, the transaction doesn’t need a central authority to verify it. And this transaction happens very fast. Decentralization isn’t just for financial transactions; it can be used in almost every industry in the world, which is pretty cool.
The Disadvantages & Advantages
Before we go into the advantages of both systems, let’s look at the disadvantages of centralization and decentralization.
Centralization Pros & Cons:
Pros:
- Coordination among the network is easier. Central authority can urge participants to adopt upgrades, protocol updates, etc.
- Usually higher performance (higher throughput, fewer total computational resources expended) and easier to implement.
- Network management is consistent, efficient, and affordable.
Cons:
- Participation in the network is controlled by the central authority.
- Have full control over the system and data
- Single point of failure: malicious parties may be able to take down the network by targeting the central authority.
Decentralization Pros and cons:
Pros:
- No single point failure: network can still function even if a large proportion of participants are attacked/taken out.
- Anyone can participate in the network
- Decentralized network architecture allows for greater privacy, as information is not passing through a single point and instead passes through a number of different points.
Cons:
- decentralized networks require more machines, which means more maintenance and potential issues, which in turn means an additional burden on your IT resources.
- Coordination is often difficult, as no single agent has the final say in network-level decisions, protocol upgrades, etc.
Those are some differences you can spot between Decentralized and Centralized systems.
So, Which is better?
Centralization was created as a means of increasing efficiency and maximising the potential benefits of scale. However, decentralization aims to increase the network’s speed and flexibility by distributing processing power to each user.
Both systems, as you can see, have their pros and cons. When it comes to determining which one is better, it boils down to a matter of taste and choice. Which system do you prefer, Vicigers?
