Decentralization In Blockchain: What Is It and Why does It Matter

Blockchain is essentially a book of records shared or distributed among many different points of entanglement, the knots, which are single computers or powerful systems connected to the grid. All information is stored in a digital form, that looks like a block, chained on with a special link i.e. “hash” or solved predefined algorithm.

Blockchain technology revolutionized encryption and security among the users of digital data by its architecture and excluding the middlemen. The difference between a standard book of records, or database, and the blockchain is in the way information is organized and stored.

Blockchain is filled in with data up to the available capacity for information storage. Once this storage is filled, that particular block is locked and chained in with the previous block by solving the hash algorithm. New incoming data and related information are then structured in the new block using the same process of encryption i.e. locking the block and chaining it with the previous block.

This text is meant to explain the importance and view the benefits of utilizing decentralization in blockchain technologies.

Why Does Decentralization Matter?

In the centralized system, the book of record, or the ledger can be altered or updated only by authorized users or personnel. After a certain period, transactions recorded in the ledger can be audited and therefore confirmed. Decentralized systems, on the other hand, are open for the transaction to any miner that will use proof-of-work to instantly confirm the integrity of the change in the ledger, the validation of the new Bitcoin so to say.

The importance of decentralization can be explained through the creation of internet services during the initial phase of development. Many of the technology giants such as Google, Amazon, Facebook, etc. were using open source internet protocols to increase their internet presence and create web services.

Similarly, cryptocurrencies are using decentralized blockchain to align all participants to work together in realizing the ultimate goal—the development of the network and the rise of the value of its token. Crypto networks are decentralized social networks that are the pretext behind the extraordinary rise of Bitcoin and Ethereum.

Moreover, there are now even decentralized social blockchains built from the ground up to scale decentralized socialapplications to billions of users and scale such apps which are slowly but steadily becoming the powerhouse in the app industry lately.

Transparency

Because of the decentralized architecture of such blockchains, all previous transactions can be observed in full transparency through a personal node or by using a blockchain browser to view the ongoing changes in the ledger. Each node, or miner, has its record of the chain updated with each new transaction and everyone can trace further developments.

Even when some crypto exchanges were hacked, resulting in the stolen wallets from the exchanges, the cryptocurrency tokens can still be traced where and when have been moved despite the malicious hacker’s identity is not known. In other words, the tokens’ blockchains have never been hacked, the exchanges were.

An Undependable Setting

Another point to be made: in the decentralized blockchain network, the system design does not preclude trusting other members or setting a pre-qualification procedure. Should someone try to modify existing records, or create new ones, outside set protocols, they will be dismissed by all other participants in the network.

Decentralized systems can only be modified if the vast majority of the miners are accepting the change, which in case of a hacker attack, is not possible.

Improves Data Recovery

In the more complex systems like big corporations and financial houses, the information is exchanged on a regular basis. Modification of information, or changes and storing is always done from a single point of access, exposing the user to a possible loss or wrongdoing. Decentralized databases store the changes or modifications simultaneously on many different users’ entry points, eliminating the possibility of information loss.

A Safety Net Against Risks Exposure

Weak points such as providing services from a single actor or geographic region, inability for effective service providing, and corruption of data or information may cause systemic failures, whether derived from lack of resources, accidental outages, or data loss/hackers attack. Decentralized systems can provide a safety net against all these threats.

Optimizes Resource Distribution

Using decentralized networks, the distribution of resources can be optimized so that the best operation and required consistency can be maintained for a longer time. Disaster recovery is provided in a continuous manner and at a systemic level.

Final Thoughts

Decentralized blockchain technologies are peer-to-peer networks that enable the distribution of an equivalent book of records (ledger) to each participant. Instead of having a central authority (or authorized entity: banks; brokers etc) to operate and distribute data and information, each participant in a decentralized network is entrusted to validate, operate and store transactions in a direct communication without the middleman.

A distributed ledger is made of building blocks, a digital store of information that is further connected through a special function, hash, or consensus algorithm that provides for an identical ledger across the network members. Decentralized networks provide secure, cost-effective, and trustworthy systems for executing transactions without a need for intermediaries and are proved to be more resilient than centralized networks.