Decentralized Vs Centralized: What’s the Difference?

Decentralized Vs Centralized

Blockchain is a decentralized ledger or network where transactions are communicated, verified and stored in a peer-to-peer manner without the middlemen. The basic and major difference between decentralized and centralized platform is that in terms of ownership and control. Continue reading to know more about decentralized Vs centralized.

While a centralized network is owned, controlled and/or managed by a single entity or group, a decentralized platform is independent of such centralized entities and is controlled by the network users or participants.

There are many pros and cons of the two systems, which we will discuss in brief here.

So, without further delay, let’s get started.

What is Decentralized? How Does it Work? How is Decentralized Better than Centralized?

A decentralized network like the blockchain is a network that is owned and managed by its participants only. In such a network, there is no central authority, controlling or governing the network. The usual benefits include increased transparency, privacy & security and the reduced need and cost of the middlemen.

In a blockchain network, the platform participants always have full control over their data and funds. For example, the Libra e-commerce blockchain system allows e-commerce market participants to securely store and manage their data and perform P2P transactions on the network.

Another useful property of decentralized networks is that the data stored with them is immutable. It means the data once recorded on the blockchain cannot be changed or corrupted. This ensures the integrity of information and makes it easy for users to trust and/or verify it.

Decentralized networks are also known for the highest security standards. Besides the fact that each and every transaction on the network is verified by all the nodes (participants), each verified transaction is encrypted and then stored in an immutable database. This makes it nearly impossible for unauthorised parties to access or penetrate the network, i.e. high security from unwanted parties, hackers, etc.

However, there are some drawbacks as well of decentralized networks and currencies (cryptocurrencies), which include the high volatility, complexity to understand, and lack of regulation.

What is Centralized? How is it Different from Decentralized?

Most of the systems, platforms and networks that exist today are centralized. These are systems that are government, controlled and managed by centralized entities. For example, your bank has an owner and a management team that control how the bank operates, how users transact, where the customer funds are invested, etc. They have full access to your funds and personal information and can use them as they see appropriate.

The government, the banks, and almost all other entities are centralized in nature. The obvious benefit of such a system is that the presence of a systematic, regulated command chain makes it easy for users to trust the system. But, remember that not everything that is easy is also the best. Most of your information, funds and data in a centralized system can be controlled/accessed by third parties, who are not always 100% trustable. Also, a single point of failure in a centralized system increases the chances of failure because it makes it easy to access or penetrate the centralized server/entity.

A decentralized network, on the other hand, stores the user data, records, etc. in a decentralized, distributed ledger, the same copy of which is maintained by millions of nodes/participants in the network. So, there is no central or single point of failure that can be hacked.

Other benefits of a decentralized system over a centralized system include increased transparency, higher data security, more scalability & flexibility, reduced cost and time of transactions (no middlemen), and improved user privacy.

To find out more about how a decentralized network and cryptocurrency work, visit https://libraecosystem.com

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