What is a decentralized network?
A distributed digital network is not under the control of a central authority.
Instead, control is distributed among the users. There is no central server or command center. Instead, the network operates on a peer to peer basis with each user having equal power and responsibility.
The internet is a great example of a distributed network. It is not controlled by any one authority. It is instead distributed among its users. Some claim the internet is heading towards centralization because of the dominance of large names in the space, such as Google, Facebook, WordPress, and the like.
How is this possible? These big players have huge data centers. All the information one requires to access the internet can be accessed through these servers. To answer the question “Is the internet decentralized or centralized?”
Although technically it’s not decentralized, the argument that it is gradually but surely becoming more centralized cannot be ignored or downplayed.
Another example is Bitcoin ( Bitcoin-TC), which was the first cryptocurrency. The network architecture of Bitcoin was created during the Great Financial Crisis in 2007-2008. Bitcoin was created as a decentralized network because central institutions (banks, financial companies) had “failed the people.”
The creators of Bitcoin knew that the financial system could be at risk if there is only one point of control. They designed Bitcoin to be distributed and decentralized. It is not controlled by any one entity. It is instead managed by its users.
What is a decentralized network?
Rather than rely on a single central server, a decentralized network distributes information-processing tasks across multiple devices.
Even if one master node is compromised or fails, other servers can still grant access to data to users in a decentralized network. The network will therefore continue to function without interruption.
Modern technological advances have enabled computers and other devices to be equipped with high amounts of processing power. This can be used to sync and use for decentralized computing. This is what makes decentralized networking possible.
It is important to keep in mind that decentralized network are different from centralized networks. However, they still depend on main servers even if there are more than one for each network.
The fundamental difference between decentralized and centralized networks
Other than the locus control, the main differences between decentralized and centralized networks are rooted in their values.
A centralized network is used for stability and control . A decentralized network, on the other hand, is designed to allow users freedom and collaboration.
We have a great piece on the philosophical and theoretic underpinnings to centralization vs decentralization.
Let’s now look at the differences between them.
Third-party involvement: A third party, or middleman, is needed to facilitate communication between nodes in a centralized network. In a decentralized network, there is no need to involve a third party. Every node in the network can communicate with each other directly.
Transparency: Centralized networks have less transparency because all information and data are kept in one place. However, distributed ledger technology (DLT) allows for greater transparency and decentralization.
Security: Centralized networks are more susceptible to attack because hackers need only to target one point to gain access. Because only one node can be compromised, all other nodes are unaffected. Decentralized networks are safer.
Scalability: It is easier to scale centralized networks by simply adding more servers to them. Decentralized networks are more difficult because each node must be capable of handling more traffic.
Exchange fees: Because there are more middlemen involved in centralized networks, they tend to charge higher exchange fees. Decentralized networks do not have such actors, which results in lower fees.
Benefits of both centralized and decentralized networks
A centralized network has many advantages, including a clear chain-of-command, a simpler setup, and the ability to delegate tasks more easily. Decentralized networks are immutable and censorship-resistant, and offer complete control and security.
In a central network there is a clear chain to command and everyone knows who is responsible. This is helpful during times of crisis, when decisions must be made quickly and efficiently.
Because only one server or mainframe is required to manage centralized networks, they are typically less costly to set up and maintain. It is also easier to delegate tasks using clear lines of authority. This makes it easier to complete tasks on time and efficiently.
Users have complete control over data and information in decentralized networks. They are also immutable. Once data has been entered into the system it is indestructible. This protects data integrity and prevents fraud.
Another advantage is the fact that decentralized networks use cryptography to ensure data integrity. The current block’s data must first be verified using cryptography. It then relies on the data from the next block to make the data extremely secure.
Finally, there is no central authority to restrict or censor content in a decentralized network. This is a great option for those who want to share information without fear of reprisal.
Advantages and disadvantages of decentralized networks
Centralized networks can lead to censorship, limited scale and security problems. Decentralized networks are also vulnerable because of lack of clarity, high maintenance and setup costs, and volatility.
A centralized system often has one point of failure. A compromised central authority can lead to the collapse of the entire system, which is a serious problem, particularly in critical systems.
Scalability is often limited by the ability of a central system to grow at the speed it allows. When users demand more functionality and features, it can be frustrating to have a restricted development process.
Another disadvantage is the practice of censorship. A central authority can restrict content in a centralized system. This is a big problem for anyone who wants to freely share information.
In a decentralized system, however, clarity can be a problem. Decentralized network governance does not rely on key authorities. This structure can be unwise in times of crisis, when decisions must be made quickly.
Because they require systems with automated communication capabilities, decentralized systems can be more costly to set up and maintain.
Last but not least, decentralized digital currencies are volatile and can be risky for conservative investors.