The meaning of decentralization

If you are reading news articles or studying related to cryptocurrency, you will often see the term decentralization.

In the last part, we learned that blockchain is a data store that is difficult to tamper with, but what do blockchain and decentralization have to do with it?

First, let’s look at the meaning of decentralization. Most of the system's infrastructure is created considering one of the following operations; centralized, distributed, and decentralized as shown in the figure below. To understand the distinction between the three architectures, you need to understand the term single point of failure. A single point of failure means a single point in the system or network where the system can be halted due to anomalies (disaster, hacking, power outage, etc.) at a specific point.

For example, let's say that you are using a hotspot on your smartphone to connect your laptop, tablet PC, or smartwatch to the Internet. At this time, if the smartphone is turned off, the problem of not being able to connect to the Internet occurs in other devices. A network that is connected this way, the point of failure that causes the entire infrastructure to fail is called a single point of failure. Note that having a single point of failure does not in itself define a system as bad. It can also provide faster and more efficient service.

A centralized system has a single point of failure. This is quite obvious from the picture, yes? :) On the other hand, distributed and decentralized systems are designed to be free from a single point of failure. So, what is the difference between distributed and decentralized?

A cloud service is a good representation of a distributed system, even if the server in the eastern United States does not operate due to a disaster, the distributed design is very well designed so that the service maintains as long as the system in the western part is alive. The power supply system also needs a distributed design to avoid blackout conditions in which the entire system shuts down. These systems have high dependency because they are usually managed by a single institution and enterprise.

Systems with dependency pose a threat that will eventually lead to monopolies, excessive fee policies, and misuse of customer data, and in the end, should only be selected based on the trust and reputation of the company. Moreover, no matter how large and reliable a company is, accidents have always occurred contrary to the intention.

The biggest difference between a distributed system and decentralization is that it is divided according to whether there is a dependency by a specific company, institution, or organization. In a decentralized system, the work done by institutions and companies in a centralized or distributed system is replaced by members that freely participate and contribute. For this, the system needs to be designed so that it can exert influence based on fair standards, and an open environment in which anyone can participate is also required. Due to opportunity cost and because there is no management body, the responsibilities related to the incident are unclear, and design and maintenance are very difficult. In short, such a system was ideal but very difficult to realize.

At this time, the advent of Bitcoin in 2009 was an event that signaled the full-fledged start of decentralized infrastructure by presenting ideas that would enable realizing decentralization.

In the next part, we will look at how Bitcoin achieved decentralization.

Last updated