Decentralization is an essential aspect of disruptive technology Blockchain. It eliminates the disadvantages of centralization such as power misuse, delay in work, no special attention, etc. as there is no central point of control.
What is decentralization in blockchain?
Blockchains use different types of consensus protocols to validate transactions instead of relying on a centralized authority. The blocks in a blockchain have a timestamp, a link to the previous block, and users cannot modify them.
The blockchain technology resides on a host of computers on the P2P (peer to peer) network and shares the control among different nodes. The decentralized system physically cannot work with a single computer or point-of-connection and requires a slew of other computers to join in to complete a specific task on the network.
Decentralization is of three types viz. Architectural, political, and logical.
Blockchains are politically decentralized as no individual or entity has control over them.
Blockchains are also architecturally decentralized because they don’t have a central location.
But, blockchain is not logically decentralized as different computers on the system act as a single computer and showcase the same data.
Benefits of decentralization
Let’s take a look at the benefits of decentralization in the blockchain technology.
- Fairer and more secure system
Miners monitor and maintain the integrity of the blockchain by validating transactions. Thousands of miners simultaneously carry out the mining activity each day, resulting in an extensive inspection of the transactions. Hence, miners store information honestly and accurately in the blockchain system.
- Cost-effective
Blockchain eliminates the involvement of central authorities such as banks, governments, etc. Hence, it also does away with the fees and other costs associated with them. This feature helps the parties to a transaction save a lot of money, as their only cost is a nominal fee to reward the miner.
- No manipulation of records
As there are multiple records of the blockchain transactions, a single user can’t manipulate records. Besides, blockchains use cryptographic hash functions to secure transactions.
- No loss of data
Blockchain does not have a central point of data storage. There are multiple copies of the data on different nodes, making it resilient. For example, Bitcoin has successfully withstood the barrages of attempted attacks over the years.
- Quick transactions
Businesses around the world benefit from faster transactions with blockchain technology, which is mere minutes. With banks, some transactions could even take days. Faster transactions lead to quick trades and benefit economies worldwide.
- No Government meddling
History suggests that meddling by governments has led to the devaluation of many currencies. Fiat currencies are susceptible to inflation and hyperinflation, but not cryptocurrencies as no one has control over them.
- Minimal accidental failures
As blockchains store data on multiple computers, they have fault tolerance and are less likely to fail accidentally.
Concluding thoughts
While decentralization has several benefits, it is also true that the system is not fool-proof. For example, all nodes in the blockchain use the same client software. Now, if there is a bug in the client software, all the nodes can get affected.
Social corruption, bribery, or vested-interests of the majority of miners/stakeholders can have serious repercussions. As blockchain technology is continuously developing, we need to wait and watch how it plans and prepares to counter such attacks and maintain its security.