Decentralized Networks
The Internet is a decentralized network with unlimited sources of creativity. - Peter Sunde
What is decentralization?
In the blockchain, decentralization alludes to the transfer of supervision and decision-making from a centralized association (individual, corporation, or group of people) to a dispersed network. Decentralized networks endeavor to decrease the degree of trust that members should put in each other and dissuade their capacity to put forth authority or command over each other in a manner that corrupts the potency of the network.
Why is decentralization important?
Decentralization is actually not a new idea. When assembling a technological arrangement, three essential network structures are commonly thought of: centralized, decentralized, and disseminated. While blockchain technologies frequently utilize decentralized networks, a blockchain application itself simply can’t be sorted as being decentralized or not. Maybe, decentralization is a sliding scale and should be applied to all parts of a blockchain application. By decentralizing the administration of and admittance to assets in an application, more prominent and more pleasant assistance can be accomplished. Decentralization typically has a few setoffs, for example, lower exchange. However, such setoffs are worth it in comparison to the improved security and services they provide.
Benefits of decentralization
Facilitates a trust-less setting
In a decentralized blockchain system, trusting other members is not required. This is because every member in the network has a duplicate or precisely the same information as a disseminated record. In any case, where any member’s record is modified or tainted in any way, it will be dismissed by most of the individuals in the network.
Improves data recovery
Corporations regularly trade information with their associates. This information, thus, is regularly changed and put away in each party’s information storehouses, possibly to reemerge when it requires to be passed downstream. Each time the information is modified, it opens up circumstances for information loss or wrong information to enter the workplace. By having a decentralized information store, each party has a timely and shared impression of the data.
Reduces degrees of shortcoming
Decentralization can lessen degrees of shortcomings in frameworks where there might be an excess of dependence on explicit workers. These tender spots could prompt critical failures, including the inability to give guaranteed administrations or wasteful assistance because of the weariness of assets, intermittent blackouts, bottlenecks, absence of adequate motivations for excellent service, or fraud.
Optimized assets dispersion
Decentralization can likewise help streamline the dispersion of assets so that guaranteed services are furnished with better execution and consistency, just as a decreased probability of explosive letdown.
The 3 types of decentralization in blockchain
1. Business decentralization
Business Decentralization is the use of blockchain to eliminate centralized, single party processors by having the involved parties transact
directly through a smart contract. This speaks to the potential for blockchain technology to be used to eliminate an existing central party “in the middle” holding all of the assets or data.
In the business definition we often hear about disintermediation: two parties which used to rely on a middle party to facilitate a transaction now transact directly with each other. Sometimes this business concept is also described pseudo-technically as transacting directly “point to point” and removing “extra hops”. In my experience, less than 5% of use cases businesses are actually working on would be in the category of business decentralization. Most of those middlemen exist for sound reasons or the journey to remove them is a long one.
2. Physical decentralization
Physical decentralization is the dispersion of runtime blockchain servers around the world being operated by as many different parties as possible.
The big idea here is something like “wouldn’t it be grand if we had a global technology infrastructure that no single party owned or controlled, and anyone could use if they can afford to”. For example, Bitcoin was designed to be censor-resistant—if you have a bitcoin then no one can stop you from spending it on the bitcoin network (assuming you have internet access to it). For mainnets, it is therefore essential to have a large, diverse group of users (often strangers) running the nodes of the network. These strangers are incentivized to do this because they are paid to run your transaction (technically the process is called “mining” and they often must compete to win the token prize by creating the best block of transactions).
Running a single, global network of blockchain servers (“mainnet”) is a big undertaking, especially if you want the network to be independent and self-sustaining. Broad, physical decentralization is a must for public blockchain mainnets but comparatively less significant for a private blockchain.
3. Transactional decentralization
Transactional decentralization is the use of blockchain for B2B transactions to achieve greater efficiency, transparency, and trust in B2B networks. As enterprises have adapted the technology of blockchain to better suit their needs, they’ve done something profoundly powerful. The B2B transaction, the lifeblood of many businesses, has been completely reinvented.
All of the value chains and ecosystems in our global economy are formed by complex and many-sided business relationships. The two building blocks of these relationships are contracts and ledgers. A blockchain network gives you a new model for a transaction which uniquely uses contracts and ledgers in a novel, secure, and robust way. Enterprise blockchain features a shared ledger that is an immutable store of transactions and a common smart contract executing the business logic in an efficient and trustless way. A consensus process for executing, verifying and recording keeps the separate parties in lockstep. Finally, a cryptographic consent mechanism tied to the verified identity of the relevant parties ensures trusted results.
Where did Decentralization Come From?
Many people must have curiosity regarding the reasons for the sudden growth in the popularity of blockchain technology and decentralization. Blockchain introduced the concept of peer-to-peer digital tools that can help in distributing power and information alongside opening new roads for collaboration. The benefits of decentralization blockchain depend on the peer-to-peer model, which takes away the authority of single or external powers.
Blockchain established the concept of running the network in accordance with a specific set of rules decided by the network members. You can notice how decentralization is an inherent trait of blockchain technology. As a matter of fact, the primary value proposition of blockchain technology involves better efficiency, equitability, and transparency in the exchange of value and information. Decentralization delivers the ideal foundation for the value benefits of blockchain, fuelling collaboration and removing centralized authorities.
