If you take a look at any cryptocurrency or blockchain project, you will likely see numerous projects bragging about being decentralized. This is a sharp contrast over the traditional centralized currencies and technologies and is done for a reason. Those in the crypto community regularly tout the benefits of decentralization. But why is being decentralized so important?
Centralization Can Hamper Innovations
Many advocates of decentralization point out that the popular centralized systems hurt innovations. If a company or single group is in charge of something or a market leader, they would not want to innovate in a way that changes this. In that way, centralization can hold innovations back since the big platforms do not want competition. If a smaller platform begins to grow too much, the centralized platform in charge can take steps to eliminate it or reduce its effectiveness, even if that is detrimental to society as a whole.
By contrast, with decentralization, everyone is interested as it is a community effort. This pushes the focus toward what is good for the community as a whole. In other words, developers and others in a decentralized community will be encouraged to innovate. Everyone wants to see improvements and advances.
No Single Point of Failure
Centralized services are notorious for having a single point of failure. While this is getting better with many major companies and websites ensuring a backup of some sort, it is still a serious problem. While some decentralized systems will still have a single point of failure, it is significantly less likely to be true.
Decentralized networks rely on a network of nodes. If a single node goes down, this will not take down the entire network. By contrast, if the main servers of a website go down, it is no longer accessible. This is bad from a business perspective as well as a convenience one. After all, if the website or servers go down, no profits can be made, and productivity tools cannot be used.
Reduced Risk of Cyberattacks
Compared to a centralized network, decentralized ones also have a dramatically reduced risk of a cyberattack. For a cybercriminal to change something on a decentralized blockchain network, they would have to go through and adjust it on every single node and do so simultaneously. Since that would require more resources than are practical, decentralization can provide a strong deterrent for hackers.
No Need to Deal With Country-specific Restrictions
In the case of centralized projects or currencies, there will always be a single location where the project or coin is based. As such, the currency will be subject to the rules of that particular country, no matter what they are. While some areas have minimal regulations and encourage cryptocurrencies, others place unnecessary restrictions on cryptos and blockchain projects, holding them back.
If, however, a project is decentralized, it does not have a single government authority in charge of regulation. This means that it will not have to stick to restricting rules that can prevent advances or discourage adoption. Instead, the market and natural demand for the currency or project will dictate what happens to it.
Reduced Censorship
The lack of country-specific rules associated with decentralization also leads to another factor: decentralized systems have less censorship. This comes down to the fact that the majority of members or nodes must agree for a rule to go into effect. If one element of a peer-to-peer network does not send on a particular outbound packet, another one will do so, forwarding the message.
No Need to Trust an Authority
One of the biggest issues with centralization is that a central authority is in charge. Whether you are discussing a network, a currency, a technology, information, or something else, this is the case. Users of the item or service would have to trust that central authority. Yes, we do this regularly, but what happens if the company that is the authority goes out of business? Or if the government is in charge of something and an official against the project rises to power? Or a social media platform decides to sell your data?
With decentralization, there is no need to place your trust in a single central authority since the ownership and authority is spread out. No single entity has enough power to make dramatic changes or far-reaching decisions, such as to sell your data. With a decentralized network that is set up properly, there is no need to place trust in any third parties. Instead, you trust that no one will have enough power to make changes without the agreement of the rest of the community.
Decentralization Incentivizes Developments
Decentralization is also important when it comes to leadership and ownership of the network. A decentralized project or network can easily be set up to incentivize innovations via ownership alignments and the potential for meritocracy. With blockchain technology, it is possible to encourage developers to contribute by giving them a stake in the network. When the network grows, their stake becomes more valuable, encouraging each developer to try their hardest to innovate and achieve success for the network.
On a related note, decentralized networks tend to be more meritocratic. This is because the best products and ideas are more likely to receive rewards. Part of this comes down to the transparency associated with decentralization and the blockchain. Everyone can check the ledger to see the distribution of assets and rewards. If they were distributed unfairly, people would know and be able to take action.
Conclusion
As more and more decentralized projects and networks prove their worth, the trend toward decentralization will continue to grow. Most see decentralization and the blockchain as going hand in hand. As applications for the blockchain grow, we will likely see even more decentralization arrive in unexpected ways.
Sources:
https://www.bitcoinmarketjournal.com/decentralized-currency/
https://hackernoon.com/why-decentralization-matters-explained-for-dummies-f75b5d40b2ee
https://medium.com/@petkanics/the-benefits-of-decentralization-88a0b5d0fd39