Decentralization is different from centralization in many fundamental aspects of blockchain technology. In a centralized structure, a few people at the top have the power to oversee, manage, and control the decision-making process. Fiat currencies for example are an integral part of centralized structure. This is because the central bank agencies control its production and supplies. In a decentralized structure, no person or entity has the authority to manage a network or structure. Therefore, many cryptocurrencies are decentralized.
Reasons For Decentralization in Blockchain Technology
There are several reasons for keeping blockchain technology decentralized. The foremost reason is to avoid the concentration of power in the hands of a few people or institutions such as a central bank agency. The main motivation is to ensure that banks remain out of the picture from all financial equations and encourage only peer-to-peer transactions.
Decentralization enables blockchain technology to remain unchangeable. For instance, if data is entered, then it cannot be changed. New data can be added, but the existence of the old data cannot be changed or edited, or erased. Therefore, in the realm of cryptocurrencies, this feature averts many financial scams and ensures the safety and security of users. The technology maintains records of all present and past transactions.
Categories of Decentralization in Blockchain Technology
There are different categories of decentralization, each having different levels of command. These are as follows:
- Fully decentralized is a system where there are no central authorities or intermediaries to administer or manage the network.
- Semi-decentralized is a system that has many authorities having limited powers of control and management.
- The single authority controls the entire organizational structure in a fully centralized blockchain.
Advantages of Decentralization in Blockchain Technology
There are numerous benefits of decentralization, which is why blockchain integration is increasing.
High Degree of Trust
Blockchain technology earns a high degree of trust because it is hard to tamper transactions. The distributed ledger technology also supports better recording of transactions and leads to better tracking of transactions.
Reduction of Downtime
Blockchain’s decentralization feature helps in averting major failures because there is no one point of origin of failures. The system lacks bottlenecks owing to deficiency of singular sources and widespread even distribution.
Security Systems
Blockchain technology is decentralized and therefore offers better security systems. The easy use of both asymmetric encryption and symmetric encryption are also noteworthy factors for superior security.
Immutable Ledgers
It is hard to manipulate data in the blockchain because of continuous automatic recording by the network nodes. Therefore, this is one of the best features of immutable ledgers.
Data Accuracy
Decentralized blockchain technology guarantees better data accuracy because it is impossible to manipulate data put invalid data or delete existing data. Therefore, this feature can prevent many businesses from data manipulation.
Also Read- Applications of Blockchain Technology in Law Enforcement
Bottom Line
Blockchain technology is becoming popular in many sectors apart from the cryptocurrency sector. Its enormous potential rooted in decentralization is the key reason behind its popularity. The advantages are also undoubtedly going to be beneficial cutting across different sectors. The popularization of this technology will ensure better data accuracy, increase the use of cryptography, prevent fraud, and enable faster network expansion. The increasing credibility of blockchain technology concurs the growing acceptance of cryptocurrencies and can bring about a paradigm shift in the financial sector.
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