What is Decentralized Currency ?

If you are learning about Cryptocurrency, you must have come across a term called 'decentralization', one of the most groundbreaking features of these currencies. But while the word decentralized can be used in a lot of different contexts, it’s not obvious what it means for the world to have a decentralized currency. Let’s understand what a decentralized currency is as compared to a centralized currency.

Most people say that decentralized currency isn’t controlled by any bank or government, which is true, though it probably comes as a surprise to many folks that other currencies are controlled by banks and governments. So let’s start with articulating how a centralized currency works.

Every country has it own currency which is printed by its bank with permission from the government. This means that the piece of paper in your pocket is backed by the government of your country, which is how a shop owner can trust that it will be worth something tomorrow when they trade you some item for it. However, if the government disappeared tomorrow, then the value of that currency would drop because there would be no one vouching for and maintaining the value of the currency. The government can also, whenever it sees fit, print more currency, and whenever they do so each note or coin you have is worth less.

Some people are okay depending on their government — they trust that it will still be here tomorrow and that its financial policy will be moderate and responsible enough to protect them. But depending on where you are born in the world, you are automatically opted into trusting whatever government you started with, and your only real option to avoid that trust is to leave the country and trust someone else.

A decentralized system doesn’t have one person with that much control. Instead of a government that prints money for itself, everyone can mine the virtual currency. Instead of putting trust in a government to back a currency and maintain its value, cryptocurrency's value comes from the network of people using it. Every person in the network is connected to every other member, so there’s no central point of failure. If any one person, or a group of people, disappear tomorrow the value of these virtual currency will be unaffected by their absence.

Decentralization is a way of taking power away from big institutions and distributing it to everyone else. It’s one of the most exciting things about Cryptocurrency and a big step in thinking about how the world can be organized in a better way.
Image source - Google Images.

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