Crypto Academy Week 9 - Homework Post for [ @yousafharoonkhan ].. Centralized and decentralised systems.

in SteemitCryptoAcademy • 3 years ago (edited)
I am excited to see that the cryptoacademy courses have resumed again and that too with enhanced rules and regulations. Today i am submitting my homework task for @yousafharoonkhan which is about centralized and decentralized systems. So let's begin :

Write the definition of Decentralization and Centralization in your own words. Explain these two systems in your own words.

AS for my understanding of centralisation and decentralization is concerned, i would define centralisation as a system in which there is central authority that has absolute control over all the entities working in that system. The central authority passes on the orders which others are bound to follow irrespective of the their desire. The workers working under adminstrator have no decision making power.

1280px-Decentralization_diagram.svg.png
source
As seen in this image, in centralized structure, there is a point in centre on which all other are dependent while in decentralized system there is no central authority, all entities have individual existance.

Whereas decentralization is a system where there is no Central authority to control the entities or units working in the system . Each unit of the system has a right to work as per their own desires and needs. There is no one to pass an order which individual units are bound to abide. The individual users are therefore their own bosses. They are free to act.

Explain in your own words the difference between decentralization and centralization system Or Compare both in own words.

As we are talking about cryptocurrencies, so our discussion would be catering to centralized and decentralized markets or exchanges.

Centralized system

In centralised system, be it centralised market or exchange , there is is central authority that controls or administers the market or exchange. The central authority has absolute control over your assets and act as middle man just like traditional banking system. Before a trader starts trading on centralized system, they have to give proof of their identity like photo id, contact number, email address etc. So there is no anonymity on centralized exchanges. Although simple to understand, operate but there is low liquidity and scalability when compared with decentralized system.

Decentralized system.

In decentralized system , there is no controlling authority to control your assets. Here you can directly execute the trade. No middleman is required and such a system where no intermediaries are involved is known as peer to peer system. So decentralized exchange or market system is a peer to peer financial system. Here whole power is given to an individual user and they have absolute power to manipulate their assets. Decentralized systems are run on blockchain which is a public ledger based on cryptogrpahic algorithm . This system is a bit difficult to operate when compared to simple centralized system.

Write five Advantages and five Disadvantages of decentralized and centralized system.

Advantages of decentralized system

  • Traders have absolute control over their assets.

  • Decentralized system is run on blockchaain, and by now we all are aware about security of blockchain. So assets are more secure as there is complex cryptographic system of verification of transactioms before being recorded on blockchain.

  • Decentralized systems are more transparent. As blockchain is a public ledger , the recorded transactions are immutable and noneditable. The public address of transaction can be viewed by all. Therefore it makes decentralized system more transparent and accountable.

  • P2P Global transaction are executed spontaneously and there is no bar on transaction amount.

  • Transaction fee on decentralized system are lesser as compared to centralized systems especially on international transactions.

Disadvantages of decentralized system.

  • Anonymous nature of transaction makes assets vulnerable to use in illegal transaction like drug abuse, human trafficking etc.

  • We are all aware of price volatility of cryptoassets . Some users look at it as disadvantage while other who believe in hodling can took advantage of it and earn huge benefits

  • As blockchain system is run on computers, GPUs etc. The cost of the hardware used to operate such systems ia high.

  • Environmental hazards are posed by hardware that is put to use in decentralized systems like huge energy consumption, carbon emissions etc.

  • No one to make claim about any problem you face like wild price swing, hacking etc.

Advantages of centralized system.

  • There is central authority to issue orders and the workers working down the chain abide and implement the ordere quickly. In case of any problem faced, you can complain it to the controlling authority and get it solved.

  • As there is no user anonymity in centralized systems, abuse potential of assets is less.

  • Cost of maintaining assets is much lesser.

  • No significant environment hazards unlike decentralized system.

  • No need to bother about price fluctuation because there is central reserve to control inflation and deflation.

Disadvantages of centralized system.

  • When compared with decentralized system, security breeches are common here.

  • User data is editable at the central level without customer consent. So transparency and accountability is weaker than decentralized systems.

  • Favouritism is seen in centralized system, so merit is sometimes kept at back in such system.

  • Central authority has every right over your assets. User rights and wishes are sometimes suppressed when they contradict with administrators.

  • Quality of services delivered in centralized systems is poorer than decentralized.

Which one is better for Business/trading and why? (write in own words)

As we have seen that, none of the two systems is 100 percent perfect. Flaws are seen in both the systems and so are advantages. Therefore, depending upon the type of business, nature of business, and priorities and requirements of traders, system has to be choosen. At times one system may suit your interest while at other times, second system may be feasible for you. Suppose a trader wants keep his identity hidden, for him decentralized system is there in place. And suppose price fluctuations is bothering another user, for him centralized system is best. So choose as per your needs.

How do you know if a blockchain is decentralized or not? You can describe any method, but in your own words.

To check whether a particular blockchain system is centralised or decentralized, we need to follow following simple steps;
  • Step 1
    Go to etherscan official website that is: https://etherscan.io/
    and you got to see the following interface

IMG_20210414_195213.jpg

  • Step 2
    In the address bar provided, enter the the token address which you are interested to check. I want to check wavesdex with

Wavesdex contract address
0x1cF4592ebfFd730c7dc92c1bdFFDfc3B9EfCf29a

And saw following details:
IMG_20210414_200004.jpg

  • Step 3
    Click on contract and see details like
    IMG_20210414_200108.jpg

in coding you will search in the coding function destruct only administration,self destruct , if you see this type of wording in coding area about any token,, its mean this system is not fully centralised .
Source

As nothing like that is seen in coding area, it means WavesDex is a decentralized platform.

Thanks

#yousafharoonkhan-s2week1 #cryptoacademy #india #dex #cryptoexchange #steemit
3 years ago in SteemitCryptoAcademy by
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     3 years ago (edited)

    First respected student Thank you very much for taking participate in Steemit Crypto Academy Season 2, Week 1 course class..

    in last question you did not provide wavesDex contract address that you used to find out the coding,

    thank you very much for taking participate in the class

    Ratting :8

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     3 years ago 

    in last question you did not provide wavesDex contract address that you used to find out the coding,

    Oh yeah, skipped in hurry. Now included.

    Thanks for reviewing sir.

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       3 years ago 

      That is a very informative post. You really worked hard man.

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        [-]
         3 years ago 

        Thank you.

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