SteemitCryptoAcademy | Season 2, Week 1 - Homework | Decentralized & Centralized Systems by @yousafharoonkhan
This is my first homework for Steemit Crypto Academy. @yousafharoonkhan has explained Decentralized and Centralized systems very well. Here's my homework assigned by him.
Question1 :
Write the definition of Decentralization and Centralization in your own words. Explain these two systems in your own words.
Decentralization can be defined as having authority or the decision-making power on every level rather than a single unit.
Power of authority, decision-making, and control is delegated to each individual. In other words, in a decentralized system, each individual has the liberty of making his own decisions.
Centralization can be defined as a system that revolves around a single unit. That unit has the ultimate power to control everything from top to bottom levels.
Policies and rules are enforced by the central or top authority. Everyone that comes under the top level has to abide by the commands of the central authority.
A blockchain can either be centralized or decentralized. In the centralized blockchain, only reputable parties can transact on the ledger while in a decentralized blockchain any individual can transact on the ledger.
Question2:
Explain in your own words the difference between decentralization and centralization system Or Compare both in own words.
If we talk about blockchains then the main difference between centralized and decentralized lies in the rights of participants on a ledger (database).
1- Anonymity
In the centralized blockchain, only participants with a high reputation or good credibility can post to the ledger. Therefore the transactions are audited. Whereas, in the decentralized blockchain anyone can post to the ledger.
This makes the decentralized users anonymous and centralized ones known and reputable.
2- Third Party Involvement or Peer to Peer
In a centralized blockchain, transactions can be made only via a third party that has the right to post on a ledger. Whereas, a decentralized blockchain offers peer-to-peer transactions without the involvement of a third party.
3- Insecurity and Threat-prone
Having no single authoritative unit makes the decentralized system of a blockchain difficult to hack. However, the centralized system is more prone to threats and hacks.
4- Single Point of Failure
Centralized systems cannot be reliable to function properly all the time. If the system crashes, everything will be put on a halt and may result in a loss. However, that is not the case in Decentralized systems.
Question3:
Write five Advantages and five Disadvantages of decentralized and centralized system.
1- Control
Users have full control over their transactions in Decentralized systems. They don't have to be dependent on a third party like in Centralized systems.
2- Secure System
Decentralized systems are more secure because the data in ledgers are secured with cryptography and data in each block requires the data of a previous block for validation. But this is not the case in Centralized systems, they can be hacked and misused as whole data is saved at one central unit.
3- No Alteration of Data
In decentralized blockchains, every node is connected to another and has a copy of the previous one. So the data cannot be changed once it's validated. However, this is not the case in centralized systems. central authorities have the power to change the data. They don't do it generally but in sensitive cases, central units cannot be trusted.
4- Exchange Fees
Exchange fees are comparatively less in decentralized blockchains than in centralized blockchains.
5- Trust and Reliablity
As the data cannot be changed in decentralized systems so they are reliable but if the authority changes in centralized systems or the authority is corrupt, one cannot trust their data with them.
1- Use of Command
In a centralized system, there is a proper command system that means everyone in the network or organization knows their role- who is their superior, to whom they have to report, and who are their subordinates, to whom they can give the command. This chain of command makes this system very well organized but there is no such thing as a decentralized system. No one can command anyone. Each person is his own boss, this often leads to chaos and makes the system weak.
2- Timely Decisions
In a centralized system, there is a central authoritative unit that controls everything. That unit has a small number of people or nodes so the decision-making is fast. In a matter of few minutes, any decision can be made and implemented timely. A large number of nodes in a decentralized system and all having their own decision-making power make the decision procedure slow.
3- Crime
Despite the fact that centralized systems are prone to hacks, the overall crime rate is low. People cannot do fraudulent transactions as everything is monitored by a third party. However, in decentralized systems, fraudulent cases are high. The anonymity and no involvement of the third party in that system make the crime rate high.
4- Scalability
Decentralized systems have high scalability whereas centralized systems have limitations in this regard. Because a single central unit is handling everything so when the organization grows the system faces limitations.
5- Single Point of Failure
Decentralized systems cannot crash on the whole if one node gets corrupt. Whereas if the central unit or server has a breakdown or gets crashed then the whole system will be on halt and may face loss.
Question4:
Which one is better for Business/trading and why? (write in own words)
As the professor said, the choice of a centralized or decentralized system depends on the nature of the business. There are various factors that need to be addressed before deciding on this matter. There are pros and cons of both. Sometimes the only system is best for the business and sometimes both have to implement according to the need.
If the business requires strong and timely decision making then Centralization is the answer because decentralization makes this process slow.
But if one does not agree with the policies of the central authority then a centralized system can destroy the business. In this scenario, decentralization is best.
As the professor said, one has to consider long-term and short-term plans. If one wants to expand the business on a large scale in the long-term run then decentralization is better because it has high scalability and centralization will limit the business expansion.
If one wants the business to be secure by involving third parties and limit the crimes and fraudulence then adopting centralization would be better. But to prevent hacks and single point failure, decentralization is the answer.
There are many factors that need to be considered so one should decide on the basis of the needs and demands of the business.
Question5:
How do you know if a blockchain is decentralized or not? You can describe any method, but in your own words.
I want to check SushiSwap.
First I opened this link.
https://coinmarketcap.com/currencies/sushiswap/
Then found contract details.
After clicking it, I see all the contract details of the token. I'm copying ethereum's.
Then I opened it.
I pasted the contract address copied from coinmarketcap and searched it.
Here, I searched for contract and clicked it.
Then I found the contract source code (solidity).
Here in the code, I searched for the terms function destruct, self destruct, only administration, but I found none.
That means SushiSwap is decentralized. If I had found such terms then that would have meant that it's decentralized.
good defination
good
in last question you did not explain that which coin you are going to check , and you did not not share contract address of coin ,
you explained the rest of question very well , and thank you very much for the taking participate in the class
Ratting : 7
Thank you Professor for the encouraging remarks.
I checked Sushiswap. I have mentioned here.
And the contract address.
Haven't I done it properly?
So good