Steemit Crypto Academy Season TWO, Week ONE|Homework Post for @yousafharoonkhan| Decentralized and Centralized system, Advantages & Disadvantages and which one is best for business?
Centralization
Centralization is a system of management in which major decisions are made by the high level management ,that is the top level management . Centralization could also be the degree to which power is retained by the high level managers within the organization rather than being delegated. In the form of crypto world. Crypto currency is centralized and its an exchange platform where you can buy and sell digital assets. In this process you have to trust a third party (middleman) to monitor the transactions and secure the assets on behalf of the buyer and seller. It is owned and operated by a company or individual that have absolute control over all traders transactions. Some popular centralized crypto exchange: Kraken, Binance and Bittrex.
Decentralization
Decentralization is a system of management in which the physical location of facilities and the degree to which the decision making, authority and responsibilities are dispersed and allocated through out the organization. A decentralized crypto currency, like Bitcoin, its anonymous, peer to peer exchange makes it revolutionary. That said, Bitcoin is the first completely decentralized digital. Some popular decentralized crypto exchange: Etherdelta, Airswap and WavesDex.
The differences between centralization and decentralization
Centralized exchange is used to to conduct trades from fiat (government issued paper currency) to crypto currency. Decentralized exchanges serve as an alternative, they cut out the third party,which is thought as a “trust less environment” The digital assets are never held by any escrow or third party and are done entirely on smart contracts and atomic swaps.
The difference between centralized and decentralized exchange platforms is whether a middle man is present or not. Decentralized exchanges are less popular and less widespread in comparison with centralized exchanges. Nevertheless , there are many decentralized exchanges all the time and it is possible that they will give centralized exchanges a run for their money in future.
Centralized crypto currency exchange compared to decentralized crypto currency exchange confirms that ninety percent (90%) of crypto trades happens on centralized system. While decentralized system, there are two shortcomings which is the difficulty of use and limited functionality.
Centralized system has higher liquidity while the decentralized system do not have high liquidity compared to centralized system. Centralized crypto system allows its users to exchange fiat for crypto currency. Decentralized system only exchange crypto currencies.
In Centralized system, users are insured against any loss, which means you will get your funds back if something goes wrong. Decentralized crypto exchange are not insured.
Centralized crypto exchange are licensed are regulated by government institutions. Decentralized crypto exchange are not licensed because government and regulators cannot interfere.
Crypto currency exchange publish their ownership details and also include the location of offices. Decentralized crypto exchange have no formal location.
Centralized crypto exchange have been banned by some government recently like China, Russia and South Korea. Decentralized crypto exchange is distributed worldwide because government intervention is not possible.
Crypto currency exchange is not immune to hackers, in fact more than 40 crypto currency exchanges have been hacked and occurred in the last 8 years. Decentralized crypto exchange experience lower risks from hackers because their nodes are distributed.
In the case of infrastructure, Crypto currency exchange depends on operators and the robustness of infrastructures. Decentralized crypto exchange, there is no risk to infrastructure because the hosting of decentralized crypto exchange modes are distributed.
The advantages of centralized crypto currency
Crypto currency has the the capacity of making It easier to transfer funds between two parties without a third party.
It provides more robust tools and fast confirmation.
It offers new investors a friendly way of investing and trading in crypto currencies.
It is reliable and secured when it comes to transactions and trading. And also offer higher level of comfort. It offers deposit of fiat currency to crypto currency.
You can possibly recover your funds from an exchange if you happen to forget or lose your password. It’s exchange stores your digital assets for you and makes the process of trading easier. It helps in bringing new users into the system and made crypto more popular. Location and address of its users are made available.
It offers discounts while trading large amounts.
Disadvantages of centralized crypto currency.
It’s fees are very high when trading large amounts. Centralized crypto exchange platforms are not safe from hackers cause large exchange platforms hold bitcoin worth billions of dollars. It is vulnerable to some certain extent.
Advantages of decentralized crypto currency.
It insulates customers from bank failures, collapses and aggressive bank policies.
It’s payments allows for seamless and cheap international payments despite limits on transactions relating to fiat payments.
It’s currencies are immuned inflation or deflation. For you to be able to use decentralized currency, it’s only requirement is the ability to use and obtain a wallet. It’s currencies are not related to geographical based exchange rates, meaning that goods and services will not be devalued due to tariffs. It is a real world demonstration of blockchain technology.
It can serve as a stabilizing agent and an alternative to fiat currency. It’s exchange is cheaper. It prevents market manipulation thereby protecting users from fake trading.
It’s users are assured of great safety from theft and hacking because they do not need to transfer their assets to any third party. It offers privacy and anonymity to its users. It stores its data across several servers around the world.
Disadvantages of decentralized crypto currency
It’s users must remember the keys and password to their digital wallet or all their assets are lost forever.
Decentralized crypto exchange platforms requires its users to learn and get familiar with the process and platforms. They do not allow trading of fiat currencies for digital ones.They lack liquidity. It is difficult for buyers and sellers to trade when it’s volumes are low.
Which one is better for trading and why?
Centralization said to be good in terms of running a small scale business and it’s now the most widely accepted platform used in the buying and trading of crypto currencies. Before you can trade on a centralized crypto exchange, you must first verify your identity and complete KYC (know your customer), ALM (Anti money laundering) and CFT (counter terrorism financing). These will help exchanges platform prevents criminal activities from taking place.
How to know if a blockchain is decentralized or not
How do you know if a blockchain is decentralized or not?
The following steps can be used to verify if a block is decentralized:
i. Log in to google page using https://etherscan.io/
ii. A search box will appear at the middle of the screen, input the token contact address into the search box and press enter.
iii. The code details of the token contact address will be displayed in a box.
iv. The information gotten above will be used to determine whether a token is decentralized or not.
Thank you @yousafharoonkhan for the lesson.
First respected student Thank you very much for taking participate in Steemit Crypto Academy Season 2, Week 1 course class..
I have read your assignment very satisfactorily
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there are some point rewritten from other assignment
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Question no 4, and 5 you did not explain well
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Grade ; 5