Hello everyone!

Today, an interesting topic is being announced by our crypto professor @yousafharoonkhan which talks about Centralization and Decentralization. This is a very hot topic in the cryptocurrency world in the past years because Cryptocurrencies, in general, are aiming to abolish centralized systems and push to global domination of decentralization.

Why is it? Why decentralization and what are the problems this centralization brings? Our Steemit friends, allow me to discuss my homework article about this topic.

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Centralization & Decentralization

To formally start, I'd like to discuss these two terms:

• Centralization - root word - Central means that an entity, known, and identified parties have control of a network or technology. This means that these authorized parties are the only ones allowed to implement, delete, or modify the network for a certain purpose.

Since identified parties are the only authorized, other entities including the general public are not included in the decision process. The network and structure access is limited to these individuals which has the credibility and reputable background to govern the network.

• Decentralization - on the other hand, is the complete opposite of centralization. Decentralization means that no central authority is owning the network, that anyone can participate and contribute to the network. The decision and power are given back to the individuals and most of the time decisions are made via election or voting.

This is the reason why this type of system is being widely used on "almost" all cryptocurrencies in general because it gives the power back to the community. Everyone has the power to decide and validate decisions for the network.

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Centralization vs Decentralization

_{Photocredit from Creative Commons under Pixabay}

From the words themselves, they are completely opposite. They have differing ideals that divide the attention of the masses. Centralization has areas that they are strong in and so does decentralization. I believe that neither of them should be abolished but instead implemented in proper areas.

• Centralization

Centralized systems generally provide a strong and secured technology because they are being developed by credible and specialized individuals paid to create and maintain the network. Since these identities are known, their transactions can be audited.

The cost of implementation, data centers, security systems, technology, and future modifications are also being shouldered by these entities as a return for having full control of the network and monetization. Investing in developments, employees, infrastructures, systems, and technologies is a bit risky, but the reward/ROI of it is sometimes overwhelming.

It can also happen the other way around, they can lose all of the effort and investment they put in. That's why it is better to weigh in the risk-reward ratio before jumping. You can come out on top or you'll be dragged down to the bottom.

Take Facebook as an example, this company is aiming to provide a social media platform for everyone. A platform that people around the world can communicate, engage and share their stories with everyone. It can be sometimes ground for businesses and opportunities. They invested so much on it and cost $$$ from their pockets. But since they control the network, they can do whatever they want. They control the ads, sponsorships, censorship, and data access to everyone. Since we are interacting on their network, they track our activities, hobbies, and interest and use them to attract investors.

• Decentralization

As mentioned above, in a decentralized network, anyone can participate and transact. This means that they can participate in the decision process and be part of the network of validators.

Decentralized systems are being loved by cryptocurrencies. It is in fact the reason why crypto, in general, has a very strong and secured system. The power is given back to the community. As a result, they can set up their own nodes and be part of transaction validation. Because everyone can be part of the validation process, they ensure that the blocks being processed are accurate.

Mechanisms must exist in order to prevent exploitation, hacking, and combatting vulnerabilities since the technology is widely available across the globe. This gave birth to the blockchain technology that if explained in layman's term, is a public ledger that everyone can see, validate, and update to each node in the network.

Unlike centralized systems, the general public or the people who want to be part of the validation process need to purchase/invest in the equipment as required. There are specifications needed in order for the network to sync with each other. Outdated systems are most likely rejected because they will not sync with the new ones.

It adds cost to the participants of purchasing the equipment needed + maintenance + electricity costs. But participating in the network will give you tokens as a reward (mining). So it can most of the timing cover the expenses and will soon become income-generating equipment.

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The Advantages and Disadvantages

_{Photocredit: Creative Commons Pixabay}

1. Centralized

Advantages

• Transactions are audited and targetted authorities are accountable.
• Profits/ROI is being maximized if the business succeeds.
• As of the moment, it is preferable to be used in any highly regulated industry such as financial services
• Decisions and governance are generally smooth and straight-forward
• Centralized systems provide a variety of features since decisions are easy

Disadvantage

• Since networks and systems are centralized, they are prone to attack and hack.
• The community/public is not allowed to participate in the decision process.
• Interference of third-party transactions. This may come up with additional fees, hassle, or resources.
• They have the most control. They can control ads, sponsorships, and what appears on our feed.
• Fetches and uses are data for business purposes.

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2. Decentralized

Advantages

• It brings back the power to the community to make decisions.
• Mining can be profitable to most coins since anyone can participate in the mining pool.
• Transactions are readily available at any time on a public ledger.
• Systems are more secured since validators across the globe need to sync in with the data and transactions they fetched.
• Charges lesser fees and eliminate third-party charges

Disadvantage

• Difficult to regulate. Cryptocurrencies in general have been battling legal issues from the government.
• Battleground of unhealthy competitions - since everyone has the chance to participate in the election process, it may become tedious as differing opinions will arise.
• Cost. Setting up mining rigs/networks costs more than centralized systems because the public needs to purchase equipment to participate.
• Conflict in Decision-making. The community has to decide what should be implemented and what idea should be considered. An overdue debate sometimes happens.
• Crime and Theft. Decentralized systems are easy to exploit and used to hide their real identity.

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Which One is Better for Business

I believe centralized is being suitable if you were to maximize a certain business. The hassle-free decision-making and full governance of the network make you execute things the way you envisioned the network.

In terms of the legal aspect, since all of the transactions are audited, it is very easy to be cleared from government regulations and taxes. It is also organized since data and storage systems are only maintained by authorized entities.

These are my reasons why centralization is a better pick when it comes to businesses because as much as possible, they want to capitalize on the profit and authority of the system.

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How to know a Decentralized Blockchain

I usually look at how the supply was being distributed especially when that cryptocurrency started. They may be decentralized in nature but the stake of the owners/developers sometimes matter when it comes to the decentralization of a cryptocurrency.

Take Ripple/XRP as an example, they supply that Ripple Labs, Chris Larsen, and Jed McCaleb were accumulating as much as 99% of the overall supply. Then because of some protests and arguments, the company decided to distribute a portion of their stake via airdrops and locked down some billion coins in XRP too.

Apart from that, I also know the process that our very own professor @yousafharoonkhan made here. Etherscan has been a common way with a little tweak on its source code to know if that cryptocurrency is centralized or decentralized. Thank you professor for sharing the step-by-step process!

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Conclusion

Centralization and Decentralization both have important roles in society. There are things that centralization is better used than decentralization and vice-versa. It is only a matter of assessment, experiments, and thorough research to choose which among them is suitable.

Decentralization is more enticing now because, for more than hundreds of years, centralization rules the world. This is one of the reasons why cryptocurrency in general is a very exciting matter. Lots of technologies offered by different altcoins are revolutionizing the world, solving the obvious problems that centralized systems can't beat.

Thank you so much for reading and a massive shout out to professor @yousafharoonkhan for putting such an amazing Homework article for us. I really enjoyed the topic and the time I spent working on it!

cc: @steemcuurator01, @steemcurator02, @steemcurator3, @steemcurator04, @steemcurator05, @steemcurator06, @steemcurator07, @booming01 @booming02 @booming03 @booming04

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