Decentralization, Advantages and disadvantages | Crypto Academy S5 - Homework Post for task 4 | by @mahishines
I hope you are doing good. After taking the lecture, here I am writing beginner task season 5 task 4. The task was given by @yuosafharoonkhan.
Define decentralization. Describe the advantages and disadvantages of a decentralized system. In what areas of life can a decentralized blockchain be helpful? (Write in own words)
Decentralization means the transfer of authority from a centralized or unified authority to a dispersed network. It is a prominent element of the blockchain system. In simple words, it is the process of dispersing and distributing power from a central point. It is the inverse of centralization where a single entity Is permitted to control and manage the system.
Centralization in any form is not a good activity, whether in government or financial institutions etc. it is because the probability of failures increases in this form of system. A single entity in the top hierarchy’s mistake could destabilize the whole system.
Let’s take an example of a business in a centralized system, where a business owner is bound to comply with all the rules and regulations of the authority. The business owner is bound to act according to a centralized system wish. Your business details will be checked accordingly, and your profits will be scrutinized.
In other words, you can not run your business as per your wish, your freedom of thought will be restricted.
Likewise, if we see a centralized blog such as Twitter, Facebook, Instagram, etc., etc. we can not create content that is not according to the rules of these centralized authorities. They may block your account or give a warning to your account if they did not like your posts.
Contrary to a centralized system, a decentralized system enables individuals to run their business as per their wishes. Individuals have freedom of speech, and they are free to make their own decisions.
Decentralized blogs respect individuals' right to speech. One such example of a decentralized platform is steemit platform which enables its users to engender plagiarism-free content without being judged. Rather steemit platforms value individual creativity and give rewards to their content.
##Describe the advantages and disadvantages of a decentralized system.
Now I will elaborate few advantages and disadvantages of a decentralized system.
- The important characteristic of a decentralized system is the transfer of power to the individuals. Hence, every individual develops in this system as per their abilities.
- Decentralized system promotes motivation among the users and diminishes deprivation.
- It allows users to make their own decisions.
- In this system, users are protected from government intervention. Government intervention creates problems in the market. One such example is that when governments want to promote exports and reduce imports, they adopt a devaluation policy. In this policy, they devalue the currency to raise exports.
- Decentralized system is an open-source ledger, where each and every transaction is recorded, it is very to know if fraud happens. Hence, we can say that a decentralized system prevents fraud.
- In a centralized system, bank transactions take enormous time. However, in a decentralized system transaction is very fast. It takes very little time to transact. Therefore, it is also beneficial for a country’s economy if the transaction is speed is high. Producers will get their payment quickly for their goods.
- Cryptocurrencies that are using decentralized blockchain systems are highly volatile. One reason of high volatility is that Cryptocurrencies are still new to the world, investors, businesspersons, and governments are perplexed to either invest in it or not therefore they are volatile.
Moreover, it is affected by countries' actions. The example is from the past when China banned cryptocurrencies and then the prices of bitcoin fell to a huge low level.
- Since the powers and controls are with individuals, any transactions you have mistakenly done. It can never revert. While in the centralized system there is an authority that is called the central bank who can redeem your mistake.
- One of the disadvantages is that it is very expensive to run a decentralized network. There is a need for qualified managers who can manage different tasks. Employing new working hands requires a huge cost to pay them for their work.
- The biggest disadvantage in a decentralized network is that it gives way to money laundering and other heinous acts. Criminals can send money this way.
In what areas of life can a decentralized blockchain be helpful?
A decentralized system can be helpful in many areas.
One of the biggest problems of developing countries is that their land records are still not updated. The old and cliché system created hurdles in the management of land records.
Land records can be stored on a decentralized blockchain system, which will make things easier for the people and governments. Moreover, with this technology corruption in land sales and records will also stop.
In the democratic world, elections are of paramount value. Because through elections people elects their representatives. One of the issues in elections is rigging and other malpractices.
When the elections are being conducted on a decentralized network, it will eradicate rigging and other malpractices.
Likewise, a decentralized system can be beneficial for the health sector. It will be easy for both patients and doctors if the medical history of a patient is stored in a decentralized network. It will bring ease to doctors’ life too, as they can easily treat their patients.
The lecture was a treasure of knowledge. I learned so much from this lecture.
lastly, a decentralized system gives autonomy to individuals. Along with some useful advantages, it also possesses some disadvantages.
Moreover, the decentralized network can be helpful in the health sector, land management sector etc.