Centralization and Decentralization - Homework for @yousafharoonkhan Steemit Crypto Academy course

First of all, thank you @yousafharoonkhan for a very interesting lesson about centralization and decentralization. This is a topic I really enjoy, so I hope you will like the homework I have done!

The definition of decentralization

When something is decentralized, it means that it doesn't have a center. As a result, you cannot find one point that is the very center of a decentralized institution, project, business, or so on.

A decentralized business doesn't have a center. Source: Bluewire

The definition of centralization

When something is centralized, it has a center, which means that you can find the midst of it. If this is a business or a company, it means that it has a visible center, a leadership, a building, or some sort of governing standing above the rest.

Centralization: The business has a center. Source: https://pixabay.com/illustrations/stars-snails-screen-colorful-magic-1904262/*

What is the difference between decentralized and centralized?

So, what are the big differences between the two concepts? I guess it can be clearly and easily explained just by taking a look at different cryptocurrencies. Let me start with one of my favorite cryptocurrencies, Bitcoin. This is a perfect example of a decentralized cryptocurrency. What does this mean? Let us say that you would like to stop Bitcoin. What can you do? You can try to attack one miner, but then there will be thousands of other miners still operating all around the world. There is no main building for Bitcoin, and if you remove the electricity from there, the entire coin will stop working. Instead, since it is decentralized, it will be impossible for you to stop it, simply because it is built up by thousands of miners and nodes all around the world. But, it isn't only structured in a decentralized way. If anyone would like to change the code of Bitcoin, then it will be a big decentralized process in which lots of people with all sorts of opinions will share their thoughts, and it is much harder to reach an agreement, simply because it is decentralized and everyone has a saying in what is going on.

Now let us take a look at another fantastic crypto-project, Vechain! This is led by Sunny Lu, former leader in Louis Vuitton. Vechain is a project that will help fight counterfeight products by "stamping" products and following them from production to the store. This is about fashion products, wine, groceries, medicines, and it is also central in "smart-cities" in China and more. But, Vechain has a leadership and it is a centralized project. Even though they have many nodes all around the world (making it hard to stop it entirely), they still have a structure/hierarchy, meaning that most people do not have a saying in what's going on with the project. However, there is a leadership, and if they would like to make a change to the project tomorrow, they will have an easier path towards change than in a decentralized project.

Pros with a centralized system

• Change is easier due to being a centralized system
• It has a clear leadership, making outward communcation easier.
• It has strong capital in the background, making support of the system easier.
• The feeling of responsibility is bigger, because the leadership know that it is "OUR" product.
• Much easier to upgrade and update protocols when things has to be made quickly.

Cons with a centralized system

• It can easily turn into a "us" and "them" thing. It is easy to blame everyone else!
• The general person is passive and don't feel like a part of what's going on.
• Easier to hack for people with bad intentions.
• If a leader person does a mistake, the entire project might suffer (moral failure etc.)
• Solutions are expected to come form the top.

Pros with a decentralized system

• Everyone has a part and feels ownership.
• People have a strong feeling of responsibility.
• It doesn't have a center, making it way harder to attack.
• Changes cannot be made by one single person, but a wider sense of agreement has to be reached among users.
• Cannot be bought or sold from one day to another.

Cons with a decentralized system

• Way harder to implement changes, making it a time consuming process.
• If you want to learn more or contact leadership, there is no designated leadership.
• Due to lack of leadership, it is easier to "leave the ship" if things get tough.
• With cryptocurrency projects, it can often lead to outdated nodes, as people don't pay attention and know what's going on.
• Lack of leadership often leads to passiveness, thus hindering change.

Which is the best solution for a business?

All the cons and pros above can be discussed, and I do not always agree with myself. What might be good in one situation might be a negative aspect for someone else. But, when it comes to running a business efficiently, I do believe that a centralized system is very good. How come? Let us take Steem as an example. Even though it is based on a decentralized principle (which means that it has nodes placed all around the world), it also has a leadership. But, the leadership is surrounded by witnesses, all having a say at what is going on. But, if changes has to be made, the leadership still has an easier way of making things happen than in a 100% decentralized project.

It all depends on the vision of the business, and the goal behind the business. If I have a dream that I want to see come through, and I believe that I see clearer than most others, then I would go for a centralized structure. But, if I want to build a business that isn't centered around me or my dream, but around millions of users all having a say about what's going on, then a decentralized structure is better.

I do see the advantages of both options, but I do believe that an efficient business with a designated product, has to be sort of centralized in order to work properly and to follow the dream and original purpose it was created for!

How to understand if a business is centralized or not?

To be honest, I read and looked at the example in the crypto lesson writing about function destruct in the source code of the blockchain contract to find out whether or not it is decetranlized. But, there was no explanation as to why this actually tells me about whether or not it is centralized! So, I know how to find it on Etherscan, but I don't understand what it actually tells me.

But, if I was to use my knowledge, then I would look at the actual structure of a business to discover whether or not it is centralized. Does the project have a set leadership and address? Are there institutions or companies running and paying for the project? These are all clear signals of centralization, or the lack of such, might be slight proof of decentralization.

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I have tried to do my homework as good as possible. Thank you for the class, and look forward to your future crypto classes here on Steemit!