Welcome to our ‘Crypto Made Easy’ series, where we simplify the complex world of crypto so that you can better understand, be informed, and feel good about joining the future of tech, internet, and connectivity.
Decentralization is the concept of transferring control and decision-making away from a single, centralized entity such as an individual, corporation, or government — (think big banks or Facebook). This happens across a distributed network of many people or computers. There are many benefits of decentralization:
- It provides a ‘trustless’ or ‘trust-free’ environment for people to interact. Each party in the network has the exact same data in a distributed ledger. If someone tries to change or corrupt the information, it will be rejected by the majority of the people in the network.
- Decentralization adds a strong aspect of security to your networks. It reduces points of weakness or failure that would otherwise become security issues for hacking, fraud, or system failures.
- It improves data collection. When people communicate and exchange information, it is usually transferred and stored in each party’s database, which creates opportunities for data loss or incorrect data to be shared. With decentralized parties, everyone has access to shared, real-time information.
- Everyone shares in ownership, information, or decision-making, instead of a single, powerful entity that has potential to act in their own best interest.
Concepts of decentralization has been applied to businesses and organizations, political science, law and public administration, economics, and money and technology.
We’ll also touch on centralized and decentralized exchanges in our Crypto Made Easy series so make sure to stay connected!
This is not financial advice.