In a blockchain network, data is kept in several network nodes that are located at various locations. Decentralization in blockchain means that no single individual, group, or organization has decision-making power, supervision, or control over the blockchain network. Read on to learn more about how decentralization works on the blockchain and why it’s used:
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What Is Decentralization in Blockchain?
Decentralization is one of the most common approaches to blockchain network infrastructure and management. The objective of decentralization is to reduce the degree of dependency or trust that participants must place on one another and to prevent corruption of the blockchain network via decentralized management.
Decentralized vs Centralized Networks
A centralized network is designed around a single master node, which is responsible for all major data processing and data storage on the network. Most web services, such as online banking and YouTube, use a centralized network. A blockchain network can also be centralized, but this is less common than a decentralized blockchain network in which data processing and storage are spread across multiple nodes.
Decentralized vs Distributed Networks
Another type of network is the distributed network or distributed blockchain. It is similar to a decentralized network, as it does not have a single master node, but unlike a decentralized network, it is owned and managed by a network service provider or another third-party vendor. This means it has no single point of failure, similar to a decentralized network, but the service provider maintains control over the distributed network.
Learn more about network service providers here.
Who Uses Decentralized Blockchain?
Decentralized blockchain networks are a fundamental component of several cryptocurrencies such as Ethereum, Bitcoin, Binance Coin, Monero, Solana, Chainlink, and many more. With a decentralized system, cryptocurrencies get an unbiased and transparent network. There are also decentralized social networks, such as Steem and Mastodon.
What Are the Benefits of Decentralization?
There are several benefits of decentralization in the blockchain, especially as it relates to data reconciliation.
First, users don’t need to trust or know anyone else, as each member of the network can access the same data through a distributed ledger. If the ledger is tampered with or corrupted, the majority of members in the network have the ability to reject the alteration.
Another benefit of data reconciliation is improved efficiency. Master nodes can be created in regions where user activity is higher rather than routing connections over long distances to a single centralized node. There is also a greater degree of user privacy since information is disseminated across multiple nodes; this makes data tracking extremely difficult.
What Are Potential Problems with Decentralization?
There are two primary potential problems with decentralization in blockchain networks: coordination issues and maintenance costs. As data is managed by several users across the network, it is challenging to complete collective tasks that require coordination. And although decentralization results in fewer points of weakness in the network, maintenance costs can be higher. For example, data storage costs are higher than on centralized networks as there are multiple nodes and servers being used in decentralized networks.
Interested in learning about decentralization and blockchain security? Learn more here: The State of Blockchain Applications in Cybersecurity