Have you ever wondered why blockchain is such a rage? People are opting for this technology over other tried and tested methods because of one key reason- security. Blockchain technology is able to provide this security due to its decentralized nature. To understand how it is able to do this we need to understand the concepts of centralization and decentralization. A simple example can be that of a government. Governments can be classified as centralized or decentralized based on the division of power. In a centralized government, all the power is vested within one single entity, in a decentralized government power is divided at various stages. Essentially, if something is centralized, every piece of information goes through one point. On the other hand, if something is decentralized, there are multiple points that process information. We are confronted with various decentralized and centralized systems every day, though we might not realize it all the time.

Centralized Systems

Did you know that you use a centralized system almost every day? Google is an example of such a system, even Facebook. Being a centralized platform, such systems require data to pass through one single place. This system is great to track and store information. A central hub manages the flow of data, i.e you can not send or receive any information without it going through a single point. This is the reason Facebook is considered to be the king of data collection, billions of people interact on this medium and other social media sites like Instagram and WhatsApp owned by Facebook on a day to day basis. All this data becomes extremely easy to store as it is a centralized system.

Decentralized Systems

A decentralized system, on the other hand, can be described as one that has multiple points that process information. A central party is not in charge of managing the entire system, instead peer-to-peer in (P2P) interaction drives the network. Thus compared to a centralized network a decentralized system allows for more data privacy. It is much more difficult to track information in such a system as information passes through a variety of points and not just through a single entity. An example of a decentralized network can be BitTorrent, files can be uploaded and downloaded from various points without a central authority managing it.

Decentralized Blockchain Technology

Now that we know the basic difference between the two systems we can understand why having a decentralized system makes blockchain so alluring to businesses and firms. Essentially blockchain technology is a decentralized ledger which keeps records of all transactions that take place in a peer to peer network. Now, you may ask why this is better. The main reason for this is security. In a centralized system, there is a single point of data collection and creation, thus it makes the system highly susceptible to hackers. Blockchain technology, and in turn decentralization, is an effective way to work around this weakness. This function of blockchain makes exchanges and trade much easier and safe.

When people talk about blockchain and its benefits, they are usually talking about having a single database, institutions like banks use a local private database instead. This process of collecting and storing data has been found to be very inefficient and complex, this is where blockchain and its decentralized system comes into play. It makes the entire system less fragmented, secure and efficient. The internet is filled with companies and applications that are centralized; privacy and security become a huge concern because of this. Giants like Google and Facebook can do anything with the data we provide them, they can just store it or even sell it. In this technologically advanced age, privacy has become a luxury. No wonder it has been said that the internet is a centralized mess and decentralization is the solution.