How Does Decentralisation in Blockchain Really Work?

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The data stored on the decentralised blockchain is irreversible, and all transactions leave a permanent record. This is a shift from providing central control to a single authority to decentralised control by the public. So, how does decentralisation in blockchain really work?

Revolutionary advancements in our financial systems are happening every day. One of these new digital concepts is the idea of decentralisation in the blockchain. To understand that, we’ll first take a look at what decentralisation means. From there, we will unravel the main purpose of this technology and why it matters in the blockchain. Let’s get into it.

Table of Contents

What do you mean by decentralisation?

Decentralisation is a process that puts authority in the hands of the public. Instead of putting all the power in the control of a single entity, many people are responsible for running a decentralised system.

Often, decentralisation refers to how an organisation is structured. Usually, it is a top-down process that is centralised. The management sits at the top, delegates responsibilities, and makes the final decisions. Thus, in these cases, the top management is in control of taking the organisation in a certain direction.

On the other hand, a decentralised organisation gives some amount of power to middle-and lower-level subordinates as well. They are active in the decision-making process, which makes the entire organisation more efficient.

What is the main purpose of decentralisation?

Every new technological advancement aims to produce a beneficial result, including decentralisation. Decentralisation, which is still a disruptive technology, aims to address several issues with earlier ideas. It specifically aims to transform what businesses and the internet do. As the name implies, it aims to decentralise.

Decentralisation seeks to enhance the provision of services in the public sector by removing a centralised authority. Utilising decentralised technology can potentially have a good effect on people’s quality of life.

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What does decentralisation in blockchain mean?

The blockchain is a distributed ledger of digital cryptocurrency, most notably Bitcoin. On the blockchain, a new block is added, and a chain of blocks is formed each time a new transaction occurs.

To increase blockchain security, we use decentralisation. To add a new block to a chain, verification first needs to take place on the block. So, who does this verification if there is no central authority to oversee everything?

This is where decentralisation truly comes to life. A network of decentralised computers verifies each block. This ensures that the decision making and control of the ledger are not in the hands of a single person or group. Instead, it is evenly distributed in a network of anonymous individuals. Consequently, this eliminates the chance of bias or unfair treatment.

A high level of encryption and cryptography keeps blockchain transactions secure. Through decentralisation, we ensure greater safety, because it is not easy to change information in every block.

Why does decentralisation matter?

Whenever we are building a technology solution, there are three ways in which its networking is approached:

  • Centralised
  • Decentralised
  • Distributed

Blockchain technologies commonly make use of decentralised networks. However, you cannot call a blockchain application a decentralised network. Rather, blockchain operates on a decentralisation scale.  Essentially, we apply decentralisation to every aspect of the blockchain application. By doing so, we achieve better access to the resources in an application and more stability in the system. Consequently, we can provide improved and fairer service to people.

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Benefits of decentralisation in blockchain

1. Trustless environment

In a decentralised blockchain network, you don’t have to know or trust anyone else. Everyone who takes part in the network has a copy of the same data as you do.

If a member’s ledger is attacked or corrupted in some way, it will be rejected by the rest of the members in the network. This creates an environment where you have peace of mind by creating a trustless network.

2. Fewer weaknesses

Decentralisation in blockchain reduces the points of weaknesses in systems. It does this because the networks don’t have to rely on specific factors too much. Examples of weak points in systems could include systemic failures, such as failure to provide the services that a business promises. Other examples include inefficient services or unequal allocation of resources.

Additionally, we also have the benefit that if the server of one of the blockchain’s owners goes down, the entire system doesn’t go down as a result of it. This is because other members of the network can still provide the service.

3. Fair resource allocation

Since the system is fair and open to the public, decentralisation in blockchain allows for equal treatment. This means that the resources are equally available to everyone. As a result, if there is a promise of a service, the user will receive it. Not only that, but they will do so with consistent performance. Other serious failures have also become fewer as a result of this technology.

The Bottom line:

Knowing that the security of blockchain lies in its decentralisation helps you decide whether you should invest in it or not. Each network architecture has its own benefits and drawbacks, so when choosing the right technology for you, remember to keep the pros and cons in mind.

Therefore, before you invest and put your money in blockchain technologies, such as Bitcoin, you should understand their mechanisms. Once you understand how the technology works, you can then start working on investing in Bitcoin by reading my Bitcoin guide for beginners.

If you enjoyed this article on trading for women blog – How Does Decentralisation in Blockchain Really Work or have any questions for me, please feel free to leave them in the comment section below!

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    Giovana Vega

    Best Seller Author, Award Winner, Trader & Investor Blogger

    I’m Giovana currently living in Amsterdam, I used to work in big corporate firms in the finance sector. I quit my job after working more than a decade and started the path as a trader, investor and blogger. End  your search now and grow your financial knowledge with my book “Trading for Success: 8 secrets why women are better forex traders”. If there is an opportunity and adventure, count me in. 

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