How Does Decentralization in Blockchain Really Work?

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The data stored on the decentralized blockchain is irreversible, and the transactions made have a permanent record. It is a shift from providing central control to a single authority to decentralized control to the public. So how does decentralization in blockchain really work?

Revolutionary advancements in our financial systems are happening every single day. One of those new digital concepts is the idea of decentralization in the blockchain. 

To understand that, we’ll first take a look at what decentralization 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 Decentralization?

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

Often, decentralization refers to how an organization is structured. Usually, it is a top-down process that is centralized. 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 organization in a certain direction.

On the other hand, a decentralized organization 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 organization more efficient.

What is the Main Purpose of Decentralization?

Every new technological advancement aims to produce a beneficial result, and so with decentralization.

Decentralization, which is still a disruptive technology, aims to address several issues with earlier ideas. It specifically aims to transform how businesses and the internet. As the name implies, it aims to decentralize.

Decentralization seeks to enhance the provision of services in the public sector by removing a centralized authority. Utilizing decentralized technology can potentially have a good effect on people’s quality of life.

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What Does Decentralization 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 the security of the blockchain, we use decentralization.

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

This is where decentralization truly comes to life. A network of decentralized 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.
Indeed, it is evenly distributed in a network of anonymous individuals.

Consequently, this eliminates the chances of bias or unfair treatment.
A high level of encryption and cryptography keeps blockchain transactions secure. Through decentralization, we ensure more safety because changing information in every block is not easy.

Why does Decentralization Matter?

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

· Centralized
· Decentralized
· Distributed

Blockchain technologies commonly make use of decentralized networks. But you cannot call a blockchain application a decentralized network.

Rather, blockchain operates on a decentralization scale.
Essentially, we apply decentralization to every aspect of the blockchain application. By doing so, we achieve better access to resources in an application. We can provide a fairer and greater service to people.
There is also more stability in the system. Furthermore, service levels also get better as a result of using this technology.

Let’s go into the benefits of decentralization of blockchain a little more.

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Benefits of Decentralization in Blockchain

1. Trustless Environment

In a decentralized blockchain network, you don’t have to know or trust anyone else. Everyone that 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 makes for an environment where you have peace of mind by creating a trustless network.

2. Lower Weaknesses

Decentralization 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 systematic failures, such as failure to provide services that a business promises. Other examples include inefficient service 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, decentralization in blockchain allows for equal treatment. That means that the resources available 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 also become less as a result of this technology.

Conclusion – How Does Decentralization in Blockchain Work?

Decentralization in the blockchain is very important to understand. The reason for that is that knowing the security that the blockchain rests on helps you decide whether you should invest in it or not.

Of course, each network architecture has its benefits and drawbacks. Hence, when choosing the right technology for you, remember to keep the pros and cons in mind.

So, before you invest and put your money in blockchain technologies, such as Bitcoin, you should understand its mechanisms.

Once you understand how the technology works, you can then start working on investing in Bitcoin reading my Bitcoin guide for beginners.

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

Recommended Resources: If you’re interested in learning more about online trading, check out my book “Trading for Success; 8 secrets why women are better forex traders” and take a deep dive into my blog.

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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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