What is centralization?
Before I explain in detail what centralization is, I want you to think about some of the systems that use it on a daily basis. Whether it's Facebook, YouTube, Twitter, your bank account, or pretty much just about any service you use — they're all controlled by a centralized authority. This means that in order to verify the data transaction, dapps development company a third party intermediary must do it for you. Let me explain this using the example of Yahoo…
Imagine that you want to send a friend a private email with funny photos of a party. You log in to your Yahoo account, write the email, upload the photos, and send them to your friend. Right now, think about the information Yahoo has on you.
When you first registered your account with Yahoo, you had to provide personal information, such as your full name, nationality, and date of birth. After this, every email you send is stored internally on Yahoo's centralized servers. This means that you have to really trust Yahoo to keep your data private. In addition, you also have to trust that they will not use this data for their benefit, such as to sell it to advertising companies.
Which, as far as we know, is almost always what happens. In 2015, Yahoo experienced the biggest hack of all time. A group of hackers managed to infiltrate the centralized servers, which allowed them to see private emails from millions of accounts.
The reason they were able to gain access to this information is because Yahoo uses centralized servers. If this central point failure is hacked, then the entire network is at risk. To clarify, I have identified three main problems with a centralized system.
You have to trust that the centralized organization will keep your data safe
They have complete control of the system and your data
If main servers are compromised, data is at risk
These problems are not just related to Yahoo, they are from almost any system you use. So now that you know what centralization is, the next part of this Centralization and Decentralization guide will define what decentralization means.
What does decentralization mean?
Before giving you real world examples of a decentralization definition, it is important to explain some of the main functions. First of all, Dapp development services decentralization was first made possible thanks to blockchain technology. The first blockchain was the Bitcoin client, which was created in 2009. When someone sends Bitcoin to someone else, the transactions are not verified by a centralized authority.
Instead, anyone can log into the Bitcoin system from their computer to verify a movement of funds. Each device connects to a system called a "node," and in total, there are thousands of independent nodes helping the network operate. This means that for the network to be hacked, the hackers would have to have control of every node — this is almost impossible. It also means that the blockchain is the most secure way to send and receive funds. However, the most important thing to note is that decentralization is not just for financial transactions, as will be explained later, decentralized systems can be used by almost any industry in the world!
The second point to remember is that people do not have to identify themselves to interact with a decentralized system. They simply use a private and public key, which means they can remain anonymous.
Third, a decentralized system operating on the blockchain is not controlled by a single authority, nor is it supported by a centralized government or nation-state. Instead, control is fairly distributed to anyone who wants to use the system. This makes society fairer because it takes control out of the hands of powerful corporations. Overall, these benefits would have made it nearly impossible for Yahoo servers to be hacked in 2015.
Now that you know what decentralization means, the next part of this comparison of differences between Centralization and Decentralization will give you real-world examples of how decentralized systems would make the world a better place.
Centralized vs. Decentralized: Use Cases
payment systems
The obvious starting point that we will talk about is the global payment system, because this was the original idea behind the first decentralized cryptocurrency in the world – Bitcoin. Each of the banks in the world operates on centralized servers, this means that they have access to each of your financial activities.
They know how much you get paid, what you spend your money on, who you send money to, and everything related to your bank account. Also, decentralized application development if someone gets your internet banking password, or even worse, hacks the centralized servers, they would have access to all the information. If the centralized servers fail (which happens frequently), then you would be denied access to your funds.
When we compare centralization and decentralization, a decentralized payment system would solve all these problems. When you use cryptocurrency to send or receive payments, you don't have to trust third parties to confirm the transaction. Therefore Bitcoin and other cryptographic forms of money are designated "shared computerized monetary standards".
No third party is required, the fees are much lower and in some cases completely free. This makes cryptocurrencies the ideal option for sending or receiving payments from someone in a different country, because companies like Western Union charge large amounts.
Decentralized systems have no borders, it doesn't matter if you send money to someone in your city or someone on the other side of the world. It takes the same amount of time and the fees are the same.
Your funds are much safer when you use a decentralized system. The only person who has access to the money is you, because you are the only person who has the private keys to access your funds. If you follow the correct security measures, no one will know what these private keys are.
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