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Centralization vs DecentralizationBlockchain is meant to be a decentralized database – a way of storing data across 100’s or even 1000’s of servers (rather than one central server like we have today).

The reason why this has become such a prolific talking-point (apart from the rampant speculation of the price of Bitcoin) is that it is the underlying technology powering all of the cryptocurrencies.

Also Read: Can Blockchain Change the World? 3 Signs That It Could Be The Next ‘Internet’

The whole point of blockchain is to decentralize data aggregation, which will not only make it more accessible, but should (as demonstrated with the likes of the crypto coins) encourage the creation & adoption of decentralized applications – which could do everything from facilitate the creation of smart contracts to helping people transfer money anonymously.

Whilst Bitcoin gets its 15 minutes of fame, the real money is in examining whether a decentralized world of data (as popularized by blockchain) would be better than a centralized.

This article is going to examine the pros-and-cons of each situation, which should give you a good rundown of which would be better for the world… As ever, it must be stipulated that this is not financial or legal advice, and as such you should not consider any of our recommendations as anything other than education and entertainment.

How Blockchain Works…

how blockchain works

The main point about blockchain is that it’s a decentralized database.

It’s best to imagine it like a dynamic telephone directory, with each of its listings being updated as part of a huge network of 100’s or even 1000’s of systems (called nodes) working on collecting all the latest data for it.

The system works by having a central blockchain database installed & running on multiple servers. These servers work to not only synchronize all versions of the database together, but add extra data to it whenever the need arises.

Each blockchain database is made up of chains (which are the equivalent of database tables) and blocks (which are blocks of data added to the database). It must be noted that a block is not a single piece of data but a collection of different data elements. For example (with the telephone directory analogy), a block of data could be 15,000 new & updated numbers.

The point of a blockchain database is VERY similar to an Internet forum – people are able to add and edit any of the data inside (considering they have the correct decryption codes)… each forum thread is a chain and each forum message is a block.

The reason this is important is that data today is stored in central repositories (typically servers, but can also be files) whereby gaining access to the data has to be done through a central provider (bank/government/app).

Whilst these providers generally do a good job, there are times when they’ve either been hacked (causing serious data integrity issues) or they’ve had problems themselves. In any case, it’s lead to something called data siloing, whereby data is kept in silos that the company/organization in charge of it will not divulge.

Blockchain works to solve that problem – its open nature gives companies and individuals the opportunity to access wide arrays of global data which is publicly available and can be downloaded from 100’s or 1000’s of systems at once (rather than just one).

This not only would give companies the opportunity to create a data manifest which is more secure & robust, but it would also encourage stakeholders within the organizations (and potentially outside) to better manage the data at the same time.

And because blockchain databases are encrypted by default, access can be heavily regulated (this is where many of the cryptocurrencies originated)…

Notes About Decentralization

DecentralizationThe whole point of blockchain is to ‘decentralize’ data.

Whilst the reason for this may not seem apparent (especially if you’ve never worked in corporate America or dealt with backend API’s before), you’ll quickly discover that data integrity is one of the major problems besetting digital infrastructure (especially in business).

A decentralized database would not only solve the security issue, but blockchain’s encrypted nature gives owners of the data ultimate control over who access it. For example, the myriad of cryptocurrencies on the market today are nothing more than encryption algorithms for particular blockchain databases. The various coins are simply access tokens for the encrypted data.

In this sense, decentralization would be hugely beneficial (if not slightly risky). It would also benefit end users because decentralized applications would become possible — the ability to work with peer-to-peer functionality using global data.

This latter is actually the most likely reason why blockchain (or another decentralization technology) will gain traction, and is partly why the many cryptocurrencies have become targets of massive speculation… the REAL power of blockchain is to facilitate transactions between more people in more countries.

For example, by removing the need for a central processing system, the likes of a restaurant reservation system would allow users to book a particular table at a particular time, with the data made available to the wider Internet (for services such as comparison engines etc). In the same sense, restaurants and airlines could offer their rooms at more accurate prices (depending on how full their stock is).

Because the data will be publicly available (if you have the correct key), the data could be used by a number of different applications. For example, a future website for the restaurant mentioned above could have a live list of available tables & times, all updated automatically through the blockchain. Because the data is the actual data used by the restaurant to facilitate bookings, the live system would facilitate orders much more accurately and with a better price.

However, this is not to say a completely decentralized system is all that’s needed…

Notes About Centralization

centralized vs decentralized blockchain

Whilst centralization is seen as the antithesis of decentralization, the reality is that both have their merits and downsides.

Centralized data has the benefit of being rigid.

You can trust its provenance and are able to validate many of the specifics about it. For example, if an airline says that it has no available seats, whilst they may be incorrect, it is incumbent upon them to keep their data valid and accurate (otherwise they’ll lose business).

In the same sense, having a system which has a central data infrastructure means that you’re able to input and manage the data from a central location. In the case of, for example, a hospital or government department (where very serious issues would arise if the data was stolen), this could be a vital consideration.

Decentralization generally means loss of control. And despite what some people will say, control is a very good thing in certain situations.

What you’ll probably find is the following…

Firstly – blockchain is typically seen as a new web, with companies & individuals using it to store data they would have never published before. This is both partly due to the facility & inclination to publish this data. For example, there will likely be a company that comes along to create a decentralized hotel reservation system that will give full access to the hotel’s itinerary (thus making it more open).

However, that same hotel would NOT want its financial records made similarly available. This would mean that the hotel would either be best keeping those records hidden (centralized) or encrypting them with one of the encryption algorithms (cryptocurrencies).

In other words, both will stay, the question is – though – what does this mean for the wider technical landscape, and how will this stack up against the hype of the crypto bubble today?

Both Are Best

Centralization vs DecentralizationJust like how we still use mainframe computers for particular tasks, there will be a place for centralized and decentralized databases.

There is no one size fits all and (unlike other parts of the technosphere), decentralized data will not obsolete the centralized model. Instead, it may evolve ideas & trends towards the storage & management of data (with new decentralized applications coming online).

The underpin lies in the type of solution that’s delivered as part of the process of creating wealth. Hotels will always attract buyers. Airlines will always attract buyers. The difference lies in how they facilitate service to them. If they want to provide a decentralized dataset, that will definitely open them up to wider application but it has to be secure and done correctly, if at all…

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