Fundamentals of Decentralization

After having gone through the fundamentals of Bitcoin and blockchain in the previous chapter, let's now try to understand a little bit about decentralization. In this section, we are going to take a look at the following topics:

• How decentralization works
• What can be decentralized
• The impact of decentralization on the current and future world
• The pros and cons of decentralization

So, what is decentralization in the first place? Now that you have started to understand blockchain technology and its architecture, you should be hearing a lot about decentralization. It is one of the buzzwords used more frequently in the cryptocurrency space and is often considered as the sole purpose of blockchain technology. Decentralization sounds like it is the opposite of something that is centralized, but it is far more than that.

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Decentralized, centralized, and distributed systems

Bitcoin based its foundation on its cryptographically secure ledger, unique assets model, and P2P technology. It led to a new architectural era that helped in building massively scalable and profitable applications, a new type of software referred to as decentralized applications (Dapps). Now let's go through the three types of applications and their differences. Most of the applications that we use are based on a centralized or client-server model. A few discs are distributed, but now more and more are becoming decentralized.

The following diagram demonstrates the differences between these three types of software:

Let's now look into the following different types of applications mentioned in the preceding diagram:

• Centralized systems: Centralized software or systems are extensive. These are single instance systems...

Decentralizing various entities

After having talked about what decentralization is and how we achieve decentralization, let's now look at what can really be decentralized. It is very exciting to know that many things in the real world can be brought onto a decentralized blockchain platform:

Now we will look into the things that can be decentralized in detail as shown in the preceding diagram:

• Name Mapping: Anything that is purely digital can be decentralized. The first example in this category is Name Mapping. Namecoin is a good example where human-readable names are mapped with addresses. Different participants can enter names as values, update these values, and blockchain can be used to maintain the current state of that value.
• Storage: This category is another classic example and a business case to use decentralization. The most important and critical requirement...

The impact of decentralization

In the previous sections, we looked at how decentralization works and what can be decentralized. In this section, we will look at the following topics:

• Why are decentralization and blockchain being considered as some of the most important platforms or technologies in today's and the future world?
• What is the possible impact this technology can bring to today's world and the futuristic vision?

The blockchain technology has been hailed as a revolutionary technology that can dramatically impact the following key factors that play a key role in the day-to-day activities across the globe:

• Cost of trades or transactions
• Speed of execution
• Transparency of all transactions
• An involvement of intermediaries
• Security

Each of these factors has implications in almost every industry, be it banking, stock market, legal, agriculture, business, trading...

The pros and cons of decentralization

After going through the journey of understanding decentralization in detail, we now have reached the end of this section. In this section, we will look at some of the most important pros and cons of decentralization. Over the past few decades, the technology advancements and innovations have helped mankind and this world make good progress and growth. However, at the same time, any such innovations in technology have also exposed the dark side of the internet and has shown us the misuse of the technology itself.

The internet, for example, has its benefits but also has its disadvantages as well. People misuse the internet for hacking online systems and various other scams. It is not primarily the pitfall of the technology, but the usage of it with wrong intentions. The coin always has two sides and we are talking about the crypto coin here...

Summary

This chapter has enabled us to understand and look at the various possibilities in which we can use decentralization and blockchain for the benefits of society and individuals. Since this technology is completely new and undergoing changes, we hope to see a better world tomorrow that includes security and transparency while eliminating all the cons present. This brings us toward the end of the fundamentals of decentralization and how decentralization is going to impact our present and the future world in a better way.

In the next chapter, we will get to know some advanced concepts of blockchain and the various security features. We will also look at hardware wallets and how Bitcoin is physically stored and much more.