Decentralized Blockchain Or Not: Should It Matter?

The development of blockchain technology is no doubt the most promising innovation of the last decade.

Although it’s best known for underpinning the creation of P2P digital currency (cryptocurrency) as a transfer of value, that is one of the numerous use cases of blockchain technology. Its applications are far-reaching and have been able to bring about a revolution in almost every space.

This alone is an impressive feat; after all, no one — at least not a lot of people — believed that blockchain had the potential to revamp technology (and the world at large). Although blockchain technology (alongside Bitcoin) was created in 2009, it only became front and center of the tech debate in the last couple of years.

Blockchain technology has since gone on to achieve more impressive feats, impacting industries like healthcare, supply chain management, fintech, gaming, content creation, social media, digital rights management among others.

The development of Bitcoin has changed how transactions are conducted around the world. It eliminated the need for a central authority (i.e. banks, credit agencies and payment processors), enabling blockchains to evolve rapidly and achieve increased security, speed and efficiency.

To start with, let’s take a brief look at what the term ‘decentralized’ means in the context of blockchains.

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What Is a Decentralized Blockchain?

Decentralization itself is defined as the delegation of the decision-making processes of an organization from a central point to various entities.

When the word “blockchain” comes up in conversation, most people would think of Bitcoin, Ethereum and other decentralized (public) blockchains which grant access to just about anyone willing to participate.

However, centralized blockchains also exist, and they are usually developed by large corporations who want to fully utilize the potential of blockchain technology.

Decentralized blockchains are known as public blockchains, and the centralized ones as private blockchains.

The core difference between decentralized and centralized blockchains lies in what you’re allowed to do. Decentralized blockchains are unable to place restrictions on or elevate the privileges of a particular node(s), excluding malicious or faulty ones. This implies that all nodes on the blockchain network have (no need for) equal permissions and privileges.

On the other hand, centralized blockchain networks are able to select a group of participating nodes on the network who are exclusively authorized to validate blocks of transactions.

Features of Decentralized Blockchains

From a technological point of view, both decentralized and centralized chains share the same core features. The makeup of a decentralized blockchain is not in any way different from a centralized blockchain.

Decentralized blockchains possess some features which give them an advantage over centralized blockchains. Here are a few:

Faster transactions — One of the most amazing things about a decentralized blockchain network is that transactions are conducted much faster. Since the need for a third-party to handle transaction verification is eliminated (due to its decentralized nature), it allows all the nodes present on the network to contribute to the computational power required to process and verify transactions.

The conventional payment methods are rather slow and they usually incur considerable transaction charges. However, a payments system sat atop a decentralized blockchain enables seamless transfer of funds with lesser verification windows. This saves cost and increases the speed at which transactions are processed.

Secure Network —  It’s almost impossible to take over a decentralized blockchain network, as long as the diversity (by which I mean the number of unique nodes present on the network) is maintained. On most decentralized blockchains, several thousands of nodes participate in consensus to verify transactions. There’s no central node neither are there nodes with elevated permissions to verify transactions.

To successfully hack into a blockchain network, an attacker must seize control of the greater majority (more than 51 percent) of nodes on the network, at the same time!

A decentralized blockchain is much more difficult because of the sheer number of nodes present on the blockchain. Nowadays, decentralized blockchains are designed to ignore malicious (or faulty) nodes, so they are not allowed to participate in consensus.

This is in fact how the concept of immutability in blockchains work. It is impossible to alter the records in transaction blocks on a decentralized blockchain network after a consensus has been reached (i.e. the block has been verified). This is a major advantage of decentralized blockchains over centralized ones, since there’s node equality.

An understanding of blockchain technology at its very core is a great step to identifying the higher level differences in centralized and decentralized blockchains. Of course, it still remains a question of design and target audience.

A blockchain solution developed for enterprise applications would often be centralized. In contrast, a blockchain network targeting public users should ideally be decentralized. The aim should be to put the user back in the driving seat when it comes to sensitive information (for instance, medical records, personally-identifiable information).

All in all, the average person prefers the concept of decentralization in blockchain because it offers unlimited freedom, as it’s not controlled by a select few.

To them, it is the ‘true’ blockchain.

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Oluwatobi Oluyede

Oluwatobi is not your typical geek; a computer scientist, he left med school in 2017 to pursue an ML-focused career in tech. In the past, he's covered various subjects ranging from DeFi and Web3, through Android and iOS, to emerging technologies like IoT and blockchain. Presently, he manages a team of content creatives of Hola! Content, a content marketing agency using rich storytelling and content strategy to connect brands with their desired audience. Say hi on Twitter @theOluyede
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