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Centralized vs. Decentralized Networks | Outdefine

Authored by on 4/11/2022

Centralized vs Decentralized: What is the future of digital networking?

Humanity is producing data at an unprecedented rate. Recent statistics project global data creation will expand to more than 180 zettabytes by 2025.  With this fact in mind, emerging organizations are looking for the most effective way to handle and store their data.

Two of the most common models of data management are Centralized and Decentralized networks. To analyze which one is best suited for present-day systems, we examine the basic features of these two networks and learn about their core differences.

What is a Centralized Network?

A centralized digital network is characterized by the control of a central authority on all functions of data and network management. In this system, a single server acts as the custodian of all significant network processes. Workstations within this network submit their requests to this central server for performing specific functions.

Since a central server has to handle major data processing and rule implementation, it typically has robust computing power. This also implies that if the main server fails, all parts of the network go down with it.

From a management perspective, centralized networks allow consolidation of authority in the hands of a few key individuals or board members of a corporation. For example, Google and Facebook are centralized platforms that function under a hierarchical chain of command.

What is a Decentralized Network?

Decentralized networks do away with a single point of command by distributing control among different system nodes. Data is processed on a peer-to-peer basis, built over a community of users on the network. This implies that no single individual or entity has control over all operations of a decentralized platform.

A famous example of Decentralized networking is Bitcoin. After the financial crisis of 2008, Bitcoin used the blockchain to distribute cryptographic currency across programmable nodes of a network. This was a major step towards employing decentralized technology as an alternative to centralized banking.

As a model of management, Decentralized networks have revolutionized data handling and decision-making by distributing all functions of a platform across multiple devices. Doing away with the traditional style of top-down information processing, decentralization focuses on shared responsibility.

Key Differences Between Decentralized and Centralized Networks

The basic difference between a centralized and decentralized network lies in the arrangement of master servers that control the network. In the case of a centralized network, all services and processes are coordinated through a single central server. On the other hand, a decentralized network coordinates with a cluster of domain controllers that share important information and network load.

Let us dive deeper into the main differences between the two models-

Transparency

Centralized networks compromise on transparency as all information is stored in one location. Consequently, a few individuals monopolize access to all data and operations, while the larger chunk of an organization is kept in dark.

In contrast, decentralized networks store blocks of data across a network of computers that are accessible to the larger community. As a result, any change made in one part of a decentralized network is automatically reported to all nodes of the system.

Security

Centralized networks can be more vulnerable to cyber-attacks because hackers can target one main server to breach the entire system. A blockchain-based network, in contrast, is built to be tamper-proof. All user activities on the blockchain are traceable and recorded transactions cannot be altered without raising an alarm across the entire network.

Involvement of Middlemen

Most centralized networks require a third party to facilitate communication between different levels of an organization. In the case of decentralized networks, coordination among members becomes seamless as the whole system is designed to stay in sync at all times. There is no need for a middleman to coordinate between members as transactions are based on peer-to-peer smart contracts.

Scalability

Centralized networks offer limited scalability in the long run. Since all processing and applications are hosted through a single server, adding more storage and bandwidth is the only way to scale the network. Compared to this, decentralized networks can be scaled more easily by simply adding more machines to the system to enhance computing power.

Advantages of Decentralized Networks

Decentralized networks were designed to increase the speed and flexibility of digital operations by localizing processing power to include a wider system of data nodes. Let’s discuss some advantages of decentralized networks:

Autonomy to members

Decentralized networks allow users to exercise complete control over their transactions. Third-party involvement is eliminated at all stages by using smart contracts and consensus methods of information verification. Members also enjoy greater freedom to share uncensored content as no central authority restricts or screens information.

Democratic Development

A large number of decentralized networks support open development. This means that members are free to improve the tools and products of a decentralized platform by using open-source codes. This gives a boost to community participation in the further development of a network. Apart from this, decentralized platforms offer higher weightage to members’ opinions by setting low voting thresholds for deciding on new rules.

Better Data security

Increased data security is a hallmark of Cryptographic coding. Decentralized networks improve data integrity and fraud prevention by using distributed ledgers of information. In blockchain-based systems, the input of new data must be validated by adjacent blocks or ledgers. This creates a stable foundation of data security which relies on immutable programming and real-time supervision of users.

Conclusion

As the world becomes an integrated community on the Web3, Decentralized networking is an effective way to organize new corporations. Blockchain applications have revolutionized workspace management, social networking, and finance on the internet by creating an era of equitable access. DeFi-based organizations such as Outdefine are on a mission to transform the job market by designing decentralized global talent networks. With better reach and inclusive governance as their functional keystones, digital democracy is now a reality at Outdefine!