To understand How is a Blockchain Decentralized, we need an example. Suppose that you own a company with 10,000 computers that are used to maintain a database containing the account information of your clients. To house all of these units, you put them in a warehouse building. All of them are under the same roof and you have complete control over each of those computers as well as the data inside.
The problem with this is that there are some points of failure. What if the power goes out? What if the connection to the internet is lost? What if the entire place goes up in flames? What if a malicious individual got in and deleted everything? In any of those cases, all the data is corrupted or lost.
Here, a blockchain allows for better data protection in a number of ways. It spreads out the database among many network nodes at different locations. This accomplishes two things. For one, it creates redundancy similar to backing up your data to the cloud. In the event of data loss, you can recover all data without an issue. Think of it as making multiple copies of a book. If one is lost, you can always get a spare copy.
On top of this, the fidelity of the data would be untouched. This means that if someone tries to change anything, other nodes would not be altered since they cross-reference each other. Therefore, it is very easy to find the compromised node and revert the changes as needed. Thus, to alter any information, the attacker cannot do so by going after only a single node.
With all these layers of security, the records on the blockchain are irreversible. In the context of cryptocurrency, such records are typically transactions, where various cryptocurrency coins are bought and sold. However, a blockchain can store other data as well such as legal contracts, product inventory, and identification.
Another noteworthy security feature can be observed when there is a new entry to a block. Since this involves data alteration, serious security measures must be taken. For this, the decentralized network’s computing power would be allocated to “approve” the new entry. There are two ways for this consensus mechanism: proof of work and proof of stake.
Benefits of Decentralization
While blockchain technology is relatively new, the idea of decentralization is not. When one is building a tech solution, three primary network architectures need to be considered. Those are centralized, distributed, and decentralized.
Blockchain applications are not all-or-nothing, in the sense of being completely decentralized or not. Rather, decentralized applications operate on a spectrum. That means, your company does not have to overhaul the entire workflow to accommodate decentralization. You can pick which aspect of the workflow to decentralize, which gives companies the flexibility to incrementally add security to their workflows without standing up a brand new system. Being wise about the decentralization of management and access to resources can lead to greater and fairer services.
With the knowledge of how blockchain can protect your data, you might be wondering why you might want decentralized systems in the first place. Turns out, there are quite a few reasons.
Provides a Trustless Environment
In typical transaction systems, a verification and hosting system is needed in order for transactions to be enacted. In other words, you need a third party to approve the transaction before the transaction goes through. It is always safer to have a third party oversee the exchange, just in case.
However, in a decentralized blockchain network, there is no need for that third party. Neither party has to know or trust anyone. There is no need for a third party to verify anything since everyone in the network has the same copy of the data in the form of a distributed ledger. So, in case anyone is compromised, the ledger there would show tampering and that transaction would be rejected. This is called a trustless environment.
Improves Data Reconciliation
Business partners often exchange data. The data shared between companies is stored in individual data silos, only to be brought up as needed. When the data is transformed, there is a small chance for data corruption or loss before it can enter the workstream. Decentralization helps by ensuring that every entity in the network has access to a real-time shared view of the data, which drastically reduces the chances of data corruption or loss.
Reduces Points of Weakness
Normal databases may rely on single actors to keep their services running. There might be redundancies in place, meaning that an actor responsible for the sustainment of the database has redundant copies of itself in case one goes down, but they are nowhere as reliable as that of a decentralized database. Any problems with the weak points in non-blockchain databases can lead to systemic failures such as bottlenecks, outages, and the inability to provide services efficiently.
A decentralized database has no single points of failure, and has built-in redundancy since each node in the blockchain contains a ledger that has to be cross-verified by every other node in the blockchain. If one node goes down, the other nodes can easily reference their ledgers and validate that node’s previous existence to stand it back up.
Optimizes Resources Distribution
A company’s throughput can be improved through decentralization, which helps a lot in the optimization of resource distribution. In this instance, the services are provided with consistency thanks to the improved data retrieval I mentioned above.
Censorship
Achieving censorship would be nigh impossible if information distribution and storage is decentralized. When all the data comes from a single source, it is easy to alter and censor certain pieces of it. However, when the database is decentralized, there is no central authority that controls the data flow.
Think of it like trying to block a leak. If there is only one hole, it’s easy. You cannot say the same if there are a hundred holes.
For instance, social media platforms often regulate the kind of content you can upload. They will delete offensive, provocative, or inappropriate content. However, when you communicate on a decentralized platform, everybody can interact with no moderation.
Open Development
Open-source developments are important for a number of reasons. The most prominent one is the fact that everybody can see exactly how the program or system is being developed. Decentralized networks typically sport open development environments. With an open development environment, the network is able to offer superior products, tools, and services since the verification of edits to a blockchain is inherent in the architecture of the blockchain.
Open-source software is basically an open book. Anyone can look at the codes behind the application and use or modify it as they see fit. That ensures nothing shady is built into the code that could restrict user access and establish a single point of control. An open development, decentralized blockchain makes these instance much easier to find.
Most major open-source software has its codes on GitHub, which is a code repository tool designed for open-source development.
