Centralisation Vs Decentralisation

Submitted by editor on Tue, 04/24/2018 - 18:17

What is the difference between centralisation and decentralisation?

According to Dictionary.com

Centralisation is the concentration of control of an activity or organization under a single authority. "The centralization of all financial power in the hands of its leaders." The action or process of bringing activities together in one place. "Greater centralization of food production"

Decentralisation is the transfer of authority from central to local government. "Efforts to promote decentralization and reform of the national political party." The movement of departments of a large organization away from a single administrative centre to other locations. "The decentralization of business services"

Currently banks and other financial institutions practice the concept of centralisation. All information and transactions go through a banks administrative process. The same applies to federal governmental processes and activities. Despite the frailties of this system such as high costs, duplication of effort, time consumption and openness to fraud and privacy issues, centralisation has been used in all companies, government departments and other institutions for hundreds of years and due to cultural lag and resistance to change likely to continue for a few more for many governments and organisations.

However, with the advent of blockchain all this is about to change. Blockchain offers a decentralised system where, instead of all data flowing through one channel, so to speak, and arrive at one point it goes into a block on the blockchain network and by virtue of the construction of the network is unable to be altered or changed in anyway.

Examples of centralised platform include Google, Facebook, Twitter and the like. All data flows through one gigantic enormous database (true it is on a number of computers or servers but the fact remains that all the data, including your data, is centralised and available to anyone with access to that database. Importantly, it is also subject to change. It can be altered at any time. It is not Peer to Peer but simply Peer to database.

Decentralised platforms, on the other hand, include BitTorrent and LimeWire which are Peer to Peer networks. With BitTorrent you can upload data and download data or a particular file from those that are uploading or downloading that file. Uploaders are called Seeders and downloaders are called Feeders.

Centralised networks are popular with governments since they provide an easy opportunity to collect data on their population. Decentralised networks tend to be unpopulated with governments since they operate outside of the data gathering opportunities centralised networks provide and the content is therefore a mystery to them and something outside of their control. Decentralised platforms offer a greater level of privacy and inhibit the ability of a single entity to sell your information to a third party (See What is Blockchain).

However the advantages of blockchain in terms of cost, time efficiency and reliability are beginning to outweigh the singular advantage of centralised networks data trawling and more and more organisations are taking up the banner for blockchain. However, it is unlikely that centralised platforms will disappear entirely. Organisations such as Google, Facebook, Twitter and others have far too much invested in it.

This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.

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