What is centralization and decentralization?
The consolidation of decision-making authority at the higher levels of management is referred to as centralization in the sense of an organization. Its polar opposite, is the dispersal of power from a central authority to lower levels of management and is known as decentralization.
When more decision-making power is concentrated at the center, the company is considered to be centralized. Absolute centralization or decentralization may not occur in real-life organizations.
The degree of centralization or decentralization varies across organizations, across divisions and departments, and over time within the same organization. Large organizations are thought to allow for more centralization than small organizations, depending on more formalization with the use of rules, processes, and more paperwork than small organizations.
In today's world, there is a bias against decentralization because it provides companies with a range of advantages. Decentralization allows senior managers to delegate authority to middle-level and first-line managers, which is possibly the most important advantage.
This allows senior executives to focus their time and resources on more critical activities such as formulating policies and plans. Delegating authority to lower levels often helps middle-level and first-line managers to hone their management skills when making decisions about their areas of responsibility.
This has the added advantage of putting lower-level managers in direct touch with the situation in which decisions must be made. Decentralization facilitates decision-making, which is critical for organizations to adapt rapidly to changing circumstances. A stable, achievement-oriented organizational environment could be fostered by an organization that adopts a decentralization strategy.
It's not that centralization is a negative thing. In certain cases, centralization can be preferable. There are circumstances in which senior managers must make decisions and act quickly without waiting for approval from their subordinates.
Then there are situations in which decisions affecting the whole organization must be made, and individual divisions and departments are unable to do so. Senior managers often have a greater understanding of the external environment than lower-level managers, allowing them to make better decisions.
How all this are related to cryptocurrencies?
Bitcoin created about 13 years ago and as people could mine it from home in their personal computers it was a pure decentralized entity. Exchanges weren't a thing at the time. As the things changed and many coins were created it was more simple for the average person to store it's crypto in an exchange and forget about the hassle of updates in general, wallet updates, private key etc. The exchange handle all of those concepts. And here comes the problem. Cryptos created with the concept of decentralization and are becoming centralized.
A healthy balance between local autonomy for subsidiaries and centralized control by headquarters is needed. Such compromises can change over time, depending on the needs of coin hodlers overall strategy. If the crypto industry will keep on relying in centralized firms, the change we all expect would not be anything else than a fancy firework. Maybe defi can change that.
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