Decentralization is a term that is used frequently in connection with blockchain platforms, but it’s meaning isn’t always clear, nor are the methods a blockchain utilize it without making transactions any less secure or reliable.
Generally speaking, decentralization means that no one entity or individual has complete control over data and processes. Blockchains by their basic nature provide decentralization because every transaction is recorded by all users participating in the blockchain network. To change the transaction record requires confirmation from the majority of users for it to be verified as authentic. This means that small groups of users or a single users can’t manipulate data on the blockchain when they are at odds with the rest of the community. This means blockchain is extremely powerful and unlike traditional databases, records are not stored in one location that is controlled by one entity which can modify records without notifying anyone else and who has control over the data and all privacy measures. This has made databases targets for hackers who can then steal personal information and profit off it.
However, this does not mean decentralization is a simple solution. Although transaction records are decentralized that does not mean all aspects of a blockchain are decentralized. On some blockchains, platform governance is centralized while transactions remain decentralized. One example of this is Bitcoin, which does not have a formal governance model, meaning its developers have a great degree of control over changes to the protocol and platform. They are not unchallenged authorities, but do have more sway than users and miners. This is notable particularly as the latter do the work of mining Bitcoin and can form coalitions to veto policies which they feel would negatively impact their income.
Also important to remember is that decentralization does not directly correlate with privacy. A blockchain can operate in a decentralized manner without guaranteeing the privacy of its users. A Bitcoin transaction can be traced, meaning it’s not private, unless there have been add-ons incorporated into the platform.
There are a number of companies are currently working to make their platforms fully decentralized while also prioritizing privacy. This evolution of decentralization is critical to the industry moving forward and widespread adoption, and now it’s a race as to who reaches that goal first.
