LeoGlossary: Decentralization

0 comments-0 reblogs
avatar of @leoglossary
LeoFinance Badge
a year ago - 3 minutes read

The process of distributing power away from a central point. This can often create more resiliency to a system since the power is not in the hands of a few individuals or entities.

We see this idea carried out in many areas.

Within businesses, many strive to decentralize power by spreading it throughout the entire system, especially to lower levels. This pushes it down the hierarchy, allowing decisions to be made closer to where problems arise.

The energy industry is seeking to established decentralized power systems. One of Tesla's goals with virtual power plants is to have individual homes generate and store electricity. This will allow for homeowners to sell the power back to the grid in times of peak need.

Computing often turns to decentralized structures. Many networks are configured in such a way as to have the data closest to where it is being accessed. While servers tend to be mirrored, each data center will not house everything.


Blockchains are designed to be decentralized networks. The server structure is such that unrelated node operators run the same software. Since a blockchain is a ledger, utilizing distributed ledger technology, all transactions are verified and added to additional blocks. As the ledger is update, the information is distributed to each block producer.

Depending upon the protocol, each network has method to reach consensus. For blockchains the major ones are:

Any node that puts up a transaction that does not match the consensus of the network gets it rejected. This makes the ledger immutable, transparent, trusted, and irreversible.

The key for blockchains is to have the code act as the authority, eliminating the need for a centralized intermediaries. This also reduces the level of trust the participants need have with each another.

Banks and other financial institutions are the intermediaries in our present monetary system. There are many ledgers that pertain to money, commerce, trade, and everyday transactions. We see central banks, commercial banks, Visa, and SWIFT all running networks. These are centralized entities which control the financial system we operate under.

Blockchain looks to break this by utilizing peer-to-peer (P2P) technology.

Web 3.0

Web 2.0 is considered a centralized structure. There are gatekeepers at every layer, in full control. Companies such as Google, Amazon, PayPal, Twitter, and YouTube all control their networks. They have full authority and control over accounts. This is due to the fact the data is all housed on their servers.

Decentralization is one of the core tenets of Web 3.0. To advance to the next generation of the Internet, many believe that we will have to exit the present siloed system. Having intermediaries every step of the way does not allow for the free flow of information. We see powerful corporations who are able to control speech, advertising, and basically censor entire sections of the population. Since the digital realm is so important to society today, we can see how this power is ripe for abuse.

In addition to decentralized, Web 3.0 promises:

Constructing databases that nobody can control or change is the foundation of Web 3.0. At the same time, accounts that cannot be closed is vital to the future, especially as we see the move where social media is entering the era of monetization for content creators. Centralized power means that social media companies not only control the data but also wallets that are tied to those accounts.

Web 3.0 seeks to utilize cryptocurrencies that are built on decentralized blockchains. This means that control of one's data and money are effectively the same.

Non-Fungible Tokens

Non-Fungible Tokens (NFTs) seek to decentralize ownership, or more specifically, the record keeping pertaining to ownership.

At present, centralized entities are responsible for the records that denote who owns what. For example, property deeds are filed with government entities. These are the institutions we must trust to maintain our real estate records. In most developed countries this is not a problem. There are, however, many stories with an "authority" showed up with someone else claiming to own a piece of land, only to be granted it literally "at the end of a gun".

NFTs seek to decentralize this by providing ownership proof by using blockchain for historical record keeping. As the NFT is moved around, a chain of ownership is established. Thus, access to the NFT is the "title" one needs.


Posted Using LeoFinance Beta