Centralization and Decentralization are both structures that are used in many fields, including:
- Blockchain Network
- Digital currencies
- Government departments
But keep in mind that today’s world is moving towards decentralization. Centralization and Decentralization are also seen in the world of digital currencies. So to understand these two types of structures, we need to get acquainted with them.
Undoubtedly, understanding the differences and features of both types of structures will increase our knowledge of the world of cryptocurrencies. For example, every time we come across a cryptocurrency with a decentralization structure, we know its characteristics.
Centralization means that the power of planning and decision-making is only in the hands of top management and others do not have the right to make decisions. This special and selected number of people can make decisions about goals, strategies, and other actions. So in this type of structure, top management decides and other members of society have no role in determining it.
In short, in this type of structure, a central point of power determines decisions, and then these decisions are transferred to the lower layers of power. For example, a centralized cryptocurrency exchange refers to the use of third parties to conduct transactions. So Individuals give their cryptocurrencies to this third party to manage their assets. This structure is similar to a bank, and customers put their assets in the bank because of the trust they have.
An example of a centralized cryptocurrency is Tether Limited, which is a centralized currency and is supervised by a specific company.
Advantages of Centralization
- The uniformity of policies and procedures can be strictly enforced
- Decisions are quick and clear
- Responsibilities are well defined in the network
- Better control over the project
- Lack of sufficient transparency in some organizations
- Top management’s dominance over other members can limit some people
Digital currencies are often introduced as decentralized. Decentralization refers to a structure that is a delegation to entities that may not know one another. In these organizations, strategies, planning, changes, and executive decisions are done by parties that are not linked one to another.
One of the best examples of this type of structure is Bitcoin. A digital currency that well defines decentralization using peer to peer technology.
This type of digital currency is not affected by inflation and government regulations.
- Decisions based on consultation
- Increase project efficiency
- Independence of a single person
- Create transparency
Centralization and Decentralization are two sides of the same coin. Each of them has its own characteristics that cause structural differences between them. But with the advent of Bitcoin, decentralization has taken on a special meaning and in today’s world, many organizations and projects have shown a special interest in the structure of decentralization. In other words, it’s a structure in which each individual has the power to make decisions and decisions are made based on consultation.