What is a centralized and decentralized system?

August 23, 2018

What are the advantage and disadvantage of a Decentralized system over a Centralized system?

 

Many people have already heard about this Centralized and Decentralized system but doesn’t have any idea about it. Here’s a short explanation between a CENTRALIZED and DECENTRALIZED system.

 

CENTRALIZED SYSTEM

 

Centralization- is a system that is operated by an organization or authority

 

(Ex. Bank, government or any intermediary). It allows them to store records which include personal information and transaction details in one private server.

 

For example, in an international financial transaction, if person “A” would like to transfer money to person “B” from a different country. Person “A” would have to use a centralized system like a bank to send money to person “B”. Since the transaction would go through a bank, bank fees or transaction fees would be applied before person “B” receives the money from person “A.”

 

 

One problem that people are worried about in this Centralized system is when the central server gets hacked. People are afraid that they may lose their privacy or anything that has value once the centralized system has been manipulated.

 

DECENTRALIZED SYSTEM

 

Decentralization — is a system that runs through a peer-to-peer network where information, data, and transactions are recorded on all computers in the network. Decentralization is designed to cut out the middleman in every transaction by conducting direct transaction from one user to another user without any involvement of a third party or manipulation from hackers.

 

 

With the centralized and decentralized system explained, which do you think is more beneficial for people in doing transactions? Is this related to the blockchain technology? What is a blockchain technology?

 

Follow me on my next article about Blockchain technology.

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