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What is a Decentralized Network?

Last updated 29th Nov 2022

A decentralized network, the backbone of blockchain technology refers to a network architecture that distributes the storage and processing among several machines (nodes), rather than using a single centralized server.

In this guide, we will understand the meaning of decentralized networks, the difference between centralized networks and decentralized networks, advantages of the decentralization, and much more. Let’s get started.

Introducing Decentralized Networks

In a decentralized network, the workload, namely the information processing and data storage, is undertaken by several nodes across the network. This way, network users do not have to rely on a remote server as is the case in a centralized network, which is the model currently in use today.

Before we take a dive into decentralized networks, let’s take a few steps back, understand the journey of the internet, and explore how the path to decentralized networks was paved.

Path to Decentralized Networks: A Brief History

In 1989, Tim Berners-Lee irreversibly changed the world when he introduced the concept of a “distributed hypertext system” which would eventually be shaped to become the World Wide Web and the first version of the internet viz. web 1.0 (a.ka. Syntactic Web)

Hence, the users had no option to communicate or interact with the content producers but only consume it. Some notable examples in this first stage of the internet include MySpace and LiveJournal.

The second stage of the internet evolution was web 2.0 (a.k.a Social Web), which offered users “read-write” access, hence allowing them to interact with the information, share the information, connect with other users, and create content.

Facebook, Instagram, Twitter, Skype, YouTube, and many other platforms were the strong catalysts in this second generation of the internet and made it possible to connect more than a billion users with each other while also empowering them with the benefit of creating content and not just consuming it.

However, these platforms are responsible for regulating a significant portion of all content posted online. According to Global Internet Phenomena Report, more than half (57%) of all traffic on the internet is attributable to a handful of companies; Google, Netflix, Facebook, Apple, Amazon, and Microsoft.

This, for many, is how the web has been centralized and taken under the control of a small number of entities, as a significant amount of content online goes through their servers. These corporations are not only providing applications and platforms through which users can interact with the web, but they are also holding sole authority on what gets published, the ability to impose censorship, and sole ownership of users’ digital footprints.

Due to the increasing market monopoly and too much data in the hands of a few, the third stage of the internet revolution viz. web 3.0 (aka semantic web) has made its debut to put users back in control of their data, activities, and digital assets through decentralized networks.

The decentralized network is a community-led reimagining of the web where users are offered read-write-execute access when interacting with the decentralized applications to empower them with greater data privacy while prohibiting data monetization by third parties and reinstating freedom of speech across the digital sphere.

Centralized vs Decentralized Networks: Key Differences

There are some core differences between centralized networks and decentralized networks, but before we explore them, it's important to have a fundamental understanding of the two first.

What Is a Centralized Network?

A centralized network is governed by a sole authority, which can be an individual or a corporation. This said authority is responsible for maintaining the network, providing the computational power to do so, regulating the users, and setting rules. The majority of the web, including platforms like YouTube, Twitter, and Facebook is centralized.

A centralized network is built around the main server which undertakes all data storage and running of all processes on the centralized network. There are also workstations within a centralized networks with less processing power that are connected to the main server.

Client servers (network users) connect to the main server through the workstations and submit their data requests for processing. The main servers typically have enormous amounts of computing power which is enough to manage a large number of users and intense data traffic.

What Are Decentralized Networks?

The main difference between a centralized network and a decentralized network is that the latter relies on the service of multiple servers rather than a single master server. In a centralized network, clients can’t act as servers as they require specific hardware and enough computing power to perform the processing.

In a decentralized network, any unit can act as both a client and server, meaning that the workload is distributed among all the network users. Computers today have significantly more computing power than before, and decentralized networks can harness this to render every involved unit a mini-central server, which then can interact with each other quickly and consistently.

A fully decentralized and distributed network, share data ownership and computational power evenly between the participating units. This way, the web can be hosted via a peer-to-peer network with information being distributed and stored all around the world, enabling nodes to communicate with each other without a governing entity.

FactorsCentralized NetworkDecentralized Network
Third-Party InvolvementInterference of the third party to facilitate communication between different nodes.No third-party involvement. Nodes interact with each other directly.
TransparencyLess transparency as the data is stored in a central location.Full transparency through distributed ledger technology (DLT)
SecurityVulnerable. The target is a central point that unlocks access to the whole system.Secure. The crashing of a single node has no effect on other nodes in the network.
ScalabilityEasy to scale by connecting more server units to the system.Difficult to scale as every node should have the capability to handle enhanced traffic.

Advantages of Decentralized Networks

Decentralized networks bring fresh solutions to problems that tightly woven centralized networks bring about. Decentralized network as such champion collaboration and freedom, while providing enhanced privacy, flexibility, and scalability.

Solving the Single-Point Failure Problem

One of its main implications in practice, decentralized networks help deter or completely eliminate single-point failure problems. Centralized networks depend on a main server/master node to process all information and store all user data.

Client nodes will not be able to send or request any data transaction, causing service interruption and a sense of unreliability for the users. This could be a particularly difficult problem for servers undertaking financial operations.

By distributing processing to several units in a network, decentralized network provide an almost fault-free experience. Should a processing node shut down, the workload will simply be carried out by other nodes in the decentralized network.

Greater Privacy

Data privacy has been a growing concern among internet users since corporations have increased their efforts in monetizing users’ personal data. Despite the introduced regulations that tackled issues, centralized networks still store a great amount of sensitive data in their servers — a problem decentralized and distributed networks can solve by disseminating the storage across several parties within a network, encrypted.

The fact that the data processing doesn’t occur through a single point but is distributed across several nodes also makes data flow harder to track, which subsequently reduces the risk of malicious attacks.

Fight Against Censorship

The concentration of authority in centralized networks, specifically within the context of content-led platforms like Twitter, has been hotly debated in the last few years. By nature, such networks are more prone to be abused for political gain, and for many, they have been utilized to silence dissent.

While regulatory activities are required to hunt down harmful content and hate speech, there are growing concerns about so-called Big Tech’s involvement in suppressing freedom of speech. The authorities of centralized networks, such as Meta, not only hold the power to take down certain types of content, but they can also tweak the algorithms to manage visibility with a little burden of accountability.

Decentralized networks relieve the problem of such gatekeeping by transferring the control to the users, who in turn may determine the validity of information within a network through certain voting mechanisms. This way accountability is not only restored but can also be shared.

Disadvantages of Decentralized Networks

Despite the crucial drawbacks, centralized networks with top-down hierarchy are proved to be efficient decentralized systems in terms of maintenance and management. These issues come across as major problems decentralized networks are trying to tackle along with implementation struggles.

Costly Maintenance

Since decentralized networks rely on more than one server, it costs significantly more to set up and maintain nodes as opposed to a centralized network should there be a need for patchwork or debugging. Specifically in distributed networks, a drastic change in the servers would mean updating every single node within a decentralized network requires remarkable coordination of network administrators who are potentially scattered around the globe.

Lack of Efficiency

Despite its issues, the top-down hierarchy by which centralized networks are governed is fairly effective, specifically in times of crisis. Decentralized network, on the other hand, lack key authority figures and may lack the speed and coordination required to tackle emergency problems, and take significantly longer to reach a collective decision.

Decentralization in Play: Blockchain

Blockchain technology is currently the biggest experiment testing the efficiency and sustainability of decentralized network. Since the establishment of the Ethereum network, blockchain-based solutions from decentralized applications to decentralized autonomous organizations and decentralized crypto trading, have been adopted by many individuals and corporations alike in varying degrees.

Solutions of this sort realize and examine the real-life applications of decentralized network models while exploring their limits and potential. Most importantly, blockchain has created an evergrowing community of developers, traders, and enthusiasts who constantly bring creative solutions and improvements to the technology.Will the Future be Decentralized?

It’s hard to say whether the future will be fully decentralized or not, as the models as such do not necessarily align and satisfy every kind of business requirement. But, at the same time, widespread adoption of decentralization and proportioned hybrid models are far from being a pipeline dream.

Will the Future be Decentralized?

It’s hard to say whether the future will be fully decentralized or not, as the models as such do not necessarily align and satisfy every kind of business requirement. But, at the same time, widespread adoption of decentralization and proportioned hybrid models are far from being a pipeline dream.

How does a decentralized network work?
What is a decentralized network in Cryptocurrency?
Is Ethereum decentralized?
Is a decentralized Internet possible?
What is the key difference between Centralized and Decentralized Networks?

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Idil Woodall

Idil Woodall

Idil is a writer with interests ranging from crypto and politics to fintech and media. She spent several years in publishing before becoming a full-time writer in the technology space, and learning the inner workings of an industry she loved ignited her interest in economics. As an English graduate, she cultivated valuable research and storytelling abilities that she now applies to make complex matters accessible and understandable to many. When she’s not writing, she can be found climbing or watching a movie.