What is Decentralization in Blockchain and how does it work?

Blockchain Decentralization

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Categories: Cryptocurrency

What is Decentralization in Blockchain and how does it work?

Imagine acompany has a server farm with 10,000 computers that are used to maintain a database containing all of its client's account information. This company has a warehouse building with all these computers under one roof and full control of each of these computers and all the information contained in them. However, it provides a single point of failure.

What if the power goes out at that place? What if its internet connection is disconnected? What if it burns to the ground? What if a bad actor wipes everything out with a single keystroke? In any case, the data gets lost or corrupted. What a blockchain does is allow the data held in that database to be spread across multiple network nodes in different locations.

This not only creates redundancy, but also preserves the fidelity of the data stored in it - if someone tries to change a record on one instance of the database, the other nodes will not be changed and thus a bad actor. Doing so can be prevented. If one user tampers with bitcoin's transaction record, all other nodes will cross-reference each other and easily point to the node with the wrong information.

This system helps in establishing a precise and transparent sequence of events. In this way, no node within the network can change the information held within it. Because of this, information and history (such as transactions of a cryptocurrency) are immutable. Such a record can be a list of transactions (as with cryptocurrency), but it is also possible for a blockchain to hold various other information such as legal contracts, state identities, or a company's product catalog.

Blockchains are distributed ledgers. They're run and maintained by a network of computers that collectively contain the same data. An open network like this allows anyone to access and modify the data on the blockchain, but only after verifying all the transactions on it.

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