Decentralization: The underlying technology for Blockchain

Hello folks! Hope you are digitizing well. We have seen the Internet blossom from a simple chat room to the current mammoth system it represents. This Internet can be comprehended as a giant repository of data, trillion and trillion bytes of them. This data as we can see is in the form of videos, written articles, audios, games and whatever you can possibly think of. Now if we just think in introspection, we notice, that all this data is produced by ‘Us’ the people using the Internet on a daily basis. For instance Facebook processes 2.5 billion pieces of content and 500+ terabytes of data each day. Logically if we are the producers, then we should be the owners. But paradoxically it doesn’t work that way. Few of the Big players of this system like the Facebook, Google, Amazon are the owners of these data. They have been monetizing this ocean of data to generate revenues for themselves. I am not saying that they are doing something wrong in this. They were the pioneers and the facilitators of this system.

This is an example of a Centralized system in which, Central Authorities (like Facebook, Google, Amazon) hold the authority for the data. Another example of a Centralized system is the financial transactions’ system that we follow normally using the currencies such as Dollar, Pound, INR, etc. Whenever we make a transaction to send money to a friend (for example), we are dependent on a Central Authority (the Bank) for approving and enabling the transaction to the friend. See below the figure depicts both the Centralized systems that we just discussed.

Contrary to this let us try and imagine a system made up of a number of components or nodes and each of these nodes are equally as power or have as much authority on the system as any other node. For example, see the picture below. The complete system is made up of a number of blocks holding the same authority and have established peer to peer sharing of data, based on a defined protocol and consensus.

A Decentralized System made up of different blocks with each block sharing the same authority over the system. No single block or few blocks have a Central Authority.

Now what do you think will happen to the system if it is broken into two parts as shown below?

The system broken into two parts

Do you think these two parts of the system will be up and running independent of each other? The answer is ‘Yes’. See the figure below.

As said earlier the components of a Decentralized system are independent of each other and there is no Central authority which defines the system. This concept of Decentralization of power and control is the underlying technology for ‘Blockchain’. The concept was first introduced by the introduction of the Bitcoin, which is a currency used for direct peer to peer transaction. A Central authority like the Bank is not needed here for enabling the transaction. For more clarity on the Cryptocurrencies like Bitcoin, please refer to the article Cryptocurrency: Online Payments Redefined.

Decentralization is the next major disruption and can be seen as the Web 3.0. It is slowly transitioning or at least creating a parallel paradigm for the incumbent Internet and the financial systems. This new web, namely the Blockchain will have the following benefits:

  1. High Resilience: A Centralized System is governed by a Central Server and any attack on this, deliberate or unintentional will run the system into failure. Contrary to this in a Decentralized system all the nodes of the system are independent. There is no one Central Server on which the whole system relies for functioning.
  2. Very less prone to cyber attacks: The technology that tenants the Blockchain enables for creation of ledgers in each of the nodes (computer system) of the chain. For each entry (like a money transaction) in the chain, the data related to the entry is logged into each ledger using cryptography for security. Hence, rather than logging in all the data in a Central ledger, the data is stored using cryptography in different ledgers of respective nodes. This helps in:
    • Negligible risks of cyberattacks: Since data is maintained in multiple nodes, it becomes nearly impossible to hack all the nodes in the network.
    • Data cannot be manipulated: One needs to alter all the entries made in all the ledgers for tampering or manipulating the data, which is not a practical thing even with the highest of the technical knowledge and computing powers.

Hence we see that we are combating some of the limitations of Centralized systems by introducing Decentralized systems. The world is slowly witnessing a paradigm shift and is calling us to contribute in one way or another.

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