Crypto Academy Season 3 Beginners' Course - Homework Post for Task 2: Blockchain, Decentralization, Block explorer

DEFINE DECENTRALIZATION. DESCRIBE THE ADVANTAGES AND DISADVANTAGES OF A DECENTRALIZED SYSTEM. IN WHAT AREAS OF LIFE CAN A DECENTRALIZED BLOCKCHAIN BE HELPFUL?

DEFINE DECENTRALIZATIONTo help one fully understand and appreciate what decentralization is, let's first talk about what happens in a centralized system. In a centralized system, there is a central point and that central point exercises all the powers and authority. The central point makes all the decisions and all the activities are linked to a central server. The entire system is controlled by an owner or organization.

However, in a decentralized system, there is no one owner or organization that controls the entire system, rather there is transfer of control and decision making from centralized body to a distributed network. What you have is a network of users connected to form a decentralized system. Each user connected under the system is autonomous, which means each user occupies a central position and exercises full power and control. You don't have a central server nor a third party.

Each user is capable of making decisions and running his day to day business as his users' data is under his control.

ADVANTAGES OF A DECENTRALIZED SYSTEMThere are a lot of advantages associated with a decentralized system and they include:

• There is high level of transparency. What is done in a decentralized system can be viewed by anyone who wishes.
• A decentralized system provides a trustless environment. Each user does not need to know or trust other users because each user has a copy of the same data. So, if a particular user's ledger is altered, it will be rejected by the majority users in the network.
• Decentralization reduces points of weakness since there is no downtime in the form of systemic failures, periodic outages or exhaustion of resources. You will notice that transactions are performed without any form of delay and of course, that makes it very efficient.
• Decentralization helps to optimize the distribution of resources so that many services promised are carried out with better performance.
• Decentralization improves data reconciliation. Companies from to time exchange data with their partners. By having a decentralized data store, every entity has access to a real time, shared view of the data.
• There is quick decision making since each user has the power to run his business and make his decisions.

DISADVANTAGES OF A DECENTRALIZED SYSTEM In a system where there are advantages, there is bound to be disadvantages too and they include:

• There is misuse of funds. Since all the users connected to the decentralized network are independent and can perform financial transaction at anytime to anyone, some body can use it to launder money.
• Another set back is that to launch and maintain a decentralized network requires much finances. The manpower required also need to acquire the right knowledge which also comes at a high cost.
• It is also important to note that the cryptocurrency used in decentralized system shows volatile behavior where the prices fluctuate a lot.
• Decentralization can lead to conflict if not well maintained in an organizational structure.
• There could be misuse of authority.

IN WHAT AREAS OF LIFE CAN A DECENTRALIZED BLOCKCHAIN BE HELPFUL?There are many areas of life that a decentralized blockchain can be useful. They include:

PAYMENT SYSTEM
It is obvious that all the currencies in the world that are operated by banks worked using centralized servers, which means that the banks have full control over all the operations. There is possibility that your funds could be hacked if someone gets hold of your bank credentials. Also if there is disruption of service due to technical issues or outages, you cannot access your funds when you need it. Using a decentralized system eliminates all these. There is no single point of failure, transactions are done quickly, since there is no third party and with more security.

GOVERNMENT ELECTIONS FOR VOTING
There has always been allegations of electoral rigging and fraud after elections in many countries. Using decentralized blockchain can help to fix this because it will bring about a transparent voting system where the voters can easily verify the votes. This also means, there would not be any manipulation of figures, and results can be announced as soon as voting is finished.

ENERGY DISTRIBUTION
In most places, generating and distribution of energy lies in the hand of centralized entities who decide where they want to provide their services and at what price. Using a decentralized power grid can help to cut off any third party and at the same time provide equal opportunity to everyone who want to buy energy or generate energy and sell it to others. The decentralized energy system can work with the decentralized payment system.

FOOD SUPPLY CHAIN
Companies can use decentralized blockchain to improve their food supply chain and this will bring about efficiency and transparency to food supply chains as all actions and information are traceable.

HEALTH SECTOR
Using the decentralized system in the health sector could help to store a patient's medical history so that if there is need to share it with other doctors around the world, it would be easy for them to access it and make their own input as required. Also, at anytime there is need to make reference to it, anyone can access or retrieve it.

INSURANCE SECTOR
Decentralized blockchain can be used in the area of insurance. Insurance company can use it to verify insurance coverage in real time and also use it to facilitate claims and make the processing faster and more efficient.

CONCLUSION
It is important to note that using decentralized blockchain in different areas of life will help improve the sector as well as its efficiency.

I am grateful to professor @yousafharoonkhan