A decentralization is a word that we just recently heard as cryptocurrency emerged. This has been used in finance and technology. However, what do we really know about decentralization -especially in the field of digital assets?
Shifting power from a single/group of entities to the masses is the very description of the word “decentralization”. Thus, it is a massive change in control as networks of individuals are now able to get involved. Decentralization is one of the strengths of cryptocurrency that has been praised by many.
An escape from a central control avoiding manipulation. Come to think of how the bank works. As you move your funds, you are reliant on the bank’s ability to process the transaction you requested. They’ll hold records, approve transfers, and can even interrupt or delay your transaction if they want. They are called the middle man of the transaction, and they have central control over the process.
Here, comes the beauty of cryptocurrency. Transactions are no longer controlled by a single entity, perhaps it is through a consensus of the network of individuals participating to validate the transactions. The authority to process the transaction is no longer controlled by the single entity but by the decentralized network of computers around the world. No one can interfere easily, control your funds, and or shutting down. Instead of trusting a single institution, you are now trusting the system itself. This system is powered by blockchain technology-a more secure and transparent.
The advantages of cryptocurrency where structured as decentralized includes the following.
✅Failure on Single Point Can’t Affect the Network Drastically
If your financial institution, like a bank, will collapse or encounter any issue. Your funds will likely not be accessible, you can’t send or receive funds. However, with new structure in the form of digital assets (cryptocurrencies) in a decentralized system, there will be no single company or server that can interfere. It is because the network is running under thousands of computers making it super resilient.
✅Accessibility and Freedom
In traditional banking, not everyone has access to it. Other countries have more strict financial controls, while some don't even have enough banking infrastructure. However, with cryptocurrency, as long as you have internet access you can participate in a transaction globally without the need to have a bank account.
✅Secure and Transparent
With your bank, your transactions and other financial records are kept on their system where it’s only between you as the customer and them can be able to trace these transactions. Most of the cases, privileges are clearly favorable to them. In crypto, everything is recorded on a blockchain where anyone can check. There will be no hidden fees, no shady transactions, and are less likely to suffer fraud.
✅It’s You Who Have Primary Control Over Your Money
Most of us have encountered a transaction that is blocked by our bank for “security reasons”, even when we are aware that the transaction is safe. Because of the bank’s lesser ability to determine if the transaction is secured or potential fraud. With crypto, since it is decentralized, the verification using the blockchain will be able to authenticate the transaction with ease. Thus, you have full control of your funds. No one can freeze your account or tell you how you’ll manage your own money.
While cryptocurrencies decentralized structure offers more benefits compared with traditional banks. It is also important that we have to consider that it is always paired with challenges.
😥Issues with Scalability
Since the structure of the decentralized networks rely on multiple computers to authenticate a transaction, it is sometimes slower and costly compared to centralized payment systems like Visa, Mastercard, Paypal, etc.
As the controls are shifted more over to us (network users of cryptocurrency), the responsibilities are more of focus to us as well. Which simply means, when you are the one who has the full control of your funds, you must also ensure to protect them. Remember that when you lose access to your crypto wallet, there’s no “forgot password” menu. There will be no customer support to help you recover your funds.
😥Uncertainty with Regulations
The government and financial institutions of every country are currently still researching on how to effectively regulate cryptocurrencies. Others see this as a threat, while others are embracing it. The regulations can change and the uncertainty makes it more risky to investors and business institutions.
The decentralization of the cryptocurrency empowers the masses on its finances, security, and accessibility. However, it is important to note that anything good is accompanied with challenges.
