As opposed to centralization, decentralization in cryptocurrency trade is not controlled by any third intermediary; it avoids central forms of control and allows market players to be autonomous during their activities. Unlike centralization, decentralization uses different network architecture of blockchain protocols. Previously, all internet activities around the world were largely under the control of open protocols and servers operating from a central location. In the current century, people’s preferences are swiftly moving towards decentralized systems in order for their internet activities to be private. Hence, users themselves engage one on one with the other participants.
Within the first years of inception of the Internet (1980 to early 2000s), internet activities were characterized by open protocols; but internet users considered them not so private. This lead to the generation of another system by the large market players of that time; Google, Apple, Facebook and Amazon, that are centralized systems, are well preferred by the open protocols. However, they are not so private. Thus, the decentralized system is being implemented. As a result, it has attracted internet users, software developers, startup company owners and third parties.
Cryptocurrency & Blockchain (Decentralization)
In the crypto-network, investors and developers are keen to push for decentralized platforms of exchange; this way, no intermediary conducts the trade of the coins and tokens. So, this allows for the market players and the crypto-community to make independent decisions and run themselves. Therefore, they benefit from all the pros of being decentralized. Such are, the user’s privacy, the data management and the control. Furthermore, government interference is eliminated while at the same time, users can recognize some shortcomings of the network.
With the intention of making decentralized systems lucrative to market players and all participants, crypto-networks often use blockchain mechanisms which maintain the privacy of users and allow for developers, miners and traders to be autonomous. Also, the crypto-network incentivizes them by giving them coins or tokens which they can then trade or store to make a profit.
This section will explain the key pros of the decentralized systems and a few of its cons.
1. Openness and transparency
With a decentralized system, all the participants including traders, 3rd-party developers, creators, and businesses interact one on one with each other. There are no medium intermediaries to hold funds in the course of trade. Therefore, it increases transparency and consequently the trust levels between participants themselves.
2. Increased security
With the very high integration and interaction of the participants, the possibility of an attack by a system hacker is very low; the hacker has to go through all the participants’ systems to hack a single crypto-network, making the attempt harder than before.
In this case, all the market participants and members of the crypto-community make own decisions in agreement with each other, as opposed to the centralized systems where everyone was controlled by one party and some decisions would be made even if they were not necessarily good for everyone.
4. Speed and efficiency
A market participant trading directly with each other in decentralized platforms is faster and more efficient. Here, no intermediary processes and protocols exist which would have otherwise slowed down the trading process.
1. Complex and elaborate
In its functionality, decentralized systems are a hard nut to crack and therefore require a lot of effort to understand and eventually use them.
2. Not fully developed
As we speak, decentralization is a developing technology, which is still half-baked but with a lot of potentials, as opposed to well-developed centralized systems.
As a conclusion, it is important to note that decentralized systems are an arising technology. In fact, they are particularly capturing the attention of most players thanks to their non-exclusivity feature, that is especially significant to developers and startup businesses.