Centralized vs. Decentralized Digital Networks: Understanding The Differences – Blockchain Council

The terms centralized and decentralized have been widely used. You will find them in articles, press releases, LinkedIn posts, and everywhere. But when it comes to digital networks, what do they mean? And which one is better? In short, a centralized digital network is a network in which collective data is processed and stored by a single node.

Conversely, a decentralized digital network is a network in which multiple nodes store and process data.

There are advantages and disadvantages to centralized and decentralized networks, and choosing one will largely depend on your specific requirements. This blog will deliver the crucial differences between centralized and decentralized digital networks. 

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What are centralized networks?

A centralized network is one in which all the nodes are connected to a single point. This single point is known as the central node, which controls all the communications within the network.

This type of network is very efficient regarding communication because all the data travels through the central node. This makes it easy to keep track of everything that’s going on and helps ensure that all the nodes are working together as a team.

But there are some drawbacks to using centralized networks. For one, if the central node fails, the whole network fails. And secondly, if someone manages to hack into the central node, they can access all the data passing through it.

How does a centralized network work?

Imagine you’re in a room with a lot of people, and in the middle of the room is a speaker. This speaker is the sole connection node to all the other people in the room and the only one they are meant to hear. That’s basically how a centralized network works. All the data is sent through the central server, and it’s the only way users can access information. This type of network is great for businesses because it allows them to control access to information and keep things organized and streamlined.

But, it also has some drawbacks. If the central server goes down, all the users are off the network. And if there’s a data breach, all of the user’s information is exposed. Ownership, in this case, is not subject to the individuals as authority and trust rely upon the central network authority.

What are decentralized networks?

So what are decentralized networks? To cut a long story short, they’re networks where no single point of control exists.

That’s in contrast to centralized networks, where a single entity (like Facebook, for example) controls the entire network. With decentralized networks, no central authority decides what content is allowed or who can join the network.

This is an important distinction because users on decentralized networks control their data. They’re not at the mercy of a central authority that can choose to delete their account or restrict their access to certain content or functioning.

How does a decentralized network work?

Imagine a world where the internet was completely decentralized. How would that work? Let’s understand it better with an example.

Let’s say you wanted to watch a movie. In a decentralized network, you would go to a website like any Torrent link per se and download the movie (we don’t promote torrent downloading). But instead of downloading it from one central server, you would be downloading it from several different servers worldwide. This property brings resilient nature to decentralized networks. If one server goes down, the movie is still available from another.

Decentralized networks are also censorship-proof. Governments can’t block access to specific websites because they cannot target one central server. This makes decentralized networks ideal for countries where the government tries to censor the internet.

Centralized Networks Vs Decentralized Networks

Basic differences 

Let’s start with the basics. 

• The involvement of third parties

In a particular centralized network, a third party or a specific mediator is required to facilitate communication among the different nodes effectively. There is no need to have intermediaries  in a significant decentralized  network. Every individualistic node can communicate directly with other nodes on the blockchain network. 

• Transparency

The centralized networks are comparatively less transparent as all information and data are effectively stored in one Central location. Decentralization significantly increases transparency through the DLT (distributed ledger technology).

• Security

Traditional Centralized networks have more vulnerability to attacks as hackers can steal information and data by attacking the central storage of the system. Decentralized networks offer more security because even if one particular node is compromised, the other nodes are unaffected. 

• Scalability

Conventional Centralized networks are relatively more uncomplicated to scale by effectively adding extra servers in the system. This is considered more challenging to pull off with decentralized networks as each of the respective nodes is required to be adequate for handling additional traffic. 

• Exchange fees

Centralized networks tend to have high fees (consider financial service providers and banks) as more mediators are involved in this process. Centralized networks do not have these factors, resulting in lower fees. 

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Key Differences

So, what’s the key difference between centralized and decentralized digital networks? In brief, it comes down to control.

• With a centralized network, all the control is vested in a single point of authority. This can be great for security and maintaining consistency across the network. But it also means that any decision the central authority makes is final, and there’s no room for debate or dissent.

• A decentralized network, on the other hand, distributes control among all the nodes in the network. This can lead to chaos and inconsistency, but it also means more opportunities for collaboration and creativity. Plus, the others can keep the network running if one node goes down.

Advantages of centralized and decentralized networks

Centralized networks

• With a centralized network, all the data is stored in one place. 

• It is easy to control and manage, and it’s great for security purposes. 

• Less probability of network downtime due to a single central server functioning mechanism.

Decentralized networks

• A decentralized network, on the other hand, is made up of multiple nodes that are all interconnected. 

• This makes it more difficult to control and manage, but it provides greater redundancy and fault tolerance. 

• Because there is no one point of failure, a decentralized network is more resistant to attacks.

Disadvantages of centralized and decentralized networks

Centralized networks

• The biggest issue is that all your data is stored in one place, which makes it a prime target for hackers. If someone gets into the centralized server, they can access all your data, including your passwords and credit card information.

• Another downside is that centralized networks are slower and less reliable than decentralized networks. This is because all the traffic has to go through the central server, which can get overloaded and cause connections to drop.

Decentralized networks 

• Decentralized networks, on the other hand, have multiple servers that store data, so if one server goes down, the network still works. 

• Hectic to solve or detect network issues as there’s no central point of failure.

• Decentralized systems have more set-up and management costs since they require systems with the capabilities of automated functioning and communication. 

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What to choose: Centralized or decentralized digital networks?

There are a few key differences between centralized and decentralized digital networks. Centralized networks are owned and operated by a single entity, while decentralized networks are spread out and owned by multiple entities. Decentralized networks are also more democratic, as decisions are made by consensus instead of by a single authority. Centralized networks are faster and more efficient than decentralized networks, but they are also more vulnerable to attack. Decentralized networks are slower but more secure, as they have comparatively fewer chances of getting compromised. What matters most, in the end, is whether you still place your trust in centralized authorities or if you prefer to assume control and accountability for your data yourself.

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