What is a Decentralized Network?

It’s been almost 30 years since the dawn of the first public internet service, but network technology continues to evolve and change the world. It started as centralized computer systems helping to speed up work in the office, but cloud computing growth over the past decade has shaken things up more.

Networks are becoming even more decentralized and distributed. Blockchain and cryptocurrency technology aims to take decentralization one step further. Here’s how decentralized networks operate and what investors need to know about them.

A decentralized network distributes information processing across multiple machines. Each computing device acts as a separate processor that interacts with all the other devices in the network. This contrasts with a centralized network, which is a single computer that handles all computing for a network.

Decentralized networks explained

Computing devices today have significant computing power. Decentralized networks take advantage of this computing capability and pair it with networking technology that can help devices quickly interact with each other and coordinate activity. Some decentralized networks may still rely on a central computing infrastructure for things like data storage. However, a fully distributed and decentralized network has no singular computing unit controlling any process.

Blockchain technology and the cryptocurrencies built using them (such as the Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) networks) are distributed and decentralized computing systems. Blockchain is a digital ledger of past transactions and information that is distributed among miners — computers that manage the blockchain, process new blocks of data, and add those blocks to the chain. Since the blockchain itself contains all the information necessary for the governance of the network, no centralized server or computing unit is needed to operate it.