Difference Between Centralized and Decentralized Blockchain

Difference Between Centralized and Decentralized Blockchain

Over the years Blockchain has become popular among investors due to it being an incorruptible ledger. When people talk about Blockchain, they refer to decentralized or public Blockchains like Bitcoin and other that anyone can access and join. But, do you know Blockchain technology isn’t limited to being decentralized, there are certain centralized a.k.a. private Blockchains that are very useful and prove beneficial for organizations when compared with public Blockchains.

Organizations that want to use power of decentralized ledger to enhance and improve current functions use private Blockchains. But why do they do so?

Today, in this article we will try to answer this question. So, let’s look into an in-depth comparison of public and private Blockchains.

What is Centralized and Decentralized Blockchain?

By definition, both Blockchains are opposite of each other.

Centralization is, “the concentration of control of an activity or organization under a single authority.” This means in centralized platforms there’s a single point of contact a.k.a a private hub.

Decentralized is, “the movement of departments of a large organization away from a single administrative center to other locations.”  This means there is no single point of contact all work on their own and the way they want a.k.a peer-to-peer (P2P) network.

Two most common examples of both centralized and decentralized platforms are:

Centralized

  • Facebook and Google

Decentralized

  • LimeWire
  • BitTorrent

Comparison Between Centralized and Decentralized Blockchains

From technical point of view, both the Blockchains, centralized and decentralized are similar, as they work on distributed peer to peer to network. This means every node is individually responsible to secure and store shared ledger. Both Blockchains use either proof-of-work or proof-of-stake mechanism to create a single ledger and they need to give upper and lower limits on the security and efficiency of the network.

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Difference Between Centralized and Decentralized Blockchains

The biggest difference between the two Blockchains is of pool of nodes that may take part in the network, and may make changes as an admin to the network. To understand, let’s take example of Bitcoin the largest public Blockchain that has no restriction when it comes to accessing the ledger and sharing computer power to perform its proof of work algorithm. Whereas, IBM’s HyperLedger Fabric Blockchain is more customizable as the organization that is using it has control over each aspect and can take active participation in the Blockchain. This means private Blockchains are restrictive in terms of making modifications as Blockchain is used for internal records and only those who have the permission can make alterations to private Blockchains.

Merits of Decentralized Blockchains

Decentralized Blockchains use large amount of mining resources, which makes them highly secure. This means if an attacker needs to hack a Blockchain he needs to spend a lot to buy huge amount of resources which is infeasible. Another advantage of decentralized Blockchain is that anyone can use it to send funds across the globe without having an intermediary body.

Demerits of Decentralized Blockchains

As decentralized Blockchains are public they are prone to analysis and may end up revealing information about the participants making it less private. Besides, huge number of miners compete with one another to verify a transaction due to which a major amount of computing power is wasted. The power wasted during this process is equal to the electricity required to power a house for eight days.  Therefore, we can say public Blockchains are not environment friendly and there is always a risk of scrutiny.

Merits of Centralized Blockchains

Centralized Blockchains offer more customization and control to the organization as they can decide who gets to take part in it. This means much resources aren’t required to secure the network and this makes private ledgers more environment friendly. Not only this, the organization can decide hardware that the network runs on, this means private Blockchains can be used by corporations to store confidential information between the nodes they trust. Thus, allowing organizations to use unbelievable power of Blockchain to store confidential information without making it public.

Demerits of Centralized Blockchains

Not much computing power is required for centralized Blockchains this makes them less secure when compared with the security of decentralized platforms. To hack a centralized platform what a hacker needs is a plan that will help him collect all the resourced and hack the network.  Besides, since centralized Blockchains are private there is no public viewing, therefore, it become difficult to verify the authenticity of a transaction. Also, private ledgers are of less use as only the people from the organization can use them and there is no public access.

Hope by now you have understood basic difference between both the Blockchains. A decentralized platform depends on host of computers due to which Blockchain technology works on P2P network. While centralized platform is private and they do not require as much power as required by decentralized Blockchain.

Centralized platforms have their time and place, and everyone can watch the transactions that take place on them while in decentralized no one can see the transactions as they are private therefore authentication of a transaction cannot be trusted.

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Preeti is a technical writer with Systweak. She covers new technology and troubleshooting. She loves gadgets and is an avid reader. In her free time, she likes to travel and explore new places solo.

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