Methods of Decentralization in Blockchain

In this Blockchain tutorial, we are going to learn about the Methods of Decentralization in Blockchain. Here we will discuss how decentralization can be achieved. Here is the list of topics that we will cover.

  • Methods of decentralization in Blockchain
  • Routes to decentralization in Blockchain

Check out, Blockchain Architecture

Methods of Decentralization

In this section, we will discuss some methods to accomplish decentralization. So, primarily, there are 2 methods to reach decentralization. And we will try to explain these methods in detail in the section below.

Disintermediation

In a nutshell, disintermediation is a process of removing the intermediaries or middlemen from a process. A process can be a transaction, supply chain, decision-making, etc.

This term is mostly used in the finance sector where it includes the removal of banks, brokers, or other third parties from the transaction or investment process. Eventually allowing individuals to transact or invest directly.

Disintermediation using Blockchain

Let’s understand this topic with the help of an example. Now, suppose, we want to transfer some funds to our friend in some other country. In such cases, we will use our bank to transfer the funds.

Now, the bank will charge some fees and transfer that fund. Also, the bank keeps an up-to-date central database that confirms that we sent the money.

Methods of Decentralization
Methods of Decentralization in Blockchain

Now, as an alternative, we can use blockchain technology to send the funds straight to our friends. And for this just need the blockchain address of the friend.

Also, it will result in less transaction cost and faster delivery. So, in this way, disintermediation eliminates the need for an intermediary, and decentralization is achieved.

Moreover, this model can be applied not only to finance but to a wide range of other areas, including health, law, and government.

Also, read, Digital Signature in Blockchain

Contest based decentralization

In this approach, various service providers compete against one another to be elected by the system as a service provider. Also, this method does not help to achieve full decentralization. Still, it helps to achieve a specific degree of decentralization.

This method ensures that a middleman or service provider does not have control over the service. In the perspective of distributed ledger technology, a system is developed where smart contracts are utilized.

Now, the role of a smart contract is to select a certain external data source from a wide number of options based on some criteria.

As a result, a competitive atmosphere is created between various service providers, with each competing to become the preferred data provider.

Read Types Of Blockchain

Routes to decentralization in Blockchain

Now, in this section, we will discuss how we can decentralize any existing system. For this implementation, we will take a look at various ways to reach decentralization.

Over the years, many initiatives have sprung up in response to the introduction of blockchain technology, especially in the United States of America. And the goal is to achieve decentralization through this new technology.

Now, Ethereum is the most popular blockchain which offers a variety of tools for building decentralized applications.

Further, let’s discuss how we can decentralize an existing system.

Read Decentralized Applications in Blockchain – DApps

How to decentralize

In the book Bitcoin and Cryptocurrency Technologies, they provide a methodology for evaluating the decentralization requirements of a wide range of situations in the context of blockchain technology.

And this methodology consists of 4 main questions whose answer helps to determine how a system should be decentralized. The questions are as follows.

  1. What is being decentralized?
  2. What level of decentralization is required?
  3. What blockchain is used?
  4. What security mechanism is used?

The first question is used to classify the existing system that we want to decentralize. For example, banking system, trading system, etc.

The second question is used to classify the level of decentralization that we want in our system. We have discussed different levels and types of decentralization in the “Decentralization in Blockchain” article.

The third question has a very important role in this whole framework. And here developers need to select a specific blockchain that satisfies the needs of the decentralized application. For example, Bitcoin, Ethereum, or any other.

In the end, a major concern that must be addressed is how a decentralized system’s security would be ensured. For example, the security method could be based on atomicity, where the transaction is either implements completely or not at all.

How to decentralize – Example

In the above section, we have discussed one framework which helps to evaluate the decentralization requirements of a system. Now, let discuss the example related to the framework discussed.

So, here are the answers to the questions that are there in the framework.

  1. What is being decentralized? – System of Money Transfer
  2. What level of decentralization is required? – Disintermediation
  3. What blockchain is used? – Bitcoin
  4. What security mechanism is used? – Atomicity

The results demonstrate that removing the intermediaries can decentralize the money transfer mechanism. This will be implemented on the Bitcoin blockchain, and that atomicity will give a security guarantee.

Here atomicity ensures that transactions either complete successfully or do not complete at all.

Moreover, this methodology can also be applied to any other system that has to be assessed for decentralization. The answers to these four easy questions will help you figure out how to decentralize any system.

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So, in this tutorial, we have learned about the Methods of Decentralization in Blockchain. And we have also discussed the following topics.

  • Methods of decentralization in Blockchain
  • Routes to decentralization in Blockchain