Contemporary technology indeed permits decentralization, it also permits centralization. It depends on how you use technology.Noam Chomsky

We have seen about bitcoin, Blockchain under the rule of decentralization but what does it mean? Well, I would prefer just go through the brief description in the article below to know the comparison between two broad categories on how the finance and banking system is running and also how the future would bring a twist.

What does centralized system mean would be the first question in many minds as may the technology we are in use is known to us but we are unfamiliar with the actual name it has. Today the system that your banks follow is known as a centralized system or if I say the system, we prefer for our finance handling is centralized then it would be more understandable. The system that we are using in our day to day life for socializing, education, meeting etc. These all are controlled by a centralized authority which owns it or maybe I can say has developed it and we are using it for our day to day activities. If we consider the payment portal, we make use then there is a third-party siting that verifies every step that is been made by us and even they are responsible to permit us for doing certain things.

We can simply understand using the example of Gmail that we use to send lot for mails in everyday life before we start using to carry out our work we make an account in that portal in which details such as our name, country, address, the phone is asked and then permitted the access to join. Then every mail that we send and received is been stored on their server and any details can be accessed by the google authority at any time. This brings the idea that we depend on google for the transfer of data from one place to another while we trust google for keeping our data safe. But as per various publications and studies, the data that we share to these authorities not only google but yahoo, Facebook and many more is been selling our data to many advertisement companies and gain the side profit out of it. There is not yet a proper proof that could verify the points made but still believe a third party for keeping our data safe is a risk. Also, if these authorities are hacked then all our data would be stolen and we would not be able to do anything regarding that thing. 

Many of us are well aware of the 2015 incident in which yahoo experienced the biggest hack from all the time. In that incident, the hackers got access to the central server and could get access to all the data in the private mails of a large group of people using yahoo worldwide. The main reason for this was none other than the use of central systems that if hacked than the entire network is at risk. The centralized system has some issues that should be known to us that are the third party that is involved in managing the authority should be trusted by us that they would keep our data safe. The authority has full access to our data and we have to permit it to happen. The server is always at the boundary of risk thus every anytime the data can be sold to random companies thus be careful in sharing the type of data you exchange through these centralized systems. These issues are not just related to Yahoo, but almost every single system that you ever use.

What is a decentralized system? It can be said as opposite of centralized system for a starting. The decentralized system came into existence with a new era of technology known as blockchain that is fully based on a decentralized system for its working and establishment. The first decentralization was made to work in the blockchain itself. The bitcoin was the first blockchain that was invented in the year 2009 as when somebody sends a bitcoin to another one then there is no participation of central authority here and the third party is no longer consider here. There is no restriction on people that who could be the part of this bitcoin system but is open to all of us and each device get connected to the system is termed as a node. there a million of nodes that connected to run this network each one has equal authority and each one is responsible for its data handling also for the access.

The network here is been managed in a group of people and the nodes thus if the hacker wants to access the platform then need to take control of every node out there which is impossible. This is for sure now that blockchain is the most secure way to send and receive funds in the form of bitcoin. In today’s scenario blockchain is been used in almost every industry and banking industries doesn’t accept it in first but now slowly it is also finding it very effective and safe in use.

The need for giving our identification in the blockchain is not needed thus no personnel details is shared. The public and private keys are used in blockchain and your identity remains a secret. The private key is a type of password that is used by you to access your fund and the public key that everyone sees to send you to fund thus here the private key must be preserved safely without letting it known to anyone.

If we try to compare both the system in term of payment sector then we would come to know the actual difference. so, let us see. All the banks worldwide are operated based on a central system that controls everything. This also gives lights on the point that this so-called central system has even eye on our financial activities. They know how much we are earning, how much we spend when do we spend, what on ewe spent means everything no details are hidden from them. Also, in internet banking, they know the password we keep which worst. If in case this centralized system fails them, we would be in great trouble. Here if we talk about the decentralized system then almost every issue is resolved. The sending and receiving of cryptocurrencies don’t require the permission of any so-called third party as here peer to peer network is taken into consideration.

The third party even charge some sort of fees but here in the decentralized system no extra fees are consumed and if taken then are comparably less. Blockchain network doesn’t have any border defined thus international payment is no longer a problem which is a headache in a centralized system. The funds are much more secure in this network. It can also be said as a transparent system where nothing is been hidden from the user. The user plays the role of the client and even the boss. The system is the engagement of many networks the work done here is quick. No central failure doesn’t exist in this technology.


The decentralized system is much more convenient and effective technology than a centralized system that we are using nowadays. the change would surely safeguard our confidential information. There is a large portion who had already started using this technology its now our turn to accept the same.

About the Author

BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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