What are the benefits of blockchain decentralization

Blockchain: The Advantage of Decentralized Systems

Leonard Dorlöchter

What are the advantages of decentralized systems over centralized systems and how we can use them.

EnlargeBlockchain: The technology offers many more uses than just generating cryptocurrencies
© Fotolia / Weissblick

We don't think about certain things. About how exactly the Internet works or how the key interest rate of the European Central Bank is calculated. Both have an immense influence on our lives.

Another example that we don't really give enough thought to is the wobbly legs on which the digital world stands. Legs that are unnecessarily slow and inefficient. The legs are symbolic of the systems of our digital world, which instead of connectivity and collaboration created monopolies. Most dangerous, however, is their susceptibility to manipulation, hacks and fraud.

All of this applies to the majority of systems, including the ones you are likely to be using right now. The reason for this is that the traditional systems that we have become used to are based on centralized databases and they have many disadvantages.

Conventional centralized databases do not offer a sufficiently neutral way of being managed and operated by several actors at the same time. This leads to fragmentation and leads to data silos and interoperability problems.

Due to their centralized structure, they also pose security risks by providing selective targets for cyber attacks and areas for incorrect handling. Above all, critical security and compliance technology in organizations and companies, but also with private users, is exposed to this risk. This includes in particular access controls - the control and management of physical access points such as doors and vehicles as well as digital access points for devices and directories.

Centralized security and access systems are particularly susceptible to manipulation through "back doors", thanks to which the usual approval processes can be circumvented. These are the classic hacks, after which the attackers can make changes and unauthorized actors can be granted access. To this day, such access systems are based on individually created so-called island solutions. The result is a fragmented security architecture.

In addition to the security risks inherent in the system, there is also the human factor. The increasing number of security systems increases the risk of human error due to incorrect handling, for example forgotten steps to log in or incorrectly carried out updates or administration of the structures. That costs time and money.

To solve the fragmentation, each system must be seamlessly integrated into the other, i.e. it must be interoperable. That's easier said than done. The reasons lie in the nature of the systems. Because every system provider has a financial incentive to sell his systems as often as possible and to create a monopoly.

The problem is exacerbated by data protection laws such as the GDPR. Possibilities of cross-system access control are prevented by their arrangements, because sharing the access control always goes hand in hand with the sharing of data, the deletion of which on several centralized systems represents a major challenge. The GDPR also requires companies to delete valuable data that could otherwise be used for in-depth analysis.

Problems with fragmentation that result from centralization are not just related to access control. These are problems that occur more and more regularly in a world in which data is exchanged and created at an ever faster rate. Nowadays fragmentation always occurs when users have to use multiple services and products from more than one company to cover their needs in one area.

However, there is an alternative that overcomes the aforementioned problems with centralized systems:

Decentralized systems

They do not provide single points of attack and solve fragmentation and interoperability problems by allowing everyone involved to manage and operate the system. At the same time, the integrity of the system is guaranteed by the fact that all processes can be checked in a transparent manner.

The main advantage of decentralized systems is the control and consensus mechanism. This enables everyone involved to operate the system under fair conditions without it being controlled and managed by a higher-level unit or organization alone. The best example of a technology that makes this possible is Distributed Ledger Technology (DLT).

Probably the best-known example of DLT is blockchain technology. Alternatives are DAG technology (DAG stands for Directed Acyclic Graph) and hybrids such as DAGchain, which combines blockchain and DAG technology.

The blockchain

Let's use blockchain as an example. A blockchain is a decentralized database that is shared by computers over a distributed network. Once a record has been added to the chain, it is impossible to change it without reaching consensus among the other network participants. A constant check is carried out to ensure that all copies of the records in the database are the same and valid. The verification process ensures that new data sets are checked by the network participants before they are added to the blockchain.

The data records that are accepted by the network are added to a block. The block is added to the so-called chain of the previous blocks. Hence the name blockchain. The result is a decentralized data storage system that can be operated and managed jointly by several organizations. It promotes cooperation and consensus - not fragmentation. It forces the transparency, immutability and verifiability of data sets - instead of hackable and changeable data sets.

With a better understanding of the general concept behind DLT, we can now better understand how it prevents hacks, fraud, and data manipulation. In addition to the unprecedented level of security, DLT can be used as a basis to replace centralized systems with decentralized platforms. These decentralized platforms can be managed by multiple parties so that competing companies can offer their existing systems as well as new systems on a faster, more efficient and more open infrastructure.

More and more machines, devices and sensors are connecting to the internet. As a result, there has been a surge in demand for an infrastructure that can accommodate this hyperconnectivity. Neutral platforms operated and managed by entire ecosystems are the natural next step.

Take access control systems as an example of how decentralized platforms can outperform centralized systems. By moving the management of access control to a DLT, every access, update, and record is stored in an immutable database as a non-personalized transaction. A completely transparent database leaves no room for hidden actions or unauthorized changes, because every change must be confirmed jointly by the operators.

This enables access control systems to achieve an unprecedented level of security. For the first time, the entire history of access management - including all actions and records - can be stored in a decentralized database and thus cannot be hacked, manipulated, changed or deleted without authorization. Since the users are decoupled from their cryptographic identities, the solution also meets all data protection requirements. This enables companies to analyze and use more user data, as the non-personalized data records are retained even after the personal data has been deleted. In addition, the use of DLT technology makes access control easier and more transparent and therefore saves time and money for organizations and private individuals.

As far as the solution to fragmentation is concerned, existing systems can use their centralized infrastructure with decentralized and DLT-based access control platforms with fixed roles and non-personalized identities. This enables users to manage different access systems, for example to buildings, machines or networks, in one place. The opposite of fragmentation. In the future, access points can easily be shared between organizations and private individuals for buildings, digital products or services such as car sharing.

DLT-based access controls give the constantly growing and networked world the urgently needed backbone to reach new heights in user experience and security. To sum up, in the first decades of the digital world, centralized systems were our only option.

Today we can choose. We can weigh the advantages and disadvantages of centralization versus decentralization and decide on what type of infrastructure we want to build our products and services.

In a world that yearns for trust, speed and cooperation, I wouldn't be surprised if we saw a major shift in the status quo.