Decentralization is the concept of dividing the functions of a system among numerous independent units. It is a central idea in the field of blockchain technology and opens up numerous possibilities in various industries. It guarantees greater security and transparency and sometimes allows economic freedom and self-government. Potentially, the concept of decentralization is said to have the power to change the world as we know it.
Leticia López Tiznado, Chief of Staff of Koibanx -a leading company in financial tokenization using blockchain technology-, explained that the main difference between centralized and decentralized networks is who controls the network: “Centralized networks are controlled by a central authority, that is, , there is an intermediary that has the responsibility and the control in the supervision of all the transactions. In a centralized network only known and identified persons participate and their transactions can be audited internally. On the contrary, in a decentralized blockchain anyone can carry out transactions in the ledger, therefore, the responsibility is shared by many people and the information is distributed in multiple nodes”.
“Although decentralization is considered the main attribute of the blockchain because it represents security advantages over traditional centralized systems, it depends a lot on the use case to be able to define what type of blockchain is needed,” he added.
For example, when there is information to be consulted by many but only one person manages, has control and can make changes to it, a centralized blockchain is recommended. Let’s think of a traditional banking system, a closed group of people have access to customer bank account information, but only some people within the bank have interference to be able to make changes to the transactions that have occurred,” said Leticia López Tiznado.
“If, on the contrary, I want everyone to be able to administer, verify data and manage transactions, what is appropriate is a decentralized blockchain. The clearest and most well-known example is Bitcoin, everyone on the blockchain keeps their own ledger and everyone else’s. This makes decentralized transactions on the blockchain very secure. Every time a new transaction occurs, everyone’s books are updated, not just the books of those actually involved in the transaction. When a transaction is recorded in a multitude of ledgers, rather than just a few (as in the centralized system), it becomes very difficult for this information to be altered. Thus,
Raúl Ortíz, Head of Business development for Bitwage Latam -the pioneer platform for payment of fees in cryptocurrencies and digital dollars most chosen by workers, freelancers and service exporters-, pointed out that one of the main advantages of decentralization is being able to increase the computational power. “This strengthens the networks and encourages contributions to their security and improvement, for example if we think about the Bitcoin blockchain,” he said.
Regarding the accusation made about some blockchains, of being “centralized”, he explained: “It is because there are tokens backed to a greater degree by a single institution that make use of this network, through smart contracts. For this reason, in addition to not being totally decentralized, some even do not even consider them cryptocurrencies. That is why it is so important to educate yourself before making any decisions. As in any field, before making an investment decision in the crypto world or choosing to apply blockchain technology in some process of your company, for example, you have to get advice, study and find out. Centralization or decentralization, whether it is public or private, can be good or bad depending on where it is applied”.
For José Ignacio Trajtenberg, CEO of Xcapit -non-custodial, multi-blockchain and open source wallet-, he agrees with Ortiza that a lot of education is still needed. “We must note that the greatest learning is usually given by personal or close negative experiences. It is very unfortunate what happened with FTX or BlockFi, platforms that millions of people trusted, but at the same time it is a great sample that tends to generate a large migration of clients towards truly decentralized platforms and to take custody of the assets”.
Santos Barrio, CFO of Let’sBit -one of the most important crypto-exchanges in LatAm focused on offering quality financial services-, clarified that “not all blockchains are the same, the levels of decentralization they have are very different. Currently Bitcoin and Ethereum are the only ones that are truly decentralized and secure on a large scale. This does not mean that the rest are useless, as is the case with Tron, Solana, which are very fast, very cheap networks and process hundreds of thousands of daily transactions”.
He added: “Many speeches from some companies are confusing on these issues, largely I suppose for simplicity (since the differences between these networks are subtle), but I think it is important that the public is given clarity on the differences that they have when saving assets in a network. For example, having a bitcoin in the original Bitcoin network is not the same as having it in the Solana or BSC network where the security levels are much lower”.
Martín González CEO and co-founder of Artbag-blockchain technology company that offers tools specially designed for art and culture-, indicated that decentralization allows obtaining a system without a central controlling or trustworthy entity that establishes whether a process is valid or not. But while he believes that a decentralized system provides transparency, does not require permissions, is more resistant to attacks and in many cases is unobjectionable, “I don’t think everyone needs to know why something is decentralized or what a miner is, a validator , a block or asymmetric cryptography, because for it to be mainstream we cannot expect ordinary people to know or be interested in these things. You have to explain and educate about the advantages and benefits of technology and make products with excellent experiences and user interface. Otherwise,
On the other hand, Guillermo Escudero, Chief Revenue Officer of CryptoMarket-cryptocurrency exchange platform-, also agreed that more education is needed in the crypto field. “There are still more doubts than certainties. The crypto ecosystem is complex and it takes time to understand why it can have added value with respect to current monetary systems,” he said. “Beyond that, let’s remember that it is still a niche market, and we must also consider that generation X (people from 53 to 72 years old) have greater purchasing power, but at the same time they are reticent to sudden changes, more even in technological matters that have a direct impact on the day to day of our monetary and financial structures. I think that with the passing of the years we will have more and more adoption,