Distributed vs. decentralised systems are one thing that comes to mind when we talk about blockchain systems. They are two different working systems, decentralised is a single processing method, whereas distributed refers to multiple points of decision making.
Even though they are two different systems; however, a decentralised system is a subset of a distributed system. The main difference comes down to where the decision is made and how the distribution of the decision is sent across various nodes in the system.
Cryptocurrencies have actively adopted decentralised and distributed systems to their benefit. All popular cryptocurrencies have such characteristics. But, are they a must-have? Should a blockchain be decentralised or distributed, or both? In this article, we will talk about the differences between decentralised and distributed blockchain systems and how they apply to cryptocurrency.
What Does Decentralised Mean?
Decentralised means that a decision is made across various nodes. Each node decides its behaviour, which ultimately affects the system’s behaviour. This ensures that no single node has complete system information.
A decentralised system has access to a massive amount of computing power due to various machines on the network. The computing power of each node is combined to operate the network.
The best example of a decentralised system is Bitcoin and Ethereum. Bitcoin has a decentralised network, where no government or entity has control over it. Ethereum offers a decentralised blockchain where anyone can publish dapps that connect users and providers directly.
Here’s another general example – consider a group of people where each person makes his/her decisions, and each individual can be considered as a node.
There are various advantages of decentralised systems when compared with distributed systems; these include:
- The decisions made are decentralised, i.e., made across various nodes.
- Provides more control to users.
- No single entity has control over the entire network.
- It improves the speed and flexibility of the system.
- Increased computation power.
There aren’t many disadvantages to a decentralised system. The main contention is the level of resources. Due to the demanding nature, maintenance is something that is regularly required to avoid any issues.
What Does Distributed Mean?
In a distributed system, all parts of the system are located in different physical locations. The processing is spread across multiple nodes, but decision making can be centralised or decentralised. Various nodes can communicate and coordinate by passing messages.
Distributed blockchain systems are more secure as the system is spread across various nodes. A great example of a distributed system is AWS or cloud instances. Instead of data being stored in one single point, it is spread across various points across the server. Even if one node fails in these networks, it will not affect the entire system.
The various advantages of distributed systems are as follows –
- No single point of failure. The failure of one node will not take down the entire system. This structure makes it reliable.
- These multiple nodes can be centralised or decentralised.
- The system is scalable.
- The load on the network is distributed, making it more efficient.
- The system is more secure as hackers need to attack multiple points simultaneously.
The disadvantages of distributed systems include:
- If the communication channel is not efficient, data may be lost in transit.
- A distributed system may be complicated and difficult to handle.
How Do These Systems Apply to Cryptocurrency?
Cryptocurrencies make use of decentralised and distributed systems to operate. As we already know, decentralised systems are a subset of distributed systems. So if a blockchain is distributed, it can be decentralised.
Our traditional financial system is highly centralised, but cryptocurrencies are here to change that by bringing in decentralisation. Bitcoin is the perfect example of a decentralised and distributed blockchain. It has a peer-to-peer network.
The decision making is not restricted to a single node, and the blockchain operates on a network of nodes. It also allows anyone to own bitcoins and transact them. You can also mine bitcoin and earn rewards for it.
Before Bitcoin, transactions had a degree of centralisation. If you had to make a payment, you had to go through a specific bank to create and monitor the transaction. But with decentralisation, you can send money to anyone without a mediator.
The blockchain operates on multiple computers or nodes, so if anyone node fails, the network can still function. The distributed ledger also makes it more secure and accessible at any time of the day. The ledger maintains a record of transactions and contracts in a decentralised form in different locations resulting in a reduction of cyber-attacks and financial fraud.
Ethereum is another cryptocurrency that focuses on decentralisation. Its entire network is dedicated to supporting decentralised applications (dapps). Anyone can develop and deploy a dapp on the system.
Cryptocurrencies are either decentralised or centralised. However, decentralisation is considered a significant aspect. It is what makes cryptocurrencies more reliable and trustworthy.
While decentralised and distributed systems have their differences, they go hand in hand in the blockchain world. These systems have multiple advantages, and when we combine them, we create a much more robust and reliable network.
With the success of Bitcoin and Ethereum, other cryptocurrencies are also adopting their characteristics. No doubt, these two are essential features for cryptocurrency. But they are two of the many characteristics that a blockchain should have. A cryptocurrency has to be globally acceptable, be easy to use, and provide financial solutions.
Bitcoin introduced decentralisation and distributed blockchain, and many other cryptocurrencies followed. Despite being a public network, the distributed nodes provide heightened security. This level of decentralisation and distributed blockchain is one of the reasons why no one has been able to hack Bitcoin since it’s begging.
In a world of highly centralised financial networks, cryptocurrencies provide more control to its users and maintain a level of transparency. They have the potential to be the future of our financial ecosystem.
We hope this article cleared your doubts on decentralised vs distributed systems and showed how efficient they are in the cryptocurrency world. For more information on cryptocurrencies and trading visit our Support Page here.