Who benefits from decentralised crypto services and what advantages?
- Crypto In A Nutshell
- Nov 1, 2020
- 3 min read
“Decentralization is what allows Bitcoin to substitute an army of computers for an army of accountants, investigators, and lawyers.” – Nick Szabo
Decentralised services can benefit many individuals, including retail consumers who can have access to things like payment services with little to no fees. Nevertheless, decentralised crypto services can also be excellent for businesses, especially for those who are in legal but frowned upon industries such as cannabis was working with payment providers and even service providers can be very difficult due to legal issues. Users could not be banned from or discriminated against when using decentralised crypto services.
A decentralised network operates and secured by thousands of computers around the world which can guarantee availability. Bitcoin has achieved more than 99.98% uptime since its inception and 100% in the period of recent six years. Failure of one computer does not impact the network overall. Bitcoin is also uniquely censorship-resistant; miners have no incentive to include a transaction in a block. Even if one miner decided to block a particular trade, others would step in, include it in a union they mined and collect the transaction fee. An additional advantage of decentralised systems is their improved collision resistance: Coordination in a distributed network is more challenging than in centralised ones. This decreases the chance that a group of network participants (e.g. miners) can work together to gain a competitive advantage (e.g. through selfish mining).
Below are the significant three advantages of a decentralised system.
1. Users can participate in a trustless system
Trust in institutions is near historic lows. Google, Facebook, and other big corporations have received their share of controversies in national headlines. It is no surprise that many consumers, including Millennials and Generation Z, are uncomfortable putting sensitive data, money, and personal property under the control of a central authority.
Poseidon Ho, the general partner of #OUTLIERS, said that: “Decentralisation solve trust issues by empowering multiple participants to manage a network. Users do not have to trust a central authority, and protocols are designed to prevent bad behaviour”. Besides, VCs are funding decentralized-focus companies because of expanding use-cases, as well as optimistic forecasts. Blockchain will create new business value worth $3.1 trillion by 2030, according to Gartner.
2. Lowers risk of systemic failure
Nowhere is trusted more crucial than in monetary systems. Decentralisation has given rise to digital currencies because of its ability to gain user confidence. Systemic failure occurs in hyperinflationary economies such as Zimbabwe and Venezuela.
The value increase of cryptocurrencies reflects people's scepticism of central banks and motives, ethics, or competence of government as well. Moreover, decentralisation is an antidote to a failure of finance. Single points of failure can bring down an economic system, such as a Wall Street bank that needs a massive bailout, lest it crashes a financial system.
In technology, small points of failure can halt a network, such as when a website or ATM software crashes. In decentralised cryptocurrency, a node that is error can pass its workload to other nodes, which means applications can remain up and operate.
Todd Crosland, founder and CEO of CoinZoom, a next-gen cryptocurrency exchange claimed that: "That is one reason why digital exchange platforms are spreading worldwide, in our case, CoinZoom is providing what we believe is the first step toward mass adoption for Digital assets, through our CoinZoom Visa debit card, that allows customers to spend their bitcoin, ethereum, or other digital assets easily throughout the world."
3. Censorship resistance fosters an open culture
Central entities or harmful actors can shut down legitimate concerns about proposals or practices that, if implemented, can improve an organisation and stop bad behaviour. Peer-to-peer communication is much harder to censor because it stimulates an environment that allows for meritocracy and constructive feedback.
Poseidon Ho insists that: "A big reason why we work with blockchain companies is the positive and open culture, traditional corporate culture can be rife with politics and dysfunction. In many decentralized-focused ventures, management and employees embrace the effort to create a better user experience, and to design protocols that nurture an ecosystem."
Moreover, decentralised networks tend to be open-source projects: everyone can construct apps, digital products and services on top of them. These expand opportunities for network growth. Under closed systems, developers are limited to what a central organisation dictates what can be built or developed.
Decentralisation is not solely a technological approach. It is a mindset and culture that does not seek one's way but instead seeks the best way for an entire ecosystem.
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