Crypto – Page 7 – FireStake

There are a lot of different network types. However, which is the best network type for which scenario? In a centralized network, all connections go to a specific server that processes them. Decentralized networks have centralized owners who have a copy of a resource. Other uses are connected to these owners. In distributed networks, everybody has a copy of a resource/information. Centralized networks - The simplest form of a network In a centralized network, all users connect to a specific server. The server then stores data, gives access to information or updates it. The most basic scenario is a webserver. Users connect to this server via a website and interact with it. Pros: Easy to setupEasy maintainableEasy to use for developers Cons: If the server crashes, the system is not availableSecurity risksLatency problems for users who want to connect to a server that is far away. For example, a user that connects from the USA to a webserver to Europe normally has long loading times. Decentralized networks - The advanced network model In a decentralized network, there are multiple centralized owners who own a copy of the resource/information. If a server crashes, another owner/server could provide that data because he holds the exact replica of the resource. Pros: Increased performance in comparison with centralized systems, because servers could be placed all over the worldFail-safety Cons: Maintenance costsSecurity risksCompanies/Organizations can't afford a decentralized network, or it is just not worth it Distributed networks - The ultimate form of a network A distributed network takes the decentralized system to the next level. There are no more centralized owners. Now, everyone could get a copy of the resource if he wants to. In addition to that, everyone has equal access to data, but user privileges can be enabled if needed. Pros: TransparentSecureScalableFail-safety Cons: Hard to developMaintenance costs Comparison of network types Centralized network Decentralized network Distributed network Secure Low/Medium Low/Medium High Scalable Low Medium High Fail-safety Low Medium High Performance Low Medium High Development cost Low Medium High Maintenance cost Low Medium High Blockchain The blockchain is based on a distributed network. The best example of this is the Bitcoin. Everybody can download the blockchain if he wants to. So, everybody could have a copy of Bitcoins blockchain and knows who send to which address how many coins. But wait? Cryptocurrencies are based on a distributed network? You probably heard that they are decentralized. Both parties are right. Cryptocurrencies are a decentralized distributed system. Wait, what? Decentralized refers to the person/organization which has control over the network and distributed is how the network is organized/structured. Let me explain this with three examples. #1 Centralized centralized Imagine using a website from a small company. They probably have only one server. All users connect to this server to interact with the website (centralized) and the company has full control over the system (centralized). #2 Centralized distributed Now, imagine using a service from Google. For instance, Google drive. They probably have multiple server locations in the world that are connected with each other to synchronize data (distributed). However, Google controls the whole system (Centralized). #3 Decentralized distributed system Now, imagine using Bitcoin. There are also multiple nodes that are connected to each other (distributed). However, there is no person or organization that controls Bitcoin (decentralized). Which system is the best? People would most likely think that a decentralized distributed system is the best. However, there are some issues that arise with that model. First, a distributed network is hard to maintain and the development costs much more compared to centralized. Second, companies are not willing to give up control over their existing systems. Furthermore, sometimes, there is a centralized unit (company, government) needed to act fast and reliable. A centralized unit can implement certain things faster compared to a decentralized system. Scenarios A blog probably wouldn't need a decentralized or distributed network. The costs are not worth it for the benefits like fail-safety. However, a larger company like Google needs a distributed network. They need multiple servers with multiple backups to provide the user with the best user experience on their platform. They operate on a much higher scale than a usual blogger and people expect different things from them. They are also able to afford a system like that. In my opinion, Bitcoin and other cryptocurrencies prove that a decentralized distributed system could work. They break the usual rules (the company has full control over the system) and give the power to the network/people. No centralized unit can change the protocol or manipulate the data on the blockchain. The data is transparent and immutable on the blockchain. The Bitcoin network is also robust and is a fail-safety system. Further Readings: What is a blockchain? Can Bitcoin become a major currency?