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Modern Economic Nonsense — Decentralizat ...

Modern Economic Nonsense — Decentralization may not work as everyone expects it would

Jul 12, 2022

When it comes to decentralization, most people agree that the more power a network has, the better for its users and other network participants. After all, a centralized system controls one or more individuals or organizations that can make decisions on behalf of everyone else. However, with the increasing use of blockchain technology and decentralized networks worldwide, we are seeing an increased push towards decentralization. While this is great news for many users who are cautious about centralized entities having too much control over their data and online activities, there are some potential pitfalls associated with decentralization. We have identified three pros and cons of decentralization that you should know before diving into this rapidly-developing space.

Decentralization may not be as safe as you think

Decentralized networks ensure that there is no single point of failure and that no one can tamper with the data being stored on the network. Both of these are critical for any organization or company to consider adopting blockchain solutions for their services and products. However, there have been instances where hackers have been able to breach decentralized networks and steal data. This is possible not only when the network is new and has not been audited and tested enough, but also when insufficient encryption is used to protect data. Decentralized networks are, by their very nature, open source. This means that anyone can view the code being used, whether it is a smart contract for recording transactions or the code being used to store data. The good news is that many decentralized networks have rules that require this code to be audited by a third-party security auditor to ensure that there are no vulnerabilities. Additionally, decentralized networks run on nodes that are connected to a network. This means that if a hacker successfully breaches one of these nodes, they may be able to steal data, or even tamper with it. Therefore, you need to ensure that nodes are well secured with strong encryption and other security measures.

There is a risk of losing your data when you deploy to a decentralized network

Although decentralized networks allow you to hold your own data, you may be required to store your data on the network permanently. This means that if you lose data or need to delete it for any reason, you cannot do so, unlike in centralized systems (email services, for example). There have been instances where people have attempted to delete data from a network, only to find that it cannot be deleted. This is because the data is being stored across a number of nodes, and one or more nodes may not have the data that is required to delete it. While this may not be a major issue for most people, it could be a critical issue for organizations that need to keep data for regulatory purposes. Therefore, it is critical to consider how you can ensure that you can delete data when necessary. Additionally, you need to be cautious about where you store data on a decentralized network. If a hacker breaches a node that is storing your data, they may be able to steal it, resulting in a huge loss. Therefore, it is critical to deploy your data using encryption, and make sure that the nodes storing your data are well-secured.

The increased cost of running a decentralized application

While decentralization ensures that everyone has an equal say in how the network is run, and it is unlikely that one centralized entity will dominate the network, it also means that there is no one person or organization to pay for the operation of the network. This means that decentralized networks are likely to be free to use, which is great for end users. However, it also means that you need to have enough money saved up to cover the costs of running your decentralized application. This includes covering the costs of servers, electricity, and other expenses required to run your application. Depending on how much data you need to store, how many transactions you process, and other factors, decentralized networks can cost more to run than centralized networks. Therefore, it is critical to ensure that your organization has the funds to cover the cost of running your decentralized application.

Users have no control over who can access the data they provide

When you are interacting with a centralized system, you have control over who has access to your data. You can decide which data is public, which data is accessible only to certain people, and which data is private and remains with you. Although decentralized systems have decentralized ledgers that keep track of transactions, data is kept in fragments across nodes. This means that you do not have control over who can access your data. Other network participants can likely view your data. Additionally, when you decide to interact with other network participants, you do not know where they are located. This means that they could be in any country, and their data could be stored anywhere in the world. This raises the question of how you can ensure that these nodes are secure enough to store your data.

Decentralization comes with its own challenges

Centralized systems are easy to understand and implement. You can create and manage them with ease, and they provide a single point of control. This means that if something goes wrong, you know who to go to. Decentralized networks, on the other hand, are challenging to understand and implement. This means that you need to have a firm grasp on how the network operates, and it could be difficult to find out who to go to if something goes wrong. Additionally, decentralized networks are constantly evolving, and there are many different types of networks available. This means that you need to understand which network would best suit your needs and decide whether to build your own network or adopt an existing one.


When implemented correctly, decentralization can be a potent tool for businesses. This is because it offers a high level of security and autonomy and allows users to keep all of their information private. However, decentralization also comes with several drawbacks, and companies will need to work hard to overcome these issues if they want to make the most of their decentralized network.

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