Welcome to our Bite-Size Insight, where we break down the mammoth world of cryptocurrency and blockchain into digestible chunks. Entering the world of digital assets can feel like stepping onto another planet, with a new language full of terms and concepts that might seem foreign and complex. That’s where our Bite-Size Guides come in.
Whether you’re a crypto-curious newcomer testing the waters or an experienced crypto enthusiast looking to refresh your knowledge, our guides are designed to make the complex simple. We distill the technical jargon, provide clear explanations, and demystify the landscape one topic at a time.
So, don’t worry if words like “blockchain”, “decentralisation”, and “smart contracts” seem like a tsunami of unfamiliar terms right now. With each guide, you’ll gain understanding, clarity, and confidence to navigate the exciting world of digital assets.
Ready to dive in? Let’s start with a fundamental concept in the blockchain world: Centralised vs. Decentralised Systems.
Centralised Systems
Centralised systems operate under a single governing authority that regulates and manages operations. These entities typically have control over the entire network, making decisions about the system’s rules, protocols, and overall structure.
Key Features of Centralised Systems:
- Single Authority: All decisions and operations stem from a central body.
- Security: These systems often have robust security measures in place.
- Efficiency: Decision-making can be quick as there’s no need for consensus.
- Opaque Operations: Centralised entities often lack transparency, which means users might not know what’s happening behind closed doors. Some have been known to use customer funds for risky bets without disclosure.
Examples: Traditional Banks, Centralised Exchanges (e.g., Binance, Coinbase)
This opacity is one reason why decentralised systems, with their commitment to transparency and user control, are becoming increasingly appealing to many users.
Decentralised Systems
Decentralised systems distribute control and decision-making across the network. No single entity holds power; instead, each participant (or node) has a say in the system’s governance.
Key Features of Decentralised Systems:
- No Need for KYC: In many decentralised systems, transactions can be made without the need for “Know Your Customer” (KYC) procedures. This privacy feature is appealing to users who prefer to keep their identities anonymous.
- Censorship Resistance: Decentralised systems are designed to resist attempts at censorship. No single party has the power to alter or delete transactions, making these networks secure and reliable.
- Resilience: These systems can be more resilient as there’s no single point of failure.
- Transparency: Most transactions and decisions are recorded on the blockchain, visible to all.
Examples: Blockchain Networks (e.g., Bitcoin, Ethereum), Decentralised Exchanges (DEXs)
While both centralised and decentralised systems have their strengths and weaknesses, decentralised systems are gaining traction for their potential to democratise finance, reduce corruption, and increase transparency. As we journey further into the digital age, the interplay between these two systems will shape our financial landscape.