In the technology field, particularly in the context of blockchain and distributed ledger technologies (DLTs), it is common to see the terms “decentralized” and “distributed” used as if they were synonymous. Although they are closely related, they are not, and this confusion is not only common, but can lead to misunderstandings about the true capabilities and benefits of these technologies.
Why do we continue to confuse these terms – is it lack of knowledge or perhaps there is something else behind it? In this article, we will explore the essential differences between the two concepts, questioning whether we are using the right words and what implications this lack of precision has.
What does “decentralized” mean?
A decentralized system distributes control among multiple nodes, eliminating dependence on a single central authority, so that instead of concentrating power in a single entity, decisions and validations are shared among participants, providing benefits such as:
- Autonomy: These systems do not rely on a central entity to operate. For example, the Bitcoin network operates autonomously thanks to its protocol, which establishes rules that are followed by all nodes. This design not only reduces costs by eliminating intermediaries, but also strengthens security by preventing a single entity from controlling the system.
- Resilience: By having no single point of failure, they are more resistant to attack and manipulation. For example, if you wanted to compromise bitcoin, you would need to control more than 50% of its computing power, which would be extremely difficult and complex. In addition, its architecture protects the network from natural disasters or any kind of disruption.
- Transparency: Important decisions are made through consensus processes in which all nodes have a voice. This ensures that rules are clear and verifiable, and that transactions are visible to all participants.
Bitcoin is an emblematic example of decentralization: transactions are validated by consensus among nodes, with no central authority. Although it is also a distributed system, its decentralization ensures that no organization can control or censor it.
What does “distributed” mean?
In contrast, a distributed system distributes tasks or components among multiple nodes located in different locations, with the goal of improving aspects such as:
- Efficiency: Distributing responsibilities allows large amounts of data or transactions to be processed more quickly. For example, services such as Google Cloud assign specific tasks to different servers to maximize their performance.
- Scalability: These systems can grow by adding new nodes without compromising functionality, making them ideal for high-demand applications such as social networking or streaming platforms.
- Redundancy: If one node fails, others can take over, ensuring service continuity and data integrity. Storage systems like Google Drive replicate information to multiple locations, protecting it from disasters.
However, distribution does not necessarily mean decentralization. Even if the nodes are distributed, a central entity may retain control over the entire system. For example, a cluster of servers managed by Google is distributed, but authority resides exclusively with the company.
The difference between decentralized and distributed
A distributed system can physically distribute its components, but keep control with a single authority. In contrast, a decentralized system ensures that power is distributed equally among its participants.
Practical example: the corporation and its subsidiaries.
To better understand this difference, imagine a company with several branch offices:
- Centralized system: All major decisions are made by the manager at headquarters, although some operational tasks are delegated.
- Distributed system: The branches are located in different cities and each has its own operational team. However, all major decisions (strategy, pricing, policies) are made by the head office.
- Decentralized system: Each branch operates autonomously within a common framework, making local decisions without relying on a central headquarters.
This analogy explains how a system can be physically distributed (such as the company’s branches), but not necessarily decentralized (if power remains concentrated in a central office).
Ambiguity and standardization in the DLT term
The widespread use of the term DLT has fostered an ambiguity that contributes to confusion. Often, “distributed ledger” is used as if it were synonymous with “decentralized system”, when in fact they are distinct concepts. This lack of precision allows centralized technologies with distributed architecture to be presented as decentralized, which can lead to misperception by users and markets.
It is necessary to consider whether “distributed ledger technology” is the most appropriate term, or whether it should be redefined to clearly establish the difference between the physical distribution of data and the decentralization of power. This would not only help to avoid misunderstandings, but would also align expectations with technological reality.
Conclusion: Are we using the right terms?
The confusion between “distributed” and “decentralized” is not just a technical error; it is a problem that distorts expectations and, in some cases, benefits those who wish to present certain technologies as more autonomous than they really are.
- Not all distributed is decentralized: A distributed system may distribute tasks among multiple nodes, but this does not necessarily mean that there is no central control.
- Not all DLTs are decentralized: It is common to automatically associate a distributed ledger technology (DLT) with decentralization, but this mistaken assumption can lead to a misunderstanding of its true capabilities and limitations.
- Bitcoin strikes a unique balance: Its blockchain is both distributed and decentralized, making it a paradigmatic example of how these qualities can be effectively integrated.
Therefore, to avoid confusion, it is very important that we be more precise in our use of these terms. By understanding their differences, we can make informed decisions, avoid falling for misleading marketing, and align our expectations with what these technologies really offer.
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