Learning Center
Waves Labs
Dec 16,2022
5 minute read

The Power of Decentralization: Why Local Control Matters

Do you know what the most successful decentralized system in history is? 

This system is responsible for bringing more prosperity, opportunity and freedom to more people in the past few hundred years, than any other system in history… 
If you guessed democracy, you’re right.

And yet, for all it’s benefits and merits, democratic governments today are still prone to suffer from incompetence, corruption, or negligence of the relatively small groups of individuals that operate them on behalf of vast national populations.

Governance is only as effective as the individuals that govern. Of course governance happens wherever multiple stakeholders need to make decisions and take actions in a transparent, accountable, and fair manner – not just in governments.

Until recently, centralized governance systems – where power and decision-making authority is concentrated in a single, central authority – were the only real option for running organizations like businesses and corporations. But through blockchain technology and automated smart contracts, organizations now have access to decentralized governance protocols that allow local, stakeholder-driven collective decision-making among individuals located across the globe.

In this article, we explore the advantages of decentralization and the benefits it offers to the individuals that use it to govern their communities and organizations.

The Advantages of Decentralization

Decentralization has several advantages that make it an attractive option for many organizations and communities. These advantages include the ability to create trust-minimized environments, improve data reconciliation, and improve services.

A Trust-Minimized Environment

Trust is at the core of most transactions and interactions in centralized organizations today. However, putting too much trust into authorities creates a system governed by a small group of individuals, and a single point of failure. If trust in a centralized system is compromised, the entire system becomes at risk.

Decentralized systems don’t rely on trust. In fact, their goal is to create a trust-minimized environment. That is, an environment where users are not required to trust each other, and the system itself maintains ongoing consensus among individuals. Such an environment enables a rapid decision-making process that is more democratic and transparent. Trust is not eliminated completely, but its role is minimized, allowing decentralized systems to persist.

Improved Service

A centralized system is prone to exhaustion of resources, periodic outages, bottlenecks, corruption and other weaknesses that may cause systematic failures or inefficient services. 

Decentralization can be used to optimize many different services that are critical to operating an organization including decision-making, resilience and reliability, innovation, experimentation, participation and inclusion.

The Benefits of Decentralization for Governance

Decentralization can have several benefits for governance in particular. By distributing power and decision-making authority away from a central authority and towards individuals or local authorities, decentralization improves transparency, accountability, and participation in the decision-making process. This can help make governance more effective, and can make it easier for individuals and communities to contribute to decisions that affect them.

Individual Empowerment

It is extremely difficult to manage very large entities in a centralized way because of the enormous amount of information that must be collected, processed and analyzed, and, consequently, the increased complexity of the decision-making process. Decentralization gives the decision-making power to those closest to the problems and therefore, they know best how to solve them.

Data Transparency

In centralized systems, most data is stored on centralized servers that are controlled directly by a single entity with databases that only a select individuals have control over. This makes it easier for a minority to manipulate or conceal information from the majority. 

Blockchain-based databases can be used to store and protect all data in such a way that the information is near impossible to manipulate or hide. The distribution of data verification and storage effectively realizes the decentralization of power.

Responsiveness and Agility

Being unwieldy in many aspects, centralized systems also hold no surprises in terms of the reaction speed. Should a problem arise, it can take a long time before a centralized system’s mechanisms get to solving problems due to excessive internal friction. This can create situations that undermine trust of the community and eventually lead to the system deteriorating.

The decentralized model aims to address problems rapidly through the power of user consensus. There’s no place for bureaucracy or corruption, there are only users deciding directly what’s best for them under particular circumstances. Smart contracts and decentralized systems operate programmatically with no manual human intervention. This makes it possible for decisions and actions to be executed within seconds without bureaucracy or third-parties interrupting or delaying the flow of productivity.

The Challenges of Implementing Decentralization

Dependency on centralized systems can make it hard to adopt decentralization because it causes a clash between the existing centralized infrastructure and decentralized protocols. In order for decentralization to work, users must have access to codecentric systems that are designed in a way that reflects the principles of a decentralized network. 

Decentralization requires users to have access to datasets that are constantly being updated on a real-time basis. While accessing these datasets may be relatively easy for a centralized system, it is not as straightforward for a decentralized one. As a result, implementing decentralized networks can be difficult for those relying on centralized systems.

Decentralization relies on mutual trust and verification between parties as it eliminates the need for a central authority, replacing it with peers that share resources among each other in a network. This often requires a lot of work and coordination from all parties to verify each other’s contributions, at least at the initial stages. 

Why We Need Decentralization

The systematic development of decentralized systems will allow us to reach new heights as a global community. The relationships of all users in the system will have a completely new vector of development, based on transparency, openness, and honesty. The transition should begin with a change of views and approach to decentralized systems. It must be clarified that decentralized finance is the future.

Decentralized systems provide not only anonymous transmission and transactions, but also the security of the entire network and each user from attacks and loss of their data. They also increase the speed and quality of services by building a trustless environment. Most importantly, mass adoption of decentralized systems will open us to new possibilities we haven't even imagined yet.

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