Has there been a moment when you have thought of having more control over your finances than the banks do or having a bigger part in the governance process at your institution? And do you know why decentralization advanced from mere folklore to reality today? The negative effects of centralization, such as data abuse, privacy abuse, and censorship, among others, were the catalysts for decentralization to start with.
Blockchain-enabled decentralization is something that Bitcoin introduced in 2009, which is finally seeing the light of day. So, let us get into the details of it and discuss the pros and cons of decentralization.
What is Decentralization?
Decentralization, in loose terms, is the process of breaking down the powers that a central authority has and distributing them to the common masses. Imagine 70k people making decisions for 7 billion of us! Yes, we are probably looking at less than 1% making decisions and pushing narratives on behalf of over 99% of people today. Pretty ridiculous, right? But what really pushed us to make decentralization a gradual reality is down to common people realizing how centralized/legacy institutions, which are often considered sacred, repeatedly abused their power to gain resources and undue advantages from the public. Decentralization, in effect, wants to bring the power back to where it belongs – people.
Blockchain technology has been the biggest promoter of decentralization in recent times. Let’s make our way to understanding the pros and cons of decentralization.
What are the Advantages and Disadvantages of Decentralization?
|Advantages of Decentralization||Disadvantages of Decentralization|
|Motivation of Subordinates||Difficult to Coordinate|
|Growth and Diversification||External Factors|
|Efficient Communication||Narrow Product Lines|
|Ease of Expansion||Expensive|
Advantages of Decentralization
1. Motivation of Subordinates
Talking about the advantages and disadvantages of decentralization, counting the motivation among the team members and the stakeholders is important. When you give them the power to be part of decision-making, it will encourage them and make them feel they are an important part of the institution. In fact, by the time decentralization reaches every corner of the planet, we will have replaced hierarchies that are abundant in our centralized societies with a fairer framework. One where networks and protocols are run by their communities every step of the way.
2. Growth and Diversification
Distributing executive powers among every organization member makes them accountable and motivated for growth. They will understand various aspects of decision-making. Moreover, decentralization makes way for diversified decision-making for a diverse and vibrant society.
3. Efficient Communication
Since the powers are distributed amongst various organizational levels, it leads to effective and efficient communication among the members. It helps with developing better relationships among colleagues. In the financial world, decentralization also improves communication between the recipient and payee.
4. Ease of Expansion
Since any organization aims to expand to various places, giving authoritative powers to team members in different places can lead to effective expansion. You can get area-specific requirements from the team members and grow according to those needs.
5. Better Supervision and Control
Team members can have better supervision amongst themselves as they have the authority to recommend new work styles when needed to improve efficiency. As members of an organization or project who are equally responsible for its affairs, they will be motivated to take a more active role in fixing burning issues.
6. Satisfaction of Human Needs
Every person wants to have a sense of freedom while working or even making financial transactions. Decentralization helps in feeling the sense of power and freedom that everyone requires. If you and others are satisfied workers in the organization, then the organization must be working towards growth.
7. Key Personnel are no more than Consultants
VP, CTO, and HR are key personnel, especially during the initial stages of a new project. The community can always consult them for guidance in the future. At the end of the day, the community, including these people, will collectively make the decisions rather than just a few people at the top.
Disadvantages of Decentralization
1. Difficult to Coordinate
In discussing the advantages and disadvantages of decentralization, it is necessary to understand that one of the biggest cons is reaching a consensus. Since there are many members to consult, the decision-making can be a difficult task to complete. It means that sometimes the lack of coordination may stretch the decision-making.
2. External Factors
A lot of times, external factors like trade unions, market movement, the government, and others, make it hard to achieve a decision through discussion and consensus. They may look to manipulate/corrupt the majority through protocol loopholes resulting in unfair decisions made.
3. Narrow Product Lines
For decentralization, the product lines in an organization need to be subsequently broad. This is important to ensure that decentralization helps in decision-making. Smaller organizations with narrow product lines and a lack of managerial-level people at lower levels may find it challenging to gain from decentralization.
Now, if you ask every one of your employees to put extra effort into managing the company and be a part of the decision-making, you need to give them leverage as well. This means bringing decentralization can cost more to an organization than the centralized version. The same goes for the financial world, as the technology for decentralizing finances is costlier. It will remain to be the case until decentralization is adopted by the masses.
Now that you understand the advantages and disadvantages of decentralization, it is safe to say that you now value decision-making even more. There are lots of people who think that decentralization can lead to the manipulation of power. But when it comes to the pros and cons of decentralization, the benefits are surely more than the demerits. Also, which aspect of the world does not have some demerits? The advancement of decentralization will bring about the ability to exercise more freedom and power for users across various platforms and industries. Not to mention the self-sovereignty it enables.
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