Blockchain technology is integrated into many business firms and organizations. The decentralized nature of blockchain distributes power to all the members of the organization rather than keeping it centralized. By prioritizing the participation of every member of the organization, decentralized platforms help in smart governance.
What are decentralized platforms?
A decentralized platform distributes control and information across the network, allowing all the nodes to participate in the decision-making and governance. In a decentralized network, not a single person or entity owns or manages a network, instead, all the participants have an equal share in control and management. Decentralization eliminates the need for trust that one participant must hold on to another and also the ability to control other participants.
How does decentralization work in blockchain?
A blockchain consists of a large number of blocks connected to each other. The data is spread among different nodes located at various locations preventing the chance of altering records. No single record can alter data, it requires altering whole nodes, which is impossible. The addition of new blocks, the validation of transactions, and all other activities are monitored by all the participants of the blockchain.
All cryptocurrencies are not decentralized, there are cryptocurrencies operating on centralized platforms. The power of adding new blocks and checking the validity of transactions is entitled to selected people in the centralized system.
Advantages of decentralized platforms
1. Trustless environment
In a decentralized platform, trust is not important, no one has to trust the other party of the network. This is because a decentralized platform utilizes distributed ledger technology to record transactions.
2. Data reconciliation
Business firms share and exchange information with each other, which is then stored in each party’s data consoles or devices and extracted when needed. Continuous transactions of data can cause data loss and the addition of incorrect data to the mainstream.
By implementing decentralization, all system participants have real-time access to data, allowing them to view and verify its accuracy.
3. Mitigation of failures
Decentralization eliminates the possibility of a single error causing the entire system to fail. Being a distributed network, if one entity is damaged or unavailable others can handle the task.
4. Security and transparency
Decentralized platforms are visible to the public, everyone can see and analyze the transactions in the network. By employing encryption technology, decentralized platforms offer more security than centralized platforms. Decentralized platforms either use a private key or a public key for the encryption of data.
5. Immutability
Decentralization keeps the data immutable, i.e., the data can’t be altered or removed when once written. This is because each node is connected to the other and each alteration must be confirmed by each node, which is next to impossible.
6. Full control
Unlike centralized platforms, where decision-making and governance are handled by a few people, a decentralized platform provides power to every participant involved in the platform.
How decentralized platform promote smart governance?
Decentralized platforms allow token holders to take part in the decision-making process. Participants can cast votes on decisions including security features, fee structures, and protocol upgrades. By distributing the decision-making power among all the participants, the platform ensures transparency and creates a sense of being valued. It also helps to create community involvement and enhance the sustainability of the platform.
Instead of a central authority controlling the decision-making and governance, all the participants collectively engage in the decision-making process. Decentralized governance helps platforms to quickly adapt to new changes and innovations. With ideas from different users, the platform can stay up with the trends and meet the needs of the community. To promote smart governance in decentralized platforms, secure and reliable smart contracts, effective voting mechanisms, and smooth operation of the platform are necessary.
Challenges of decentralized platforms
1. Coordination issues
In decentralized platforms, decision-making can be challenging. Because all of the participants are involved in the decision-making process, obtaining an agreement might be challenging. Getting everyone to agree upon a decision can be time-consuming and complex.
2. Security risks
The openness of the platform allows all participants to view the transactions made on the decentralized ecosystem, creating opportunities for hackers to exploit the transparency. In recent years, many cases of hacks and scams have been reported in the blockchain network, fostering the need for strong security policies.
3. Regulatory complexity
Decentralized platforms are subject to regulatory guidelines. Balanced regulatory guidelines benefit the platform while strict regulations can deteriorate the system.
Final Thoughts
Unlike centralized platforms, which have a central authority to monitor and manage the working of the system, decentralized platforms share the power among all the participants of the platform. Decentralization helps to access all the data in real-time eliminating the chances of data loss and errors. Being a platform without the need for intermediaries, decentralized platforms offer low-cost and high-speed transactions. All the entities of the platform can take part in decision-making and governance, opening an opportunity for engagement and adaptability.