Most of the systems that exists at present, in 2021, falls under the category of centralized system. All the big tech giants such as Facebook, Google, Microsoft, Twitter, hashnode, WordPress and countless others, are based on centralized architecture, as they are governed by respective organization which has full control on it. However, in recent past, decentralized system started budding up and growing phenomenal.
Centralized system/architecture
Let me explain you the centralized system/architecture in over simplified way with the help of some examples,
Traditional Banks
The existing Banking system (Nationalized bank, International banks, Private-Public banks) is the best example of centralized system. Your account status, money in the account, transaction limit etc.. ,are managed by them and they have full control over it (literally, full control - trust me !). At any point of time they can freeze your account or lock money in the account, impose a revised transaction limit/charges (upon their internal discussion/agreement).
Social Networking sites
All the social networking sites such as FB, Insta, Twitter, LinkedIn etc... are a centrally controlled/operated organizations. They might have several servers located geographically (distributed architecture - which is my next topic) but still they are managed by the respective organization. They have full control over your data, activity - that's why you get advertisement of same product you searched in the past. They can track accounts, suspend/block it for some duration, can control how many requests you can send per day/hour or even delete your account.
I am sure, you would have got some basic idea about what is centralized system. They are also referred as web2. Let's see some of the characteristics of web2
Managedby one person or organizationFull controlover use data (can manipulate data without prior information)Single point of failure(cab be improved with distributed architecture - don't confuse now.. just know this)- The entire system can be
taken down(many a times google, Facebook, twitter were down for some duration)
There are some benefits of Centralized system/architecture associated as well,
- Data/Information propagates extremely fast as it is handled by a central authority with hell lot of computing resources
- These systems are relatively easy to maintain and manage, therefore widely adopted
- They have high performance in terms of volume data transfer, data processing, fetching and number of transactions per second
- Coordination among network participants is much easier
- Decision can be made faster and smoother (with minimal hassle)
then what the hell, is Decentralized system ?
Decentralized system are those systems which are (or can not be) not managed by any one person/organization rather managed by n number of people, participating in the network.
-- you didn't get managed by n number of people what does that mean? same question was there with me, while I was learning for the first time. Let me get more deeper, I will make you understand. Please be with me :)
Have you ever heard of Torrent ? If yes, then you know a part of it and if not then ask someone or make a search on internet.
The torrent is peer-to-peer communication based system. When you are downloading a file (let's say a movie ~1GB) using any torrent client like BitTorrent, it is not fetched from any central server rather there are several nodes (computer run by guys like you & me, connected to internet) which provides a specific part of the movie (there goes a complex logic in selecting a node that should serve the current request and how to handle failures -- very high level topic which is not required as of now).
After the downloading is complete on your system, you will notice that the status shows as seeding --> this means now you are acting like a server-node to serve someone else's request. In simple way, you are consuming as well serving the data. There would be millions of users connected to this system by just installing the client application like BitTorrent on their machine. This type of system can not be taken down and are run by N-number of participants (node).
Don't get confuse with peer-to-peer as it is backbone of 'Decentralized system`
💡 did you got any idea ?, if not i would recommend you to just read the above para one more time !!
Decentralized web is popularly known as web3 or web3.0
What is the need of Decentralized system/architecture?
Decentralized system is not just a fancy term in 21st century rather it is need of the hour. At present we are using internet dominated by companies that provide a few free services in exchange for our personal data. Making an oversea money transfer is cumbersome, time-consuming as well as pretty costly (transaction fees, levied upon by all the third-party involved in the process). At the same time, web3 is not a silver bullet that can be applied to solve any problem. The potential usecase, advantages and consequences need to considered before choosing this umbrella.
We need such decentralized system, because of the following reasons
1 Decentralized system brings in the trust between two unknown parties (in another way, you don't need to know the other party before making a transaction)
2 Ensure data security and almost impossible to be hacked (principle of blockchain .. more on this in upcoming blog)
3 It eliminate any/all middleman/third-party during a transaction between sender & receiver. Sender has to pay a very very small transaction fees (Gas fee).
4 Since it is Distributed, Peer-to-Peer model, so there is no single point of failure (It is impossible to take down the entire system).
5 It enforces Censorship resistance - once transaction enters blockchain, it is nearly impossible to alter, also it handles the dispute extremely well
6 THE BEST part is - It is open to all; Anyone and everyone is allowed to take part in web3 ecosystem, they can help in the growth of community, participate in validation (as miner) as well as can build application to solve a Realworld issue.
web3 applications ..
web3 is in its early stage. There is way long to go. In its nascent stage itself, web3 has numerous applications that are very practical as of today. People are going crazy about it, everyone in this space is heavily investing their time, money, energy and idea !! Talking about some of the real-world use cases of web3, they are
NFT Non Fungible Token You can tokenize your digital asset and you can buy other's NFT (digital asset) or sell any NFT that you hold. It is a huge topic and I will dedicate a full blog of NFT very soon.
DAO Decentralized Autonomous Organization are internet-native organizations collectively owned and managed by their members. A decentralized autonomous organization (DAO) is an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain. DAO's are getting much more prominent and popular since couple of years.
Cryptocurrencies common who doesn't know about this burning topic !. A digital currency powered by blockchain technology that help you to make transaction, trade and store it as a digital asset. There are thousands of cryptocurrencies out there in the market and every week new coins are getting generated. This is huge topic in itself.
DeFi Decentralized finance can be thought of as a Decentralized virtual bank which facilitates all the primary activities that a real-world bank does such as lending, borrowing, transaction, staking etc... There are so many app which acts like a bank and provide all these aforementioned features.
Blockchain based Games In recent past, Gaming industry is one of the few booming sector which is coming up with all futuristic features. Now the traditional games are making use of blockchain to add additional functionalities such as buying and selling
DEX Decentralized exchange is a place (app/website) where people can buy any cryptocurrency using a real money (aka fiat currency), exchange between different currencies, can do trading (both short term & long term) as well as sell them. Unlike the traditional stock exchanges, it is operational 247365. It is can be compared with the existing stock exchanges like NSE , BSE, US Stock exchange etc..
who are using decentralized concepts ?
There are a tons of players (organizations) which are utilizing the sheer potential of blockchain to build products on top of them. Some of these organizations are building open platform where several type of application can be hosted, example of such companies are Ethereum (pioneer in this space), Solana, IBM, Microsoft etc..
There are other categories of companies which help is scaling up the exiting blockchain as well as provides great transactions speed at low cost (mostly known as layer 2 solution). Some of the companies in this domain are Bitcoin Lightning Network, Ethereum plasma, Polygon Matic etc.. There are lot of work happening in this area as the main blockchain network are still not able to clock thousands of transactions per second (TPS).
When it comes to Buy/Sell, trade and stake cryptocurrencies, there is need for some sort of exchanges which allow people to do all of these. There are several exchanges available as on today such as Binance, Coinbase, WazirX, Gemini, CoinDCX, CoinSwitch Kuber etc.. and many more are in the emerging list.
There are many gaming company such as Axie Infinity, The Sandbox, Cryptokitties, Decentraland, Gala, WAX, Ultra and tons of other, which uses the underlying principle of blockchain to build game on top of it. They are getting a lot of traction now and people are going crazy playing these games.
The other area is NFT Marketplace, this is getting insane, Seriously, you will definitely heard of this term 'NFT'. Creators are shipping out their unique digital contents such as art, music, image, book, avatar, design, animation etc.. in the form of NFT. The game companies also hosts the accessories pack, game elements as NFT for players to buy. Now people are also buying virtual properties such as land, plot, shops, services etc... by paying 1000's of $$
Metaverse will bring a lot of opportunities for both creators and consumers.
There are several other opportunities, which are yet to be discovered.
does web3 has limitations ?
Web3.0 is powered by blockchain and blockchain has a very interesting Trilemma (aka blockchain Trilemma). Decentralization, Scalability, and security represent the core features of blockchain technology and two features out of three can be improved at the cost of third one.
Decentralization - Rather than being managed by a single entity, blockchains distribute control over the network equally to all participants
Security - Blockchain networks must have defenses mechanism that prevent malicious node from bringing any sort of data alteration
Scalability - Blockchains should support an enormous number of transactions and users for the mass adoption of this technology
Let say, if an application need to be fully decentralized and it has to have high security as well then in this case, scalability (or speed) has to be compromised. In other case, where an application need not to be fully decentralized but should have high security then it can also scale as required.
Disclaimer: Blockchain Trilemma was coined by Vitalik Buterin (co-founder of Ethereum) where he says one featured has to be sacrificed at the cost of other two. However, there are still ambitious developers who believe that all these features can pulled up without loosing anyone of them.
In summary, these are a few limitations of web3 as on today (might not be there in the future).
- Scalability - Slower transaction speed
- Poor UX at the moment (interacting web3 components need a bit extra effort)
- Less accessibility with modern browser - will be solved in very near future
- Transaction cost still goes up pretty high even for small amount - some Layer2 solution exist but they aren't mass adopted yet.
what will be the future - does web3 takes over web2 ?
Oh are you scared of this heading or do you have a mixed feeling on this. We are living in a wonderful world of Information Technology and internet has just evolved in last 20 years or so (I am talking about web2 specifically). Such a great application, websites, webapp and millions of amazing products have been built with it and web2 will continue to coexist with web3.
In fact, web3 will add a few additional dimensions to the existing web which makes the user data more secure, a digital world to exists parallelly Metaverse, trustless transaction will be common and much more.
Are you excited about web3 ?
Thank you so much for your time and I hope you have learned some valuable insights from this post. I will be bringing more such articles regularly which would help you gain knowledge at one place.
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