Crypto ELI5 Part 4: What is decentralization?

In Crypto ELI5, Cryptocurrency by Juan PortilloLeave a Comment

This is part 4 of a series of short cryptocurrency “explain it like I’m five” posts. If you’re just joining us, start here: Crypto ELI5 Part 1: What is a blockchain?

This series of blog posts is meant for the absolute beginner in cryptocurrency. They are also meant to be concise and easy to understand. If you’re interested in learning about crypto, some of the history of crypto, and how to get started with using crypto, follow along! We’ll be adding a new post daily and each post will build on the one previous to it.

What is a decentralization?

A decentralized system is one that is not owned or controlled by a single or small number of entities. 

In a centralized system, as in the case of traditional money (fiat), control is held by banks and governments. 

In a decentralized system, as in the case of cryptocurrency, the blockchain is run and maintained using the computing power of many nodes owned by users around the world. This makes decentralized systems more democratic in nature. Users don’t have to put their trust in a single entity like a bank to ensure the safety of their funds. In fact, since activities in a decentralized system are distributed, it makes the system almost impossible to be shut down or controlled by a single authority.

Check out the next installment in this series: Crypto ELI5 Part 5: What is DAO?

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