Decentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal.
What Is Decentralized?
An example of such a system would be a business that relies on franchising to expand, in which willing individuals are allowed to purchase a franchise, open their own branch of the company and make independent managerial decisions in regards to hiring, workflow organization and so on.
By the virtue of not relying on a central point of authority, decentralized organizations become more robust than their centralized counterparts; unlike in the latter, where a malfunction of the governing entity disables the entire organization, decentralized systems continue working even when one or several parts of them cease operation. They are also more democratic and less prone to censorship.
Decentralized organizations have disadvantages too, which mainly stem from a lack of unified vision and a clear separation of responsibilities. This tends to result in reduced efficiency compared to a single-minded centralized organization.
This problem is demonstrated by the fact that in 2020, Bitcoin’s network consumed over 70 terawatt-hours of electricity — comparable to the entire country of Chile — despite it being able to process only about four to seven transactions per second.