December 7, 2022

What is a decentralized network? Definition, benefits, and challenges

The term “decentralized network” often comes up when talking about blockchain technology. But many people still aren’t sure about the exact difference between decentralized and distributed networks or which benefits a decentralized network offers over a centralized one.

What is a decentralized network? How do centralized and decentralized networks differ from one another?
Keep on reading to learn what a decentralized network is, its advantages, and how to solve the most critical challenges it poses to blockchain projects. To understand the value of decentralization, we compare its features to a centralized network.

What is a decentralized network?

Let’s start with the definition. According to the National Institute of Standards and Technology, a decentralized network is:
“a network configuration where there are multiple authorities that serve as a centralized hub for a subsection of participants. Since some participants are behind a centralized hub, the loss of that hub will prevent those participants from communicating.”

A decentralized network is basically a computing environment or platform where multiple machines handle workloads, not a single central server. This type of network is often used for applications with high computational demands (for example, heavy-load tasks).

Decentralized networks: pros and cons

Benefits of decentralized networks

Decentralized networks offer a number of benefits over more conventional centralized network management, such as increased stability, scalability, and privacy.
Decentralization allows for greater uninterrupted service in the event of a disaster affecting a single node in the network. That’s because the nodes don’t rely on a single central server to process information.

In addition to this, decentralized networks are much easier to scale since you can add more machines to the network to get more computing power. They can also be more private than centralized networks because the information doesn’t pass through a single point but rather through a number of different points (nodes).

Challenges of decentralized networks

Decentralized networks come with their issues. High maintenance costs make decentralized networks less suitable for small organizations.
Also, centralized systems are more fault-tolerant than decentralized systems. As a result, decentralized networks are often not as suitable for organizations requiring only a small system for larger organizations.
Coordination issues may also arise if primary nodes within a decentralized network fail to communicate with one another.

What is a centralized network?

In a centralized network architecture, the main server performs most of the data processing, and less powerful machines connect to the server and submit their requests to the main server. This can include many types of services, from applications to data storage and utilities.

Centralized networks: pros and cons

Benefits of centralized networks

A key advantage of centralized network management is its high consistency, efficiency, and affordability. Today, most network administrators are under pressure to keep their machines patched and up-to-date. Imagine that you have one central server that controls the entire network. Your job is much easier because you’re dealing with fewer IT management tasks and fewer admins involved in them.
Moreover, all the data on a centralized network is required to go through one place, so it’s straightforward to track and collect data across the network.

Challenges of centralized networks

Centralized networks have their downsides. If the central server goes down, the individual “client” machines attached to it can’t process user requests. How badly can this impact your network? This depends on how much your server processes. Suppose your client machines do a little more than submit requests – in this case, the system availability can be totally compromised.

They also offer limited scalability. Since all of the applications and processing power are locked in a single server, the only way to scale your network is by adding more storage, I/O bandwidth, or processing power to the server—which won’t prove cost-effective in the long run.
Suppose your business fluctuates from periods of high to low activity. In that case, you may find that a single server can become a bottleneck because it has trouble handling the number of requests for work at any given time.

Moreover, server maintenance may involve temporarily powering off the main server. This will likely bring about other issues like service interruptions and consequent inconvenience/diminished reliability from a user perspective.
What about security? Having a single point of failure increases the likelihood of security breaches or disruptions from cybersecurity threats (like DDoS attacks). It’s simple – there’s only one target to compromise in this scenario.

What is a distributed network?

A distributed network is quite similar to a decentralized network. It forgoes a single central server in favor of multiple network owners. However, the distributed network nodes are interconnected, meaning that data ownership and computational resources are shared evenly across the entire network.

Interestingly, the term “distributed network” is sometimes used to describe a geographically distributed network but follows a top-down node hierarchy model. Most of the time, it’s a network where node locations and computational resources are distributed evenly.

Centralized vs. decentralized vs. distributed network – key differences

Centralized networks were created to improve efficiency and take advantage of potential economies of scale. On the other hand, decentralized networks aim to improve the speed and flexibility of your network by placing the processing power with the individual user.

What about distributed networks? Since the entire network doesn’t have a central server or a separate set of primary nodes, the job of data processing becomes crowdsourced across the network. As expected, all users are granted equal access to data.

As you can see above, all of these setups have their advantages and disadvantages. There is no definitive answer as to whether one is better than the other. It would help if you appraised this on a case-by-case basis based on your needs and how each fits with your business.


When comparing the benefits and drawbacks of network architectures, keep in mind that no configuration is superior to any other across all environments. That being said, the modern Internet was largely built atop centralized networks, so most legacy systems involve some form of centralized configuration.

A lot of innovation is taking place via the wider adoption of decentralized and distributed network structures that can address many limitations of legacy system architectures.

For instance, decentralized and distributed systems can potentially actualize previously theoretical applications such as decentralized finance and the creation of self-sovereign identities.

As network configuration options continue to expand, organizations will be able to choose between a variety of network architectures tailored to their needs rather than trying to manage with a limited set of network models. This may lead to a shift toward more decentralized and distributed networks.

December 7, 2022