Those in the blockchain sphere have come to know “P2P” to mean peer-to-peer, or in other words, a way to describe the infrastructure of a decentralized system such as Bitcoin. Celsius Network relies on peer-to-peer networks, and decentralization remains at the core of what makes blockchain and cryptocurrency technology so exciting and dynamic. However, when we talk about “P2P” at Celsius, our definition goes beyond the technical language and hits at the deeper importance of decentralization — Power to the People. The purpose of Celsius Network, of cryptocurrency, and of blockchain technology is to disrupt centralized networks to do just that — transfer the power from large (not to mention greedy and/or untrustworthy) middle-men into the hands of every day working class people.
Lately, it seems everyone has been talking about decentralization. It may even seem like “decentralization” is just another buzzword. But for us, decentralization is the next step forward in creating the future infrastructure of the Internet and the global economy. It’s way more than just a buzzword, so here are five reasons why we believe decentralization is essential to bringing power back to the people.
You Can Rely on Decentralization
Back in summer 2018, the Visa payment network went down for nearly all of Europe. During this time, anyone trying to make a purchase with their Visa card was met with a screeching error message thundering out of the credit card terminal at their favorite store. This outage affected millions of people and prevented countless transactions from going through. This caused not only a massive inconvenience for shoppers but serious income lost by retailers across the region.
Why did this happen? One reason is because Visa is a highly centralized system. All these network transactions need to go through an approved transaction processing hub. If that single hub goes down, then millions of people will find themselves with nothing more than a useless piece of plastic when they’re trying to buy their groceries. When a centralized system fails, it essentially renders the currency useless.
Now let’s compare this to the bitcoin network. Since its launch, bitcoin has never had an outage of any kind. No matter how much stress the network is under or the number of malicious attackers trying to target the network at once, the bitcoin network simply will not go down. Why? Because bitcoin has a decentralized structure.
To understand this better, let’s use an analogy. Imagine that you live in a big city that has one enormous super hospital and no other form of healthcare. Now let’s imagine that there is an outbreak of a contagious illness like a new form of the flu. In order to get treatment, everyone in the city needs to rush to a single point trying to fighting and struggling to get the attention of a doctor. No matter how big the hospital is, there’s no way it would be able to support everyone if enough people got sick at the same time.
Now, let’s say that the single hospital is shut down due to a natural disaster. What then? This is the problem with centralization. It relies on putting all of the resources together in one spot, the intention it will be more efficient and easier to control. The problem is with this model is that it introduces what’s known as a single point of failure. In other words, if the centralized resource goes down for any reason, the entire network goes down or is severely crippled.
Using our hospital scenario above, what would be the decentralized approach? The answer would be dozens or hundreds of small neighborhood clinics. If many people were getting sick at the same time, they could go to their nearest clinic instead of all trying to go to the same mega-hospital. Likewise, if one of the clinics is unable to serve customers, say due to a power outage, then the other nearby clinics would pick up the slack dispersing traffic amongst many smaller entities.
In short, decentralization matters because it’s still reliable if another part of the network isn’t functioning.
Can’t Hack This
It seems like every few weeks we’re hearing of another massive data breach that reveals countless private records of innocent individuals and families. One big example of this was the Equifax hack where hundreds of millions of Americans had their identity information stolen or compromised.
Why did this happen? Equifax decided to store all their data in a centralized way. They built a single location that stored nearly all of their customers’ data, put a digital padlock on it, and hoped that nobody would bother trying to break in. Obviously, that didn’t work.
Let’s use another analogy. Let’s say that a wealthy person puts all of their gold into a single vault. They guard this vault with high-tech security features, 24-hour armed guards, and so on. But since there’s so much gold in this vault, the most highly skilled and effective thieves are inevitably drawn to it. One of them manages to successfully break in, and in one moment, all of the gold is stolen.
A decentralized approach to this would be to store the gold in small pieces all over the world. That way, no single target is particularly attractive enough to draw the top end thieves. More so, even if one of the smaller stashes is stolen, it represents just a tiny fraction of the total amount of gold.
Decentralized blockchain technology is actually far more advanced than this. Not only is there no single point of attack inherent in blockchain design, but everything is encrypted by default in such a way that no matter how many hundreds of billions of dollars are on the line, no one has ever managed to successfully steal cryptocurrency directly from a robust cryptocurrency network like bitcoin.
In short, blockchain matters because it’s virtually hack-proof and doesn’t create honey pot targets.
No Need to Have a Little Faith
When we rely on centralized institutions, we are giving them our trust. We don’t know what a bank does with our money. We don’t know what the credit card companies do with our identity information. We don’t know what our Internet providers do with our browsing history. All we can do is hope that these companies will act in a way that’s beneficial to us, and that they will keep our information secured.
The reason why these companies and systems require our trust is because that’s simply the ways that centralized systems work. There’s always a single person, group, or company making all the decisions, whether or not we agree with them. What’s worse, there’s very little (if any) transparency in how things are handled. Try calling up your credit card provider and asking them where exactly your personal information is stored, i.e. in what server farm and in what part of the world. It’s safe to say they won’t agree to tell you anything.
Decentralized systems, on the other hand, are designed from the ground up to be the exact opposite of this. Everything is transparent, and no trust is required for anything. If you hold bitcoin in a bitcoin wallet, you can rely on your own tools to verify your ownership of that bitcoin.
When you send someone bitcoin, you can verify that it arrived at its destination successfully without having to rely on a third party to “verify” the exchange. When you receive bitcoin from someone else, the sender can’t suddenly change their mind and appeal to a central authority to ask for their bitcoin back. These scenarios require trust in a centralized institution which is antithetical to decentralized design.
In short, decentralization matters because with it, we don’t have to trust anyone but ourselves. As the classic saying goes: don’t trust, verify.
Don’t Fence Me In, or Shut Me Down
Let’s imagine what would’ve happened if Satoshi Nakamoto created bitcoin in a centralized way. Perhaps they would’ve registered a bitcoin company, rented a bitcoin office, and so on. If this it happened, then the bitcoin network would not be the decentralized powerhouse that it is today. Instead, quite likely the local government of wherever Nakamoto set up business could have easily shut it down in an instant. If the network were also centralized at a single location, then it too could just as easily be shut down.
Instead, the bitcoin network we have today is so robust because it is decentralized. It is made up of nodes spread all around the world. That means if all the nodes were to be shut down in one area, others would continue supporting the network and processing transactions.
The fact that cryptocurrency networks can be so robust is also one of the reasons why cryptocurrencies are able to maintain their value over long stretches of time. If cryptocurrencies were always under threat of being shut down or censored, people would not trust them to be a long-term store of value.
In short, decentralization matters because decentralized systems can’t be shut down or censored.
We Built This Network
Banks exist for one purpose — to earn a maximized profit. The profit they earn is for them to keep. The bank’s customers in the community where the bank operates typically see no such benefit as that profit will never be shared with the community or society at large. This results in banks getting richer through extracting maximized profits from individuals and giving essentially nothing back.
With a decentralized system, anyone who wants to participate in supporting a cryptocurrency network can do so. There are no rules that say only approved miners can mine bitcoin or Ethereum. This means that in a decentralized system, anyone who wants to participate can directly benefit from the operation and success of a network. In fact, the success of a network relies on input and consensus building from individuals around the world.
Decentralized cryptocurrencies also include a number of projects that operate on proof-of-stake principles. With a proof-of-stake system, no mining hardware is required. Instead, all you need to do is hold onto the given currency and run an online node such as your personal computer. Just by holding and supporting the coins, you’re strengthening the given network, helping to process transactions and earning a reward for doing so.
In short, decentralization matters because it benefits us all, not just an elite few.
Beyond the Buzzword
The truth is decentralization has become a bit of a buzzword in recent years. However, it’s become a buzzword for a reason — it represents so much to so many different people.
Decentralization is what we are all about at Celsius. That’s why we built our platform on Ethereum, one of the most robust and decentralized networks available today. That’s also why we want to support cryptocurrencies of all different shapes and sizes so that more and more individuals can decentralize their financial future.
For us, decentralization isn’t a buzzword. It’s a way of life.
What do you think about decentralization? Is it the future of our global economy and online infrastructure, or just a passing fad? Let us know in the comments below.
About Celsius Network
Celsius Network is a democratized interest income and lending platform accessible via a mobile app. Built on the belief that financial services should only do what is in the best interests of the community, Celsius is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions. Crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrow USD against their crypto collateral at interest rates as low as 4.95% APR.
Download the Celsius Network app and start earning interest on your crypto today ➡️ celsiusnetwork.app.link