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System Design: Centralization vs. Decentralization

In centralized system, energy costs are borne by the existing system. The system itself must scale to accommodate new nodes.

In a decentralized system, energy costs are borne by the nodes. Each node has “skin in the game.”

COMPLEXITY

In order to grow, centralized systems must add functionality along all vectors.

This process requires significant energy costs in the form of development, administration, and in many cases, compliance.

Decentralized systems can grow simply by adding a node.

FRAGILITY

In centralized systems, the system itself is responsible for everything.

Because of this, attacks on one part of the system can threaten the stability of the entire thing.

Here’s where things get interesting:

Given their high energy costs, Centralized systems must keep adding nodes (as this is how they gain energy).

But in order to address fragility, resources must be re-allocated toward redundancy and security.

This means centralized systems must pull resources AWAY from growth—the sole means of survival—in order to address fragility.

If fragility goes unaddressed, the system will eventually be taken down by external threats.

So a balancing act is necessary.

(Central bank, anyone?)