Types of Decentralization
The term decentralization refers to the transfer of supervision and decision-making from a centralized association to a dispersed network. From a blockchain perspective, this means reducing the number of participants who control and operate the system. The goal is to make the system more robust and resilient to attack.
In business, the decentralization of authority can be beneficial for companies with diverse product lines or a geographical presence. This type of organizational structure also allows businesses to better serve their customers through social media and email by removing a single point of contact. It can be difficult to standardize communication and reporting in a decentralized system, though.
Decentralization can be a good strategy for smaller companies that may not have the resources to maintain a centralized management structure. In addition, it can help speed up decision-making by allowing lower levels to take immediate action on important issues that need to be resolved.
What Are the 4 Types of Decentralization?
As more work in our economy becomes knowledge work, decentralization can be an effective way to promote creativity and innovation. By empowering people at the front lines, managers can let employees use their skills and creativity to solve problems and improve processes. It can also provide a more stable and consistent level of customer service because employees are closer to the customers.
The most complete form of decentralization from a government perspective is privatization and deregulation, which transfer policy and administrative functions from the central government to private enterprise or non-governmental entities. This typically involves transferring public functions to local councils, semi-autonomous community development corporations, special service districts, or even regional development corporations. These organizations are often exempt from constraints that apply to civil servants, and they can charge user fees for services provided.
This type of decentralization is a major part of the Total Quality Movement and early corporate experiments with flexible work practices, including self-managed teams. The goal of these systems was to empower employees to work independently without the need for supervisors to monitor their activity or provide detailed instruction. This can be an excellent method for promoting employee satisfaction, especially in high-stress environments.
The decentralized structure can be a good idea for companies with multiple locations or those that want to expand into new markets. It can also be helpful for companies that have a wide range of products that require the expertise of different industries to create, manufacture, and market properly.
In the blockchain industry, the most common kind of decentralization is the deployment of a network across multiple platforms. This helps make the network more resilient to attacks because it diminishes the number of sources that can be compromised by hackers. It can also increase the speed of transactions by reducing the amount of time spent on verification.
Another benefit of decentralization is that it can allow for more efficient data storage. By distributing the database, it is less vulnerable to outages caused by one source or system bottlenecks. It can also increase transparency, as all users have full access to the entire database. It can also reduce downtime by removing the need for a centralized single-party processor to process transactions. Instead, the transaction data can be stored by a large number of parties on different servers around the globe.