How Decentralization Adds Value to Businesses

How decentralization adds value to businesses

Before we discuss how – or if – decentralization can add value to businesses and industries, we have to understand how the current model works, and why it is so vulnerable.

The database architecture of today

Today, all online transactions we conduct and our personal information are stored in databases and/or distributed systems (which is simply a cluster of database replicas) that is hosted (or belongs to) a certain company or corporation, depending on which service you are using. If you are using Facebook, the data of every field you have filled out, and every question you answered during the registration process, are stored in a database belonging to Facebook. All this information is the property of Facebook (as stated in their Data and Privacy Policy), and they can use it for whatever purpose they wish; such as selling it to third-parties for advertising purposes, for example.

The same goes for the financial sector in the banking industry. All your personal information and your current balance, amongst many others sensitive personal data, are all stored in databases. Again, these databases are the property of the bank at which you have an active account at. The exact amount you currently possess in your bank account are mere digital numbers that are stored in a database.

The issue with this architecture of having data stored in centralized database is that there is (i) a single point of failure, and (ii) the ability to manually alter the values. This poses serious security and trust issues.

We wrote an in-depth article on the issues on Architectures with Single Point of Failure vs. Blockchains.

Benefits of using a blockchain

By changing from traditional database systems (or distributed systems) as they exist today to decentralized blockchains, the security threats and trust issues mentioned above will become non-existent. This is a huge advantage for any business or industry. By using a decentralized blockchain for record keeping, smaller, unknown businesses can benefit tremendously from the blockchain’s inherent properties which are:

  • Immutability: the inability to alter data in the blocks once it has been written to the chain.
  • Decentralization: the distribution and a copy of all data which are stored throughout the world in nodes belonging to different entities.
  • Safety: the distribution of data in different nodes eliminates the safety issue of the single point of failure.
  • Transparency: anyone connected to the chain can read on-chain data without permission (if the blockchain is public).
  • No entity can see your sensitive personal data as they are encrypted before being added to the block.

These properties can build trust. The users can rest assured that the owner or entity cannot change any data written on the blocks. The users, in case of doubt, can easily trace and verify transactions back to its origin by looking at the hash of any block. In other words, with trust, small, unknown companies can easily enter a market and have a lot of user’s trust without establishing their brand first when using a blockchain.

Blockchain use cases

In today’s society, there are a lot of industries which could be improved if they were to switch from traditional databases (or distributed systems) to a blockchain. Let’s examine a few examples of different industries to give you a better idea of how blockchains could be implemented for the advancement of said industry, or to improve the user experience in it.

  • Financial sector – Transactions: Eliminating middle-men (payment gateways, banks, etc.) can lower transaction fees. Transactions with cryptocurrencies can make international payments easier, faster, and cheaper.
  • Online service sector – Escrow services: Using smart contracts escrow is possible without additional costs or third-parties. The buyer sends the money but it does not release them until all conditions in the smart contract are satisfied.
  • Non-profit organizations – Charity: A lot of people, including myself, are in doubt as to where and how much donated money actually reaches its claimed destination from charity non-profit organizations. Using blockchains, an organization can prove that money from donators have been actually spent for the purposes intended (transparency property). This can encourage donators who hesitate to donate as they are not sure how their money will be spent.
  • Other use cases: There are many other use cases for blockchains. Pioneers who can implement their decentralized solution can gain a significant competitive advantage compared to other applications that are centralized.


Blockchains have a lot of potential to boost industries which in turn will boost the economy as a whole. But in order for industries to adopt blockchains, they would need to accept cryptocurrencies, too (which we will discuss in a different article).

Blockchains have already be proven to be secure, immutable, and to work on a global scale, and it is only a matter of time, in my opinion, until the general public will accept and embrace them.