Learn more about the Decentralized Protocol

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Kirubakumaresh Rajendran

August 16, 2022 ยท 3 min read

Ethereum is a decentralized protocol that supports smart contract execution.

What does that mean?


Network Architecture

Network Architecture

A centralized system is owned by a single or group of entities. They provide value by facilitating transactions between the participants, unless otherwise it is hard to achieve. The vast majority of the systems with which we interact are centralized.

For instance, Facebook enables us to connect with friends and communities all over the world. While they have played a huge role in democratizing communication, they are centralized and are the sole authority of the network.

Web2 Centralized Architecture

Web2 Architecture

Is that a problem?

Some of the commonly raised issues are:

๐Ÿ”’ Data Privacy : They provide us free services in exchange for rights to our own data. How do we know that it safeguarded from hacks and misuse?

๐Ÿง  Censorship and Bias: We have to trust their system to provide us with unbiased information. They can change the rules at any time such as banning groups or individuals, increasing ad fees etc.

๐Ÿ›‚ Data Portability : Our data is closed behind their walls, and it is difficult for us to transfer data between platforms. As a result, despite whatever happens, we are stuck with them.

๐Ÿ’ฒ Monetization : While they monetize based on user-generated data, content owners are not rewarded fairly.

These issues are not unique to any one system, but are a common problems in centralized systems.

In a decentralized architecture, there is no single entity that controls the system. Instead it is run by a group of independent participants. Resources are not owned by anyone entity and every participant has complete access to it.

It promises to solve the problems that we face today with the centralized systems.

So, is Ethereum a decentralized Facebook or a decentralized bank or ?

No, Ethereum is a decentralized network and provides the infrastructure to build any decentralized applications (dapps) on top of it.

We could build

๐ŸŒ Social Networks (like Facebook, Twitter, Medium)

๐Ÿฆ Financial Services (Banks, Exchanges, Lenders)

๐ŸŽฎ Entertainment (Games, Arts)

๐Ÿข Organizations

and so on.

The opportunities are endless.

Instead of a central server, a decentralized application will run on a blockchain and everyone will have access to its data.

What happens if a social network like Facebook is built on Ethereum?

Web3 Decentralized Architecture

Web3 Architecture

The logic that defines the rules of the system and the interaction between participants is deployed to the Ethereum network instead of a central server. This is what we call "Smart Contracts".

Smart contracts are computer programs that are stored and run on the blockchain. By deploying to the network, the code becomes available for anyone to inspect. Since the network executes the code, there is no need for an intermediary to host and execute the code.

The smart contract's data will be stored in a decentralized manner.

  • Users and their post ownership will be recorded in the blockchain.
  • The actual content (images, videos etc) will be stored in a decentralized storage (such as IPFS/Arweave) since blockchain is not suitable for large files.

Anyone can access the above data to develop competitive insights.

For instance, We cannot query the Facebook database to retrieve all viral posts. However, with such a decentralized system, this is possible.

Sounds cool, Isn't it?

Aside from the example above, are there any real-world applications built on the Ethereum blockchain?

There are 2000+ dapps running on Ethereum network. Check here

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