Sandeep Garg

Sandeep Garg

blockchain, decentralized, web3 — July 2, 2022


Centralized vs. Decentralized system for business

Centralized vs. Decentralized system for business

The world is moving towards Web 3.0, a more decentralized system of networks and systems. The developments in blockchain technology are again revolutionizing the world of business just like the internet.

Blockchain is being anticipated as the ‘next internet.’

Earlier businesses worked on more centralized systems but with the introduction of blockchain, businesses are shifting towards decentralized systems.

If you are also planning to shift to the decentralized system for business then you have reached the right place.

We are here to provide you with some of the best use cases of a decentralized system for business/enterprise.

But before moving forward let’s understand what are centralized and decentralized systems.

Centralized System


A centralized system is a system where a central authority controls the system and its functions. Most of the businesses out there are currently based on a centralized system. The most common examples of centralized systems are social media platforms like Facebook and Instagram.

These platforms are governed by a centralized authority. It is based on the client and server relation model where the client fetches the information from the server. The central authority is required to monitor and verify the transactions in this system.

Businesses are using this system for a long time but it has several limitations and disadvantages. Some of the disadvantages of a centralized system in business are -

  1. A central point of failure
  2. Increased chances of database hacking
  3. Issues in horizontal scalability
  4. Increased pressure of decision making on the management

Various large organizations are working on centralized systems, but all are looking for better alternatives for more efficient management. Thus, now these organizations are switching toward a decentralized system.


Decentralized System


The introduction of blockchain technology has given rise to the use of decentralized systems. Multiple large organizations are now focusing on the development and application of the decentralized system. It is being seen as the solution to problems arising in centralized systems. It is making the management, control, and functioning of businesses more efficient.

So what’s a decentralized system?

A decentralized system is a distributed network where the control is not concentrated with a central authority. Instead, the nodes or systems in the network verify a transaction with the help of consensus. It is a highly secure network encrypted with cryptography which makes it almost impossible to hack. To a large extent, it has been able to solve the issues arising in centralized systems.

Decentralized systems are implemented in organizations in the form of DLT or Distributed Ledger Technology. Multiple sectors like banking and finance, education, agriculture, etc. are using distributed ledger technologies to make management more efficient.

Let’s see the business use cases of centralized vs. decentralized systems in business/enterprise and how businesses can leverage their potential to enhance business performance.


Centralized vs. Decentralized system uses in business


The inefficiencies and shortcomings of a centralized system have forced businesses to look for better alternatives. Also, there are multiple benefits of a decentralized system that has made it popular in the business world. Some of its advantages are -

  1. Transparency
  2. Scalability
  3. Distributed ledger and database
  4. Highly secured with cryptography and algorithms


Here is a comparative discussion on centralized vs. decentralized system uses in multiple sectors of business-

Financial Sector


The financial sector is one of the most centralized sectors in business. The economic crisis of 2008 gave birth to the need for a more decentralized, transparent, and secure system. This eventually led to the introduction of blockchain technology and bitcoin. There are multiple functions of the financial sector that are centralized and can be moved to a decentralized system. Some of the apt functions for the application of a decentralized system in the finance sector are -

  • Money & Payments

The application of distributed ledger technology is making the money and payment transfer system a lot more efficient for banks. The system becomes more transparent and reliable in comparison to the centralized system. DLT is promoted as a tool to facilitate the end-to-end transfer of payments. It removes the friction in transaction processing and makes the flow of information smooth.

Its implication helps the institution in eliminating the multiple intermediaries involved in money and payment transfers which leads to a more efficient system.

  • Financial Services & Infrastructure

Another use case of a decentralized system or distributed ledger technology is in financial services and infrastructure provided by financial institutions.

DLT is facilitating the finance sector with a more secure and reliable system for asset verification, security transfer, digital issuance, and settlements of securities.

The finance sector can avail of multiple benefits by creating financial services and products on decentralized systems. Products like insurance are based on smart contracts which enable automatic payouts and make the collection process more efficient.

  • Collateral registries and ownership registers

One of the major issues arising in centralized systems is in collateral registries, title transfer, and ownership registers. The whole process is very slow and inefficient. It involves multiple intermediaries who make the cost of the transaction higher. A decentralized system or distributed ledger technology comes in handy in resolving this issue. The system is governed by a distributed network that verifies the transaction, making the process faster, secure, transparent, and more reliable.


DLT-based applications in other sectors


A decentralized system can be applied to other sectors also. It helps in overcoming the problems faced by these sectors and helps in filling the gaps in the centralized system. Here are some other sectors than the financial sector which can implement a decentralized system -


  • Identity

Identity or personal data under a centralized system is highly vulnerable to hacking or data leakage. The privacy of people is a piece of sensitive information, and lack of security creates distrust among the people. DLT or a decentralized system protects the identity and personal information of people through cryptographic encryption and algorithms. It makes the system highly secure, and the ledgers in the network are nearly impossible to hack.

  • Trade & Commerce

Distribution ledger technology or decentralized systems are helping businesses to automate multiple business processes with the help of smart contracts. Businesses are implementing distributed ledger technology in supply chain management, invoice management, human resource management, trade finance, rewards and loyalty programs, etc.

Automation of small tasks in business using DLT is helping businesses to scale more rapidly and sustainably.



A centralized system has its own value in business but decentralized systems are enabling businesses and enterprises to move beyond limited scopes and explore new boundaries. This article focuses on centralized vs. decentralized systems for business use cases. It points out the various aspects of a decentralized system that make it a more reliable alternative to centralized systems.

We at Blostem are dedicated to developing a more reliable, secure, and transparent system with the help of blockchain technology for the exponential growth of your business. Blostem is built for the needs of Financial Institutes to collaborate with other organizations to enable seamless verification of Assets and enable use cases to deliver the next leg of growth.

Decentralized systems are the future and we are the vehicle for your future endeavors.