Decentralization

Decentralization using Blockchain
Mr. V. M. Vasava
GPG, Surat
IT Dept.
Agenda
• Decentralization
• Need of Decentralization in blockchain
• Types of Decentralization
• Advantages and Disadvantages of
Decentralization
Decentralization
• Decentralization in blockchain refers to the
transfer of authority and decision –making from a
centralized entity(person, organization or group )
to a distributed network.
• The decentralization of computing or processing
power is achieved by a blockchain technology
such as Ethereum, where smart contracts with
embedded business logic can run on the
blockchain network.
• In a decentralized blockchain network, there is no
single point of control or authority.
Decentralized
Ecosystem
Decentralized ecosystem
• In the bottom layer, the Internet or mesh networks provide a
decentralized communication layer.
• In the next layer up, a storage layer uses technologies such as IPFS and
BigChainDB to enable decentralization.
• Finally, in the next level up, you can see that the blockchain serves as a
decentralized processing (computation) layer.
• Blockchain can, in a limited way, provide a storage layer too, but
that severely hampers the speed and capacity of the system.
Types of Decentralization
• Fully centralized
• Semi-Decentralized
• Fully decentralized
Advantages
• Increased security and resilience
• Enhanced trust and transparency
• Reduced counterparty risk
• Democratization and accessibility
• Redundancy and data integrity
• Interoperability and cross-border transactions
Smart contract
• A smart contract is a decentralized computer program that directly and
automatically controls that transfer of digital assets between the parties
based on predefined conditions.
• A smart contract is a self-executing contract with the terms of the agreement
directly written into code.
• These contracts run on blockchain platforms like Ethereum and are enforced
by the underlying blockchain network.
• Proposed by Nick Szabo in 1994
• A computer protocol that executes the terms of the contract
• No third party is required
• Trackable and irreversible transactions
Buying Home
Features of Smart Contract
Autonomy: Smart contracts operate automatically without the need for intermediaries once
deployed on the blockchain.
Decentralization: They are stored and executed on a decentralized blockchain network,

eliminating the need for a central authority to oversee transactions.
Security: The tamper-proof nature of blockchain technology ensures that smart contracts are
secure and resistant to manipulation.
Trust: Because smart contracts are executed on a decentralized blockchain, they promote
trust among parties by providing transparency and immutability.
Efficiency: By automating processes and eliminating intermediaries, smart contracts can

streamline transactions and reduce costs.
Types of smart contract
1. Smart legal contract
Smart contracts are guaranteed by law. They adhere to the structure
of legal contracts. As smart contracts reside on blockchain and are
unchangeable, judicial or legal smart contracts offer greater
transparency than traditional documents among contracting entities.
The parties involved execute contracts with digital signatures. Smart
legal contracts may be executed autonomously if certain
prerequisites are fulfilled.
for example, making a payment when a specific deadline is reached.
In the event of failure to comply, stakeholders could face severe
legal repercussions.
2. Decentralization autonomous organizations
• DAOs are democratic groups governed by a smart contract
that confers them with voting rights.
• A DAO serves as a blockchain-governed organization with a
shared objective that is collectively controlled. No executive
or president exists. Instead, blockchain-based tenets
embedded within the contract’s code regulate how the
organization functions and funds are allocated.
• VitaDAO is an example of this type of smart contract, where
the technology powers a community for scientific research.
3. Application logic contracts
• ALCs, or application logic contracts, consist of application-
based code that typically remains synced with various other
blockchain contracts.
• It enables interactions between various devices, like the
Internet of Things (IoT) or blockchain integration. Unlike the
other types of smart contracts, these are not signed between
humans or organizations but between machines and other
contracts.
How do smart contract work?
• A smart contract is just a digital contract with the security coding of

the blockchain.
• Smart contracts contain coded instructions for triggering agreement by following
specific sequences of events, including time constraints, and are identifiable by
unique addresses on the blockchain for interaction once broadcasted.
• They are executed on a basis of simple logic, IF-THEN for example:
• IF you send object A, THEN the sum (of money, in cryptocurrency) will
be transferred to you.
• IF you transfer a certain amount of digital assets (cryptocurrency, for example,
ether, bitcoin), THEN the A object will be transferred to you.
• IF I finish the work, THEN the digital assets mentioned in the contract will be
transferred to me.
How does smart contract work?
Application of smart contract
• Financial Services:
• Automated execution of financial agreements like loans, trades, and
insurance policies
• Decentralized finance (DeFi) applications like lending, borrowing,
and yield farming
• Tokenization of assets and creation of digital tokens representing
real-world assets
• Supply Chain Management:
• Tracking the movement of goods across the supply chain
• Automating payments and ownership transfers based on delivery
conditions
• Ensuring transparency and accountability in logistics operations
• Real Estate:
• Automating property transactions and transfers
• Facilitating secure and transparent rental agreements
• Enabling fractional ownership and tokenization of real estate assets
• Healthcare:
• Managing electronic health records (EHRs) and ensuring data integrity
• Facilitating secure sharing of patient data among healthcare providers
• Automating insurance claims processing and healthcare payments
• Internet of Things (IoT):
• Enabling secure and automated machine-to-machine (M2M) transactions
• Facilitating micropayments and data exchange between IoT devices
• Implementing smart contracts for autonomous device coordination and
control
• Voting and Governance:
• Conducting secure and transparent digital voting processes
• Implementing decentralized autonomous organizations
(DAOs) for collective decision-making
• Enabling transparent and auditable governance procedures
• Intellectual Property and Digital Rights Management:
• Protecting and managing digital assets like copyrights,
patents, and trademarks
• Automating royalty payments and enforcing usage rights
• Enabling secure and transparent licensing agreements
Advantages of smart contract
• Recordkeeping: All contract transactions are stored in chronological
order in the blockchain and can be accessed along with the complete
audit trail. However, the parties involved can be secured
cryptographically for full privacy.
• Autonomy: There are direct dealings between parties. Smart contracts
remove the need for intermediaries and allow for transparent, direct
relationships with customers.
• Reduce Fraud: Smart contracts, stored on the blockchain, deter fraud
through difficulty in forcefully altering the chain due to computational
intensity. Nodes detect and reject violations, ensuring invalid attempts
are not stored.
• Fault-tolerance:Fault tolerance is ensured in decentralized
platforms, as no single entity controls digital assets,
preventing one-party dominance or withdrawal. Even if a
node disconnects, the contract remains intact.
• Enhanced trust: Business agreements are automatically
executed and enforced. Plus, these agreements are immutable
and therefore unbreakable and undeniable.
• Cost-efficiency: The application of smart contracts
eliminates the need for intermediaries(brokers, lawyers,
notaries, witnesses, etc.) leading to reduced costs. Also
eliminates paperwork leading to paper saving and money-
saving.
Dapps
Generic architecture of DApps
• A DApp on the other hand has a blockchain as a backend and can be visualized as
depicted in the following diagram. The key element that plays a vital role in the
creation of a DApp is a smart contract that runs on the blockchain and has
business logic embedded within it:
Features of Dapp
DApps Method
• DApps at a fundamental level are software programs that execute using either of
the following methods.They are categorized as Type 1, Type 2, or Type 3 DApps:
• Type 1: These run on their own dedicated blockchain, for example, standard smart
contract-based DApps running on Ethereum. If required, they make use of a
native token.
• for example, ETH on the Ethereum blockchain. For example, Ethlance is a DApp
that makes use of ETH to provide a job market.
• Type 2: These use an existing established blockchain. That is, they make use of
Type 1 blockchain and bear custom protocols and tokens, for example, smart
contract-based tokenization DApps running on the Ethereum blockchain.
• An example is DAI, which is built on top of the Ethereum blockchain, but
contains its own stablecoins and mechanism of distribution andcontrol.
• Type 3: Use the protocols of Type 2 DApps; for example, the SAFE Network uses
the OMNI network protocol.
DAO
• decentralized autonomous organization
(DAO) is also a computer program that runs
on top of a blockchain, and embedded within
it are governance and business logic rules.
• A DAO (Decentralized Autonomous
Organization) is a type of organization that
operates on a blockchain network, allowing
for transparent, democratic decision-making
and self-governance without centralized
authority.
• it was proposed by Dan Larimer in 2015.
DAO
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Decentralization using Blockchain

Decentralization: They are stored and executed on a decentralized blockchain network,

Efficiency: By automating processes and eliminating intermediaries, smart contracts can

• A smart contract is just a digital contract with the security coding of

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