A decentralized system is an interconnected information system in which no single entity is the sole authority. In the context of computing and information technology, decentralized systems usually take the form of networked computers. For example, the Internet is a decentralized system, although it has become increasingly centralized over time.
Benefits and costs
For businesses and organizations, the benefits of a decentralized system include failure tolerance and redundancy, at the cost of additional management complexity. In any information technology organization, decentralization must be balanced with centralization when designing a networked system, to optimize this cost-benefit balance.
Decentralized vs. distributed systems
A decentralized system is distinct from a distributed system. A decentralized system generally has multiple authoritative nodes, each of which serves a subset of the total end users. In a distributed system, however, there are no end users, because every node on the network communicates with every other to behave as a single unit.
Decentralized systems have gained widespread attention with the advent of blockchain technologies, such as those used in Bitcoin and other cryptocurrencies. These systems leverage the properties of cryptography and Markov chains to provide consensus about the financial transactions that occur in the system. The result is a verifiable distributed ledger of transactions, removing the need for a centralized banking authority. Note that although the ledger is distributed to all cryptocurrency users, the cryptocurrency system itself is decentralized.