Understand tradeoffs in speed, security, control, and accountability.
Definition
Centralized systems have a controlling operator. Decentralized systems distribute control across many participants.
Centralized pros and cons
Centralized services are fast and convenient. They can reset passwords and offer support. The tradeoff is custody. The operator can freeze funds or change rules.
Decentralized pros and cons
Decentralized systems offer self custody and open access. The tradeoff is that mistakes are often irreversible and scams rely on user approvals.
Practical tip
Use centralized tools for convenience. Use decentralized tools when you need control. Know which mode you are in.
Warning
Approvals are permissions. If you approve a malicious contract, it can spend your tokens.
Quick quiz
- What does centralization provide?
- What is a cost of decentralization?
- Why are approvals risky?