What does decentralization mean?

The word 'decentralization' is often included in descriptions of what a blockchain is or why cryptocurrencies are an interesting new form of money.

To say something is decentralized is to say it is neither backed nor managed by a central authority. Instead, power and decision-making authority is transferred to entities or individuals that support the project.

In the context of money, decentralization is a way to describe whether a central authority manages the production and availability of a currency or cryptocurrency. In the US, the dollar is not decentralized because government entities have power to issue and regulate money. Part of what makes cryptocurrencies attractive to early adopters is the idea that by holding one's wealth in crypto, individuals can reduce reliance on decisions made by financial authorities.

As a parent, you may be wondering whether you need to take a side - centralization or decentralization. Remember that tradeoffs exist for each system design. It could be helpful to think of crypto like email. With an email address, you can send a message to anyone. You don't need USPS to deliver mail for you. However, you can't retract a sent email once it's in your recipient's inbox. Similarly, crypto empowers individuals with the ability to send money to recipients. However, having full control of your crypto means there's no central authority to turn to if you, say, accidentally send your money to the wrong recipient.

At UNest, we offer a happy medium for our members. When you buy popular cryptocurrencies, your crypto is held in an account managed by Bakkt, our partner, which has safeguards in place to prevent transfer errors.

Learn more about making crypto purchases by visiting UNest.co or the UNest app. This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, UNest does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.