BC-1.1.6 Problems with centralized ledgers

What is the benefit of a centralised ledger? The benefit of a centralised ledger is that it is quite efficient. As long as the trustworthy party keeps being trustworthy: You were continuously doing your job right You were continuously recording the transactions of your friends correctly, and you don’t abuse your power, than that system would work perfectly fine in that case. But of course there are some downsides as well. You can name many different types of downsides, but you can summarise them in three main categories I want you to remember these three main categories, these are important. You will often see them returning in the following courses as well. The three main categories are: 1. Exclusion
2. Dishonesty
3. Loss of records Exclusion for example is that you, as a trusted third party, can say: “Hey! You are not allowed in my ledger!” So a banking system for example disabling somebody with an Iranian passport. But this also means that, because you are the owner of the ledger, you own all the data!! So you are also increasing a wall around your data: other people can’t access all the data that you can access. Which gives you a huge, huge advantage, because data in nowadays world is world a lot of value, like money. Exclusion means that you are not allowed to play with the ledger. Well..you are allowed, but with limitations determined by the trusted third party. Second one is dishonesty. Corruption is always the easiest example. Abuse of power, for example: somebody can give you a few dollars, which makes you administer them a few extra dollars. You could also start creating dollars out of the blue, because nobody can actually see you entire ledger. So we need to hire other intermediaries to check your work. In this case often done by an auditor or “an accountant” as we say in the Netherlands. So dishonesty…just remember the corruption, always an easy example for that one. Third one is loss of records. This is not only when records got hacked, or when you get coerced, when somebody puts a gun to your head, “hey, I want you to transfer those dollars from person A to my account”. They have a single entity that they can attack. And also of course natural disasters and things like that. I want you to remember three things: 1. Exclusion
2. Dishonesty
3. Loss of records And as you will see later on, this will take many forms. Next session will be the distributed decentralised ledgers. And we will explain what the benefits of those types of ledgers are compared with the centralised ledgers. See you next one!

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