Certified Bitcoin Professional Practice Exam

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What does decentralization in Bitcoin help prevent?

High transaction fees
Single point of failure
Market manipulation
Excessive mining power

The correct answer is: Single point of failure

Decentralization in Bitcoin plays a crucial role in preventing a single point of failure. In a decentralized network, there is no central authority or single server that controls the entire system. This design ensures that the failure of one node or entity does not compromise the entire network. Without decentralization, if a central server goes down or is attacked, it could halt all operations and cause the entire Bitcoin network to fail. By distributing the ledger and transaction processing across numerous independent nodes around the world, Bitcoin enhances its resilience and reliability, safeguarding against failures and attacks that could disrupt services. This level of decentralization not only helps ensure the integrity and availability of the network but also promotes trust among participants, as no single entity has control over the network. While decentralization does have implications for transaction fees, market manipulation, and mining power, its primary and most impactful characteristic in this context is its ability to eliminate the risks associated with a centralized point of control.