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I am checking out XGBoost documentation and it's stated that XGBoost is an optimized distributed gradient boosting library.

What is meant by distributed?

Have a nice day

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It means that it can be run on a distributed system (i.e. on multiple networked computers).

From XGBoost's documentation:

The same code runs on major distributed environment(Hadoop, SGE, MPI) and can solve problems beyond billions of examples. The most recent version integrates naturally with DataFlow frameworks(e.g. Flink and Spark).

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