Web3: why infrastructure is so important for decentralization

Creeping centralization contradicts the purpose of the blockchain: decentralization. Infrastructure must be more accessible to all and become more resilient.

For Ethereum and other blockchain networks to work as intended, they must be decentralized. Specifically, no one entity or group should have control over the network. However, studies have shown that blockchain networks are not as decentralized as people think. In fact, they inherited many of the same problematic practices and centralized infrastructures from Web2.

An example of this is the centralization of nodes. The site “Are we still decentralized?” we see that many blockchains have a small number of nodes and a small number of entities that control most of the voting/mining power. This creates risk of failure and even location-dependent latency.

Cloud services are a popular way to store data and run applications. However, they also contribute significantly to the centralization of nodes. A study from the University of Illinois at Urbana-Champaign found that Ethereum nodes primarily operate in cloud environments. Thus, a single outage or disruption at one of these providers can have a significant impact on the network.

Providers like Amazon Web Services, Microsoft Azure, and Google Cloud Platform make it easy for a tech-savvy person to set up a blockchain node. However, they also allow these centralized providers to indirectly have a lot of control over the blockchain networks they support with their server infrastructure.

Restrictions on these services could have a serious impact on networks like Ethereum, which rely heavily on cloud providers.

Web3: Concerns about Censorship and Control

Since its inception in 2015, Ethereum has always been a source of controversy. The latest controversies are related to the role of miners in the Ethereum network. Miners are responsible for validating transactions and adding them to the blockchain, and are rewarded for their work with Ethereum (ETH). The problem is that most of the network is controlled by only three entities.

At the end of 2021, the Chinese government cracked down on crypto miners, who previously provided the largest share of global mining production. The consequences were felt immediately: the hashrate and the Ethereum price collapsed. The ban exposed the dangers associated with centralizing blockchain nodes. If a small group of entities control the network, then they can manipulate the Ethereum price. This is a serious problem because it undermines the trustless nature of a “decentralized system” like Ethereum.

An image from BeInCrypto.com

China isn’t the only country cracking down on crypto

China is not the only country taking action against cryptocurrencies. Cryptocurrencies are also (almost) banned in at least 8 other countries. Such strict laws have come into force in Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh. Another 42 countries indirectly ban digital currencies through regulations for banks and cryptocurrency exchanges. In other words, more than 50 countries have banned cryptocurrencies either directly or indirectly. Such bans are often not in the interest of the population, but only serve the interests of governments. China, for example, wants to launch its own digital currency (the digital yuan). Cryptocurrencies like Bitcoin are in direct competition with it.

The reasons for this development are obvious. Decentralized networks threaten the control that governments have over the economy and money. By banning the mining of Ethereum, or even Ethereum itself, these countries are still able to control the flow of capital and keep it within their borders.

The problem is that countries that ban Ethereum mining make it difficult to use the cryptocurrency. This may reduce interest in Ethereum and other cryptocurrencies. This in turn would be bad for the users and developers of these networks.

Web3: centralization leads to latency issues

As blockchain technology becomes more and more popular, more and more companies are trying to integrate it into their business models. However, the centralization of blockchain nodes results in high latency times for many users. Nodes form the backbone of blockchain networks and are required to validate transactions on shared distributed ledgers. However, not every business can afford to operate a node due to the high cost of infrastructure deployment and maintenance. This is another reason why these networks could be centralized.

Additionally, an article from the Athlone Institute of Technology revealed that there are “high latency variations between Ethereum nodes on different networks or in different geographic locations.” The implications of this affect all applications that rely on fast and reliable transactions. For example, a trader who relies on an Ethereum node on a network with higher latency compared to another trader on the same exchange may suffer.

Decentralization is the solution

An analysis titled Geographic Latency in Crypto states that “there is not much clients can do to address trade latency‘, and that traders should coordinate their nodes with exchanges to reduce latency. Again, this is not an ideal solution.

In general, this phenomenon is a problem for any user who wants to use a decentralized application (dApp) but finds that the dApp is slow or unresponsive due to high network latency. The problem is compounded by the fact that blockchain technology is becoming more widespread. As more people use blockchain networks, more nodes are needed to maintain a fast and efficient network. This puts pressure on organizations to host nodes, which can be expensive and difficult to achieve.

An image from BeInCrypto.com
An image from BeInCrypto.com

The Web3 solution: decentralized nodes, distributed all over the world

The Web3 solution: decentralized nodes distributed around the world.

When it comes to blockchain, “decentralization” can refer to various factors, such as the blockchain development team, its nodes, and the location of the nodes. Different blockchains prioritize different decentralization factors. However, most strive for some degree of decentralization to eliminate single point of failure issues.

As it is ultimately the nodes that validate and transmit transactions on a blockchain, the more nodes there are, the more decentralized the blockchain. This is one of the reasons why blockchain infrastructure providers like Ankr are so important. They host nodes in different locations around the world to distribute the load and make the network more resilient. The Ankr protocol has servers all over the world, which not only helps solve geo-specific latency issues, but also diversifies the network itself. This aspect is particularly important given that competitors like Infura that rely on AWS have experienced outages in the past.

Monetize unused server capacity

As part of its recent partnership with MaxiHost, Ankr will leverage MaxiHost’s global bare metal cloud platform to monetize existing idle server capacity. This supports the growth of Web3 platforms, applications and services by providing a more distributed global network of nodes.

Blockchain networks are growing rapidly, but the number of nodes cannot keep up. This can lead to centralization, which can have negative consequences for networks. Ankr is working to solve this problem by building a more decentralized node infrastructure. Ankr’s partnership with MaxiHost will help improve the performance and scalability of node infrastructure while reducing costs. This will make it easier to use and access blockchain networks for businesses and individuals. The companies’ goal is to make blockchain infrastructure more accessible and resilient for everyone.

Disclaimer

All information contained on our website has been researched to the best of our knowledge and belief. Journalistic contributions are for general information purposes only. Any action taken by the reader based on information found on our website is entirely at their own risk.

Leave a Comment