Why the Infrastructure of Crypto is Yet to Align with Its Ideals

Cryptocurrencies promise a decentralized future, but the infrastructure underpinning them still relies heavily on centralized systems.

Key Takeaways

The reliance on centralized cloud services is a significant vulnerability for the crypto sector.
The "Big Three" cloud providers (Amazon Web Services, Microsoft Azure, and Google Cloud) dominate the market, accounting for 68% of global cloud infrastructure in 2024.
Outages in these services can lead to disruptions across multiple industries, affecting platforms like Coinbase and other tech services.
Some projects are beginning to explore decentralized models to mitigate these risks and provide more resilient infrastructure.
Innovations are emerging that blend centralized and decentralized elements, aiming for a more robust and flexible cloud solution.

Why the Infrastructure of Crypto is Yet to Align with Its Ideals

The Current Landscape of Centralized Cloud Dependency

In the current tech environment, decentralized infrastructure often refers to blockchain technology, which is designed to enhance trust through distributed verification and data storage. Despite these advancements, access to these networks still predominantly relies on centralized cloud platforms.

Crypto traders reported issues when centralized cloud services crashed. Source: Matt Flint

Heavy Dependence on Major Providers

In 2024, the cloud market was heavily influenced by the "Big Three"—Amazon Web Services (AWS), Microsoft Azure, and Google Cloud—each holding a substantial share of the industry and influencing many enterprise and blockchain applications. This dependency creates risk, as outages or changes in pricing from any one provider can affect various sectors.

Cloud revenue has surged alongside generative AI services. Source: Synergy Research Group

For instance, during an AWS outage in October, popular platforms like Snapchat, Roblox, and Fortnite experienced significant downtime, which also impacted financial services such as Coinbase, as noted by Gaimin's CEO, Nökkvi Dan Ellidason.

While major cloud platforms offer cost-effective options for startups, transitioning away from these services means that companies must return to managing their setups, which can increase operational costs.

Startup credit programs provide thousands of dollars in subsidized cloud usage. Source: Amazon

Despite these challenges, some companies are experimenting with decentralized alternatives. Platforms like Filecoin and Arweave are being utilized for data storage outside traditional cloud systems, while decentralized computing options are offered by Akash and Render Network.

Centralization Compromises Decentralization

Although blockchain aims to eliminate single points of failure, much of its infrastructure still relies on centralized providers. A study from the Usenix Security Symposium highlighted that AWS was the largest hosting service for Ethereum validators, showing that many operate on commercial cloud infrastructures rather than independent systems.

Hetzner remained a key hosting provider for blockchain nodes in 2023 despite announcing a ban on crypto-related services the previous year. Source: Messari

As Carlos Lei, CEO of Uplink, explains, many operators prefer centralized platforms due to their predictable performance, straightforward setup, and reliability. However, this reliance can lead to significant issues, as seen during recent outages when users experienced difficulties accessing their accounts and executing trades on major platforms like Coinbase and Robinhood.

Exploring Hybrid Cloud Solutions

The strain on centralized cloud infrastructures is prompting the development of distributed alternatives. These newer networks seek to leverage consumer hardware and regional data centers to improve resiliency.

One innovative example includes Gaimin, which utilizes GPU power from gaming PCs combined with smaller regional data centers. This creates a geographically dispersed network, minimizing single points of failure. Similarly, Uplink allows individuals to sell excess bandwidth, reducing dependencies on large telecom providers.

Azure outages, days after AWS disruption, hit businesses worldwide. Source: Azure Support

Looking ahead, researchers suggest that a hybrid approach may be more beneficial than fully decentralizing cloud services. This could involve a combination of large-scale providers, edge networks, and independent servers, ensuring smoother operations and automatic traffic rerouting during outages.

"The cloud’s elasticity remains essential," says Yair Cleper from Magma Devs. Businesses can initially use centralized services for simplicity and gradually diversify their infrastructure as needs evolve.

As demand for computing power continues to rise, the goal will not be to entirely eliminate major providers but rather to create a more fault-tolerant system that allows smaller regional players to fill the gaps.

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