Rampant centralization defeats the purpose of blockchain, decentralization. The infrastructure needs to be more accessible and resilient for everyone.
For Ethereum and other blockchain networks to work as intended, they must be decentralized. This means that no single entity or group should have control of the network. However, studies have shown that blockchain networks are not as decentralized as people think. In fact, they have incorporated many of the problematic practices and centralized infrastructures that plague Web 2.0.
One of the problems is the centralization of nodes. A website called Are we decentralized yet? (points out that many blockchains have few nodes, plus a small number of entities controlling the majority of voting and mining power.
This creates risks of outages and even latency depending on location. Cloud services are a popular way to store data and run applications, but they also contribute greatly to node centralization. A study conducted by researchers at the University of Illinois at Urbana-Champaign found that “Ethereum nodes operate primarily in cloud environments.” This means that a single outage or delay at one of these providers could have a significant impact on the network.
Offerings such as Amazon Web Services, Microsoft Azure and Google Cloud Platform make it easy for someone with technical knowledge to set up a blockchain node. But it also means that these centralized providers indirectly have a lot of control over blockchain networks, which their server infrastructure could be used to support. If they decide to restrict or block access to their services, this could have a serious impact on networks like, for example, Ethereum, which relies heavily on cloud providers.
Web 3.0: concerns about censorship and control
Since its inception in 2015, Ethereum has been plagued by controversy. The latest flare-ups relate to the role of miners in the Ethereum network. Miners are responsible for validating transactions and adding them to the blockchain, and they are rewarded with Ether (ETH) for their efforts. The problem is that the majority of the network is controlled by only three entities.
In late 2021, Chinese regulators cracked down on cryptocurrency mining, which used to account for most of the world’s mining power. The results were immediately apparent, with hashrate and ETH prices plummeting.
The ban highlighted the dangers of centralizing blockchain nodes. When a small number of entities control the network, they can impact the price of Ether. This is a serious problem, as it undermines the trustless nature of a decentralized system like Ethereum.
China is not alone in enforcing formal bans
China is not the only country to have taken action, as cryptocurrencies are banned in at least 8 other countries. These firm bans have taken effect in Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia and Bangladesh, and 42 other countries have implicitly banned digital currencies through banking and cryptocurrency exchange regulations. In other words, more than 50 countries have banned cryptocurrencies, either outright or implicitly. These bans are often self-motivated, as in the case of China, which is now promoting its own digital yuan.
The reason for this trend is clear. Decentralized networks pose a threat to governments’ control over the economy. By banning Ethereum mining, or Ethereum itself, these countries are able to control the flow of money and keep it within their borders. This is essential for countries looking to control their currency and prevent capital flight.
The problem is that when countries start banning Ethereum mining, it becomes more difficult for people to use the cryptocurrency. This could lead to a decline in interest in Ethereum and other cryptocurrencies, which would be bad for users and developers of these networks.
These concerns are exponentially higher when it comes to smaller cryptocurrencies that lack the massive node count and hashrate of Ethereum.
Web 3.0: Latency Issues
As blockchain technology gains popularity, more organizations are looking to implement it into their business models. However, the centralization of blockchain nodes results in high latency for many users. Nodes are the backbone of blockchain networks and are responsible for validating transactions on their shared distributed ledgers. However, due to the high cost of infrastructure and maintenance, not every organization can afford to host a node. Therefore, the network is likely to be centralized, which can result in high latency for users who are not geographically close to the servers.
For example, a paper from the Athlone Institute of Technology found that “there are large variations in latency between Ethereum nodes in different networks or at different geolocations.”
This has implications for any application that relies on fast and reliable transactions. For example, a high-frequency trader who relies on an Ethereum node in a network with higher latency compared to another trader on that exchange may lose an advantage in the market.
An analysis titled Geographic Latency in Crypto explains that “there is little that can be done on the client side to address exchange latency,” and that traders will have to co-locate their nodes with exchanges to reduce latency, which is not an ideal solution.
More generally, this is a concern for any user who wants to use a decentralized application (dApp) but finds that it is slow or unresponsive due to high latency on the network. This problem is exacerbated by the fact that the adoption of blockchain technology is accelerating. As the number of people using blockchain networks increases, so does the number of nodes needed to maintain a fast and efficient network. This puts pressure on organizations to host nodes, which can be expensive and difficult to do.
The Web 3.0 Solution: Decentralized, Globally Distributed Nodes
When it comes to blockchain, “decentralization” can refer to several different variables, including the blockchain’s developer team, its nodes, and the location of those nodes. Different blockchains prioritize different decentralization factors, but most strive for a certain level of decentralization to avoid single points of failure.
Since nodes are ultimately what validate and propagate transactions on a blockchain, the more nodes there are, the more decentralized the blockchain is. This is one of the reasons why blockchain infrastructure providers like Ankr are so important: they host nodes all over the world, in different locations, to help spread the load and make the network more resilient.
Ankr is a blockchain infrastructure provider that uses a network of partner data centers rather than relying on centralized cloud providers like AWS or Google Cloud Platform. This ensures that the network is as decentralized and resilient as possible. Ankr’s partner data centers include MaxiHost, INAP and Zadara, among others.
The Ankr protocol has servers all over the world, which not only solves geography-related latency issues, but also diversifies the network itself. This is important because competitors like Infura, which rely on AWS, have experienced outages in the past.
The Ankr protocol servers are located in the same data centers that connect to telecom networks, which means Web 3.0 users get the lowest possible latency when connecting to the blockchain.
Monetizing unused server capacity
As part of its recent partnership with MaxiHost, Ankr will use MaxiHost’s global bare-metal cloud platform to monetize existing unused server capacity. This will help support the growth of Web 3.0 platforms, applications and services by providing a more distributed global network of nodes.
MaxiHost’s high-performance servers and global footprint are an ideal solution to help Ankr grow and provide decentralized connectivity to many blockchain networks. By leveraging MaxiHost’s platform, Ankr can focus on developing its technology and expanding its reach to new markets.
Blockchain networks are growing rapidly, but the number of nodes is not keeping pace. This can lead to centralization, which could 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 improve the performance and scalability of their node infrastructure, while reducing costs. This will make it easier for businesses and individuals to use and access blockchain networks.
Ultimately, the goal is to make the blockchain infrastructure, and therefore Web 3.0, more accessible and resilient for everyone.
