Web3: Creeping centralization is going against the goal of blockchain: Decentralization. Infrastructure needs to be more accessible and resilient for everyone.
For Ethereum and other blockchain networks to work as intended, they need to be decentralized. This means that no single entity or group should have control over the network. But studies have shown that blockchain networks are not as decentralized as people think. In fact, they have incorporated many of the same problematic practices and centralized infrastructure that plague Web2.
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One issue is node centralization. A website called Are we decentralized yet? highlights that many blockchains have low node counts, in addition to a small number of entities in control of the majority of voting/mining power.
This creates risks of outages and even location-dependent latency. Cloud services are a popular way to store data and run applications, but they’re also a major contributor to node centralization. A study 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 like Amazon Web Services, Microsoft Azure, and Google Cloud Platform make it easy enough for a technically-savvy individual to set up a blockchain node. But this also means that these centralized providers indirectly have a lot of control over the blockchain networks their server infrastructure might be used to support. If they decide to restrict or block access to their services, it could seriously impact networks like, for example, Ethereum which relies heavily on cloud service providers.
Web3: Concerns over censorship and control
Since its creation in 2015, Ethereum has been plagued by controversy. The latest flare-ups have to do with 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 just three entities.
In late 2021, Chinese regulators cracked down on crypto mining, which previously accounted for the largest portion of the world’s mining power. The results were immediately apparent, with both the hashrate and the price of ETH crashing.
This ban highlighted the dangers of blockchain node centralization. When a small number of entities control the network, they can impact the price of Ether. This is a serious problem, because it undermines the trustless nature of a decentralized system like Ethereum.
China is not alone in hard bans
China isn’t the only country that has taken action, as crypto is banned in at least 8 other countries. These hard bans have taken effect in Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, and Bangladesh, with 42 other countries implicitly banning digital currencies via banking and cryptocurrency exchange regulations. In other words, over 50 countries have banned crypto either outright or implicitly. These bans are often self-serving, such as in the case of China now pushing its own digital yuan currency.
The reason for this trend is clear. Decentralized networks pose a threat to the control that governments have over the economy. By banning Ethereum mining or even Ethereum itself, these countries are able to control the flow of money and keep it within their borders. This is essential for countries that are looking to control their currency and prevent capital flight.
The problem is that when countries start to ban Ethereum mining, it makes it 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 both the users and the developers of these networks.
These concerns are exponentially higher when it comes to smaller cryptocurrencies that don’t have the massive nodecount and hashrate of Ethereum.
Web3: Latency concerns
As blockchain technology gains popularity, an increasing number of organizations are looking to implement it in their business models. However, blockchain node centralization results in high latency for many users. Nodes are the backbone of blockchain networks and are responsible for validating transactions across their shared distributed ledgers. However, due to the high cost of infrastructure and maintenance, not all organizations can afford to host a node. This leaves the network susceptible to centralization, which can lead to high latency for users not geographically near the servers.
For instance, an Athlone Institute of Technology paper revealed that “there are high latency variations between the Ethereum nodes in different networks or at different geo-locations.”
This has implications for any application that relies on fast and reliable transactions. For example, a high-frequency trader relying on an Ethereum node in a network with higher latency compared to another trader of that exchange may lose an edge in the market.
An analysis titled Geographic Latency in Crypto explains that “there isn’t much that can be done client-side to address exchange latency,” and that traders will need to co-locate their nodes with the exchanges in order to reduce latency, which is not an ideal solution.
More broadly speaking, this is a concern for any user who wants to use a decentralized application (dApp) but finds that the dApp is slow or unresponsive because of the high latency on the network. This issue is exacerbated by the fact that adoption of blockchain technology is ramping up. As more people use blockchain networks, the number of nodes needed to maintain a fast and efficient network grows. This puts pressure on organizations to host nodes, which can be costly and difficult to do.
The Web3 Solution: Decentralized Nodes, Distributed Around the Globe
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 are striving to achieve some level of decentralization in order 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 distribute the load and make the network more resilient.
Ankr is a blockchain infrastructure provider that uses a network of data center partners rather than relying on centralized cloud providers like AWS or Google Cloud Platform. This helps to ensure that the network is as decentralized and resilient as possible. Ankr’s data center partners include MaxiHost, INAP, and Zadara, among others.
Ankr Protocol has servers globally, which helps not only with geo-specific latency issues, but also to diversify the network itself. This is important because competitors like Infura, who rely on AWS, have suffered outages in the past.
Ankr protocol servers sit in the same data centers that connect to the telecom networks, which means that Web3 users get the lowest possible latency when connecting to the blockchain.
Monetizing unused server capacity
As part of their recent partnership with MaxiHost, Ankr will be using MaxiHost’s global bare-metal cloud platform to monetize existing unused server capacity. This will help to support the growth of Web3 platforms, applications, and services by providing a more distributed global node network.
MaxiHost’s high-performance servers and global footprint provide an ideal solution to help Ankr scale and provide decentralized connectivity to many blockchain networks. By leveraging MaxiHost’s platform, Ankr can focus on developing their technology and expanding their 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 the networks. Ankr is working to address this issue by building a more decentralized node infrastructure. Ankr’s partnership with MaxiHost will help to improve the performance and scalability of their node infrastructure, while also reducing costs. This will make it easier for businesses and individuals to use and access blockchain networks.
Ultimately, the goal is to make blockchain infrastructure more accessible and resilient for everyone.
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