People interact with open source applications like MetaMask, Web3 games, the metaverse, and DeFi protocols on a daily basis, but they often don’t stop to think about what’s going on in the background to make it all work. If we think of Web3 as a sprawling new city, node infrastructure providers are the underlying power grid that makes operations possible..
All DApps need to communicate with blockchains, and full nodes serve billions of DApp requests to read and write data to the chains every day. We need a huge infrastructure of nodes to keep up with the rapidly expanding DApp ecosystems and serve all requests. However, running nodes is time- and capital-intensive, which is why DApp creators turn to vendors to gain remote access to nodes. There is a huge monetary incentive for infrastructure providers to power as many of these Web3 ecosystems as possible, but who is winning this race so far?
The problem of centralization
The fastest way to provide reliable infrastructure to fuel DApp ecosystems is for centralized companies to establish a fleet of blockchain nodes, commonly hosted in Amazon Web Services (AWS) data centers, and allow developers access to them. from anywhere in exchange for a subscription. That is exactly what some players in the sector have done, but at the cost of centralization. This is a major problem for the Web3 economy, as it leaves the ecosystem vulnerable to attack and at the mercy of a few powerful players.
Consider that more than 80% of Ethereum nodes are located in the United States and Germany, and that the three largest mining pools could join together to attack 51% of the network. In many ways, current blockchains are much more centralized than we would like, in stark contrast to the spirit originally laid out in Satoshi Nakamoto’s Bitcoin (BTC) white paper..
If the big node providers agree, Web3 would lose all the advantages it has over Web2from censorship resistance to reliability, and you would be left with only its drawbacks, from relatively high fees to poor transaction performance.
Not only that, but reliance on centralized vendors also leaves the door open for outages. For example, an Infura outage forced cryptocurrency exchanges and wallets, such as Coinbase Wallet, Binance, and MetaMask, to suspend withdrawals of Ethereum and ERC-20 tokens, as they could not fully trust their nodes.
It is also worth noting that Amazon, which is the backbone of many of these centralized providers, has suffered several outages in the past, creating another layer of vulnerability.. Ethereum’s Infura outage is not the only one. More recently, the move from Ethereum to Ethereum 2.0 suffered a setback with a 7-hour outage due to the hardware failure of a single node on the network. This is a risk that truly decentralized networks don’t have to worry about.
Decentralization is a key tenet of the Web3 economy, and the centralized infrastructure of blockchains threatens to undermine it.. For example, Solana has suffered multiple outages due to a lack of enough decentralized nodes that could handle spikes in traffic. This is a common problem for blockchain protocols that are trying to scale.
And it’s not just Solana. Many of the major blockchain protocols are struggling to find a way to scale and become more decentralized.. In fact, while big blockchains like Ethereum and Bitcoin have stood firm in the war for decentralizationthe smaller blockchains have lost the battle, suffering 51% attacks at the hands of overly centralized node providers.
For example, on June 8, 2013, Feathercoin (FTC) suffered a 51% attack. This means that a single entity was able to control more than half of the total processing power of the FTC network. This them allowed to void confirmed transactions and even prevent new transactions from taking place
At the same time as the FTC attack, the website suffered a DDoS attack. This made it difficult for users to access information about the attack or to try to get their money out of the network. Since then, the FTC has fallen into obscurity. Its price has plummeted and it is no longer listed on any of the major exchanges.
This historical centralization is due to over-reliance on Web2 cloud providers such as AWS and Infura, which have been the main infrastructure providers for the Web3 economy until now. But now, to avoid centralization and the proverbial “single point of failure” of blockchain, decentralized infrastructure providers are gaining a lot of momentum. This is good news for Web3 ecosystems to remain healthy and decentralized.
Decentralized infrastructure offers better solutions
Fortunately, recent innovations are giving rise to a new class of much more decentralized providers. These providers manage nodes on-site, or even at users’ homesinstead of relying on centralized cloud providers.
Although centralized providers have an advantage, decentralized providers are emerging as a very viable alternative. Its main advantage is that they cannot be brought down by a single point of failure and, in many cases, provide faster connections to users around the world. Furthermore, decentralized node infrastructure providers create new economies in which independent vendors serve data requests and earn rewards in their native tokens. This new type of provider is rapidly gaining market share, and may even supplant existing Web3 infrastructure incumbents.
The competition intensifies
There are several vendors in the space, such as Ankr, Flux, and QuickNode, that are vying for market share.. East competitive environment is good for the Web3 economy as it drives innovation and drives down prices. It also ensures that providers are constantly striving to improve their services and offer the best possible experience to their customers.
And what is more important, competition in decentralized infrastructures leads to further decentralization of the Web3 economy. This is a good thing, since makes the economy more resistant to attack and censorship. The 51% attacks of the past should be a thing of the past, with infrastructure providers spread across different geographies.
This competition between providers will be vital to maintain a healthy and decentralized ecosystem.
Realizing the promise of Web3
The promise of Web3 is not just about building a better Internet, but about building a better world.. Decentralized infrastructure providers are building the foundations of a new, more equitable, secure, and censorship-resistant Internet.
By maintaining the status quo, centralized hosting providers cannot deliver true innovation and are susceptible to censorship. Decentralized infrastructure providers, on the other hand, are incentivized to go further and offer the best possible service with a democratic structure, ensuring that they are more resistant to censorship and attacks.
This article does not contain investment advice or recommendations. All investments and trading involve risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Gregory Gopman is a tech entrepreneur working in the blockchain space, where he serves as chief marketing officer at Ankr, and runs a blockchain consultancy called Mewn that helps launch projects and grow their valuation. Greg has worked in startups for 15 years: 10 years with Silicon Valley tech companies, and 5 years building cryptocurrency projects. He is best known for co-founding the Akash Network and AngelHack, and helping Kadena go from $80 million to over $4 billion in 100 days.
Keep reading: