You’re not decentralized if you’re relying on Amazon or Microsoft for hosting
DeFi projects and centralized infrastructure don’t mix
At the time of writing, there is over $10 billion USD (and counting) locked up in decentralized finance (DeFi), a massive increase since the beginning of 2020 alone. Both DeFi and the concept of decentralization are playing a significant role in the adoption of crypto and blockchain technology worldwide.
While disruption always brings the promise of potential, it also comes with its fair share of scrutiny. Renowned economist Nouriel Roubin, who predicted the 2008 economic crisis, says the real financial revolution is happening outside of blockchain technology — and decentralization is actually an illusion:
“Blockchain will not disrupt the finance industry over the next decade. There is indeed a revolution in financial services, but it has nothing to do with crypto or blockchain […] Moreover, in cases where distributed-ledger technologies — so-called enterprise DLT — are actually being used, they have nothing to do with blockchain,” he told the London Speaker Bureau.
“They are private, centralized, and recorded on just a few controlled ledgers. They require permission for access, which is granted to qualified individuals. And, perhaps most important, they are based on trusted authorities that have established their credibility over time. All of which is to say, these are ‘blockchains’ in name only. It is telling that all ‘decentralized’ blockchains end up being centralized, permissioned databases when they are put into use. As such, blockchain has not even improved upon the standard electronic spreadsheet, which was invented in 1979.”
So what do decentralized ecosystems need to fulfill their ambitious vision of the future?
And can a decentralized project rely on the likes of Amazon and Microsoft for hosting?
The not-so-popular-opinion is no.
You can’t have your cake and eat it too
At its core, decentralization is the process of taking power away from a central authority. From government to finance, the vision of decentralization is to create an ecosystem where no single person or entity has full control.
But a significant portion of decentralized projects in existence today rely on tech behemoths such as Google, Amazon and Microsoft to host their code and product.
According to Amazon, 25% of all Ethereum workloads in the world run on AWS.
While there is nothing inherently wrong with using major tech platforms for hosting, the reality is, using such services goes against the core thesis of decentralization. Relying on a centralized tech solution prevents true decentralization from ever occurring.
Of course, there are some benefits to using hosting such AWS. It’s relatively cheap and Amazon is established. But those building the future of decentralization should take caution in relying on the path of least resistance.
Even though Google, Microsoft and Amazon have credibility on a large scale, they still operate under a centralized infrastructure, which puts any decentralized project using them at risk.
Specifically, many decentralized projects including ETH may ultimately be deemed securities, which would bring an avalanche of regulatory headaches and issues that could destroy the entire industry overnight. In an extreme example, the U.S. government could pressure companies such as Amazon into not working with decentralized factions.
While many well-known decentralized projects hosted by these tech giants have had success, it’s time we rethink the tradeoffs of using them to facilitate decentralized marketplaces.
The case for decentralized infrastructure
To understand the case for ditching Amazon, Microsoft or Google hosting for decentralized apps and products, it’s important to define the benefits of a truly decentralized infrastructure.
Resilience
True decentralization is supposed to provide the kind of resilience centralized infrastructure cannot guarantee. Relying on a single company puts you at risk.
For example, in the case of Amazon, the company currently appears to openly support decentralization and has even significantly contributed to DeFi, but who is to say Bezos and Amazon’s board of directors won’t change their tune a few years down the line?
Perhaps they’ll decide only certain decentralized projects will be allowed to use AWS. What then? And what if Amazon decides to stop supporting decentralized products entirely? In a more extreme turn of events, what if the business goes under?
You can quickly see how that would affect the entire ecosystem of decentralization, erasing years of hard work and progress. While relying on centralized companies can make things easier in the immediate future, it’s not the best bet in the long run.
Cost savings
Another major benefit of decentralization — especially at scale — is cost savings. While hosting from the major tech players is considered to be one of the cheapest options, there is still plenty of room to save capital with decentralized hosting.
With no ‘middle man’ to pay, decentralized hosting solutions can provide up to 5–10% savings in comparison to traditional hosting services. As decentralized projects continue to expand, those savings are not inconsequential.
Philipp Sandner, professor at the Frankfurt School Blockchain Center, praised the benefits of DeFi: “Utilizing blockchain as technological infrastructure allows relatively speedy and low-cost transactions/settlement, the immutability of the financial contracts, and contract automation,” he wrote in a Medium blog post on decentralized finance.
Data ownership
Another key benefit of decentralization is a move towards complete data ownership. While this doesn’t come without challenges (complete ownership means added responsibility) it puts the power in the hands of the consumer.
When you purchase cryptocurrency on Coinbase, for example, you’re also putting trust in Coinbase. While you “own” the cryptocurrency you purchased, Coinbase could theoretically use your funds.
Using a centralized platform for hosting allows user data to be used with liberties (based on the platform’s terms of services). Again, large tech companies might be saying all the right things, but using their hosting services does translate into relinquishing control over your personal data.
By now it must be pretty clear that I’m a big fan of using decentralized platforms for hosting. But how do you do that? Let’s take a look at some of the major players working to help provide a truly decentralized experience.
Consider Your Options: Decentralized Providers
Threefold Protocol
Disclosure: I am an advisor for Threefold, own TFT tokens and am also currently contracted by Threefold.
Threefold is the largest peer-to-peer grid on the planet, offering decentralized storage and computing power to everyone, everywhere. It’s powered by Zero-OS, a leading open-source operating system and one of the most trusted operating systems in blockchain and crypto.
Threefold is a software-only technology — and hence able to federate any new or existing industry standard infrastructure to form a grid of decentralized storage that is fully encrypted and managed by Smart Contract for IT. Threefold is open to any application that can run on Linux. It is committed to three core values: equality, autonomy and sustainability.
Akash Network
Built with Web.3 in mind, Akash is a rising decentralized ecosystem designed for those who wish for complete decentralization. In addition to providing decentralization through hosting, it also plays well with all your favorite design and development tools, making a transition to the platform as simple and easy as possible.
Akash uses the Akash Token (AKASH) to help simplify the exchange of value and align economic incentives with proper user behavior. The token is the marketplace currency used to pay for leased compute infrastructure on its network.
Akash places a focus on reduced costs, touting it’s up to ten times cheaper than traditional hosting companies: “Clients inherently trust today’s large infrastructure Providers based primarily on the brand equity they’ve built over years. Akash does not and should not require that same leap of faith, since any Provider with capacity can compete to offer services on Akash. Instead, the blockchain earns trust via an open and transparent platform. Data on the chain is an immutable and public record of all transactions, including each Provider’s fulfillment history.”
Ethernity Cloud
Ethernity Cloud is designed for decentralized cloud computing on an Etherum-compatible blockchain.
Built with privacy, anonymity and availability in mind, Ethernity aims to allow regular cloud software to be run as decentralized cloud applications. It has partnered up with Bloxberg and Crowdholding to do so.
Ethernity’s token, which is used to purchase its server services, is traded with the symbol ENTY and is an ETH / ERC 20 token. Ethernity uses anonymity alongside encryption for all connections performed on its network. The project is led by founder and CEO Iosif, and the team consists of blockchain and cloud computing experts. There is a maximum supply of 1,000,000,000 ENTY.
Hypersphere
Hypersphere aims to offer a wide range of decentralized cloud services in addition to creating a marketplace for business and to launch and store digital assets. For example, you can use it to launch agile banking systems on a single platform, virtual credit cards, unhackable identities and wallets and more. The Hyper ID product has been especially popular for providing secure identities for a variety of use cases.
Hypersphere uses fog computing architecture to ensure all incoming and outgoing nodes are distributed in a decentralized way.
With nodes located all around the world, the platform offers competitive pricing and speed compared to other decentralized hosting options. You can use Hypersphere to share and monetize data security as well as develop cyber-secure devices. Hypersphere runs on SDNP, the Secure Dynamic Network Protocol.
Conclusion
Regardless of the many challenges present with building decentralized infrastructure, the future for both decentralization as a whole and DeFi is bright. While it’s tempting to choose the path of least resistance and rely on centralized hosting, it’s a short-sighted mistake that could be costly.
It’s not reasonable to expect a complete exodus from the many centralized companies helping build the future of decentralization. But the sooner we can accept the inevitable, the quicker we can grow and sustain a thriving ecosystem system in which no one person or entity calls the shots.
