How Amazon Cloud Service Crash Hit Cryptocurrency Exchanges
The failure of the Amazon Web Services cloud service has brought problems to dozens of crypto exchanges. Because of it, many traders and trading platforms lost their money. Why is the crypto industry, which is supposedly decentralised, nevertheless so dependent on technological companies?
Amazon Web Services (AWS) is a cloud service of the American corporation under the same name that provides virtual server and computing services. AWS is needed to optimise various processes. However, as practice shows, service failures can provoke a “butterfly effect”, causing a malfunction in dozens of sites, which happened on August 23, 2019.
Amazon Web Services crash
Large crypto exchanges such as Binance, KuCoin, BitMax and dozens of other sites have been affected by AWS malfunctions. Mostly on the platforms there were problems with the withdrawal of money and the display of trading data. According to Chanpen Zhao, the head of Binance, the snag occurred in the operation of caching services.
Also, according to the information of Dovi Wang, a co-founder of Primitive Ventures, problems with AWS have affected a number of Asian exchanges, which is why prices for crypto assets were extremely unstable, and at some sites you could buy bitcoin at a very low price.
For the same reason, the BitMax crypto exchange completely stopped trading, since the price of ETH on its platform reached 33 cents, and the cost of bitcoin dropped below $1.
One need to understand, however, that the transaction always has two sides, and if the lucky ones managed to buy an asset at a low price, then someone suffered major losses. For example, according to the crypto trader with the nickname wolf, all those who used margin trading, that is, trading with leverage, lost their money.
Amazon eventually reported that problems were identified in the Asia-Pacific region and immediately fixed, although the consequences of these problems are not yet fully understood. At the same time, crypto-exchanges reacted differently to the incident. For example, the Upbit platform assured customers that they would not lose money and all dubious calls would be canceled.
How do traders return lost money
But what should traders do if they lose their funds due to problems on the cryptocurrency exchange associated with the AWS service? The best decision is to fight for your rights in court.
“The most effective solution for platform users, of course, will be to file a class action lawsuit against the platforms. However, first of all, it is necessary to carefully study the provisions of the web documentation of such sites (Terms of Use, Risk Policy Statement, etc.). It is important to eliminate the risk that when registering an account on the exchange, the user agreed that he himself bears all financial risks and losses, ” explains Christina Nemchinova, a co-founder of Brightman legal fintech consulting.
However, according to the lawyer, before filing a lawsuit, you should wait for the official response of the platforms. It is possible that companies are insured against such events and losses will be compensated to users.
Otherwise, cryptocurrency exchanges can somehow find a mechanism for compensation for the losses.
Decentralization
Companies have still not fully reported on the losses incurred, while it is not known whether Amazon interrupted blockchains that could theoretically use it.
However, it is obvious that crypto platforms, which in one way or another are meant to ensure decentralisation of finances, cannot fully cope with this task, while their work directly depends on centralised services such as Amazon.
It is worth remembering the recent story of CloudfFare “crash” — the service that provides protection against DDoS attacks. It turned out that due to a bug in the code, more than a million sites were disabled, including CoinMarketCap, as well as the sites of the Coinbase and Poloniex crypto exchanges.
While developers are slowly building a decentralised Internet, and ideologists talk about the transition to web 3.0, most crypto platforms still use centralized services even though it contradicts the very concept of independent and distributed cryptocurrencies.
Moreover, dependence on technological companies is a direct threat not only to the functioning of a decentralised financial system, but also to the traditional economy as such. Indeed, in the event that Google loses connection with servers that support the operation of national payment systems and other economically important centres, it will provoke a collapse and, as a result, a crisis.
That is why decentralisation is not only the security of the crypto industry, but also the guarantee of the independent and uninterrupted functioning of the traditional economy and finance systems.
Author: Annabella Lapshina
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