Centralization Issues Affecting Blockchain Technology

OMNIA Protocol
Published in
4 min readMar 28, 2022


Blockchains were first created with a decentralization ideal in mind so that no one could control the network, and there was no single point of failure affecting it. Bitcoin can only be censorship-resistant if its blockchain is immune to entities looking to block transactions or alter its state.

The definition of decentralization, when it comes to blockchain technology, refers to a shift in control and decision-making from a centralized entity to a distributed network of participants. Being decentralized, blockchain networks can reduce the level of trust participants must place on one another and hinder the ability of one to exert control over the other(s).

True decentralization would mean that changes are made to the network once all — or a majority, depending on the quorum — of its participants agree on that change. That is why 51% of attacks are a complicated reality (within truly decentralised networks) in the cryptocurrency space: they see one participant exert dominant computing power over others to alter the rules and benefit themselves.

However, as we have seen before, while theoretically blockchain promises a fully decentralized system where most participants do not have to place their trust in a single entity, but there’s a centralized infrastructure controlling most blockchains.

Centralized infrastructures

To make a blockchain network completely decentralized, every user should run their own node on it, as nodes help verify blocks and transaction data. Nodes are machines with the latest copy of the blockchain running, ensuring its history has no contradictions.

A study conducted by TNW has found that cloud computing services host most nodes on the Ethereum network. Up to 61.6% of all the nodes on the network are run through centralized cloud computing services, with Amazon Web Services (AWS) handling nearly a quarter of all ETH nodes.

AWS is said to control around 32% of the cloud computing market, competing with Microsoft Azure, Alibaba Cloud, Google Cloud, Digital Ocean, and Hetzner. Most of these services are based in the U.S., which means nearly 34% of Ethereum’s cloud nodes are hosted there.

Source: Etherscan

To put this into perspective, over one-third of the Ethereum network could be shut down if, for example, there were to be a major power outage in the U.S. On top of that, most blockchain developers run their decentralized applications through centralized platforms like Infura, which manage blockchains for their customers.

These companies are another central point of failure. When these centralized entities fail, the results are significant for the cryptocurrency space.

Widespread outages

On December 8, 2021, Amazon Web Services went down for nearly half a day. As a result, centralized cryptocurrency exchanges including Binance, Coinbase, and KuCoin were ground to a standstill, meaning most major crypto on-ramps were effectively down because of the outage.

Even decentralized cryptocurrency exchanges like dYdX could not process transactions during the outage. While dYdX is decentralized, its infrastructure is still dependent on AWS. This wasn’t the first AWS outage as well, as, on February 19, 2021, the same thing happened.

To be clear, almost one-third of the internet went down with the outage as AWS powers a significant portion of it, and major centralized services like Netflix, Slack, and Amazon’s shopping site went down because of it.

Companies use AWS and alternatives because these are cloud computing platforms built at scale, allowing for reduced costs compared to running their own infrastructure.

Entire blockchains ground to a halt

Other such outages have occurred not because cloud computing providers were the single point of failure, but due to other centralization-related issues. For example Solana, a high-performance blockchain using Proof-of-History, has endured distributed denial-of-service (DDoS) attacks that ground the network to a halt.

One such attack led to a 17-hour outage due to mass botting activity for an initial DEX offering. Solana was affected because its validators are known before they start working on transactions, and as such can be a target for botnets.

To be clear, other networks have been affected as well. Polygon, one of Ethereum’s top scaling solutions, has experienced outages because of issues with its Heimdall node, which acts as a verifier layer that creates checkpoints — a central point of failure.

The solution: OMNIA Protocol

We strongly believe OMNIA Protocol could be a solution to these centralization issues, as it addresses the weaknesses of existing blockchain networks.

OMNIA Protocol is a decentralized infrastructure protocol for securely accessing the blockchain so that no single point of failure will ever disrupt blockchain applications or wallets integrating with it.

OMNIA creates the right incentives for people to run (or share if they already run) blockchain nodes, regardless of the network chain, even if they are only syncing with the chain and not mining or validating. These incentives significantly boost decentralization.

For Proof-of-Stake networks, these incentives ease off the strain from the validator nodes, leveraging the peer-to-peer protocols to distribute the transactions to validators.

OMNIA’s solution is truly decentralized and does not require technical knowledge to implement. While it may not immediately replace centralized services, OMNIA can from the start complement them.

Learn more about the technological marvel behind Omnia by following our Medium, or reading our whitepaper.

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