Cryptocurrencies by Kevin Hermann October 1, 2019
One of the main advantages of cryptocurrencies, according to their backers is that there is no centralized entity that can manipulate or control them. However, a new study shows that this may be far from the truth.
Organizations and individuals are seeking to create use cases for blockchain technology and cryptocurrencies in different sectors, even for saving the Amazon rainforest. Amidst this, a study of Ethereum nodes by cloud services provider Chainstack shows that 60% of Ethereum nodes run on cloud services provided by Amazon Web Services (AWS), Alibaba Cloud, Google Cloud, DigitalOcean and Hetzner. AWS accounts for 25% of all Ethereum nodes.
Using cloud services for hosting nodes is practical as it reduces the cost of buying expensive equipment used for hosting nodes.
Each cloud service has a unique Autonomous System Numbers (ASNs) and each IP address can be connected to an ASN. Chainstack connected the IP address of each node with its ASN to find which cloud service was hosting each node.
Chainstack used data from ethernodes.org and determined that there were 8,933 Ethereum nodes and out of these 5,299 were running on cloud services.
This is alarming because owners of these privately owned entities can influence Ethereum by their decisions. Thus, power is centralized in the hands of these entities, albeit in an indirect way. These entities will be affected by government policies and if any government is hostile towards cryptocurrency, it can influence them to curtail the use of their services by cryptocurrencies. This can spread panic in the crypto market.
It may also happen than Amazon, Alibaba or even Google can decide to launch their own cryptocurrency. Then, they will need space on their cloud for their own cryptocurrency. Also, the cryptocurrency it is hosting will become its competitor and it will have the incentive to weaken it. The surest way to do so is to block the nodes from accessing the cloud. Thus, if cloud services launch their own cryptocurrencies, they will have a conflict-of-interest with the nodes which they host.
Moreover, Chainstack’s research shows 34% of all Ethereum nodes are hosted in the US. Thus, decisions made by the US government with regards to cryptocurrency will have a disproportionate impact on Ethereum.