Lively discussions at Reddit on Friday re-emerged the debate over whether the computing infrastructure built on Ethereum is over-centralized. According to on-chain data, about 32% of all Ethereum nodes are running on Amazon AWS servers. However, Amazon claims that number is close to 25%.
Anthony Pompliano, co-founder of Morgan Creek, raised awareness of the issue when tweeting in 2020.
Jeff Bezos was able to shut down most of these Ethereum-based “DeFi” apps by simply shutting down AWS.
Just starting the server with Uncle Jeff is not decentralized.
— Pump 🌪 (@APompliano) October 7, 2020
Since 2020, there has been little change in improving node decentralization within Ethereum. However, Pomp’s tweets are not completely accurate.
Centralization of Ethereum
The following image shows the percentage of hosted Ethereum nodes running on AWS. At first glance, this seems to be of great concern as it goes against the story of Ethereum’s decentralization.
However, the graph ignores nodes running on private machines rather than servers hosted in the cloud. Hosting service providers promote about 67% of all nodes and 29% are in a residential environment.
Interestingly, unanalyzed statistics show that over 50% of residential nodes go through a small number of US-based internet providers. Therefore, Verizon, Comcast, Spectrum, and AT & T make up 51% of unhosted Ethereum nodes.
Therefore, Amazon, Verizon, AT & T, Spectrum, and Comcast promote about 47% of all nodes on the Ethereum network. This percentage is consistent with the total distribution of Ethereum across the United States. The United States runs almost five times as many nodes as other countries. It is the second highest in Germany at 11%.
This is 47%, approaching instability with the often quoted 51% magic number needed to shut down the network. If a malicious attacker gains access to a node through malicious means in an attack that spans these five US companies, it could damage the network.
However, like Dankrad Fried, a researcher at the Ethereum Foundation, 51% of attacks do not give the attacker complete control. Still, it can cause serious problems.
“They can stop you from using the chain …[and] Replace the chain. That is, it reverts a certain number of blocks and changes the order of transactions within the blocks. “
With 51% of attacks, you can’t get coins from your wallet or create new coins, but undoing a transaction can lead to double payments. This is a serious concern.
Does Proof of Stake solve the problem?
The integration of the Ethereum Beacon Chain is the final step in the transition of the network to Proof of Stake. According to the documentation, the event should lead to a more decentralized ecosystem. There are already over 400,000 validators running on Ethereum, each staking about 32 Ethereum.
Three pools form more than 50% of all ETH bet on the Beacon chain. Coinbase, Lido, and Kraken. Similar risks can be attributed to these pools as the stacker delegates ETH to the pools to remove the 32 ETH minimum and “unlock the set of validator keys”. Pooling is not natively available on the chain, leading to a staking protocol as a service to drive the needs of small investors.
Ethereum Amazon AWS
In 2021, Amazon launched Ethereum with its Amazon managed blockchain service, allowing users to activate Ethereum nodes within minutes. Familiar with AWS and existing integrations into many internet processes, this has become a semi-friction experience for developers.
Nodes are an integral part of every dApp, and reliability, safety, and robustness are top priorities for any project. Amazon AWS has gained the trust and respect of the world’s largest companies on Web 2, and is currently trying to establish a similar property on Web 3.
The percentage of hosted nodes running on Amazon AWS has dropped by about 3% since 2020, but it still holds a significant portion and there is little competition. Future web3 companies such as Alchemy and Ankr will theoretically offer nodes as a service that may compete with Amazon.
However, many of these services also use Amazon AWS, which has less impact on decentralization. Companies such as Gateway.fm are trying to provide a bare metal server infrastructure to work around AWS issues, but they are in the early stages of development.
The use of AWS does not offer the risks inherent in the feasibility of the Ethereum blockchain. However, a threat arises when a centralized entity is attacked by distributing the network and causing serious disruption.