In the race for the infrastructure of Web3

People interact with open-source applications like MetaMask, Web3 games, the Metaverse, and DeFi protocols every day, but often don’t think about what’s happening behind the scenes to make it all work. If we think of Web3 as a burgeoning new city, node infrastructure providers are the underlying power grid that enables operations.

All DApps need to communicate with blockchains, and full nodes serve billions of requests from DApps every day to read and write data on chains. We need a huge node infrastructure to keep up with the rapidly growing DApp ecosystems and to serve all requests. However, running nodes is very time and capital intensive, so DApp builders turn to vendors for remote node access. There is massive monetary incentive for infrastructure providers to power as many of these Web3 ecosystems as possible, but who is winning this race so far?

The centralization problem

The quickest way to deploy reliable infrastructure for DApp ecosystems is for centralized companies to set up a fleet of blockchain nodes, typically housed in Amazon Web Services (AWS) data centers, and subscribe to developers from anywhere on it can access. A few players in this space did just that, but at the cost of centralization. This is a major problem for the Web3 economy, leaving the ecosystem vulnerable to attack and at the mercy of a few powerful players.

Consider that over 80% of Ethereum nodes are located in the United States and Germany, and that the three largest mining pools combined could target 51% of the network. In many ways, today’s blockchains are much more centralized than we would like, in stark contrast to the ethos initially laid out in Satoshi Nakamoto’s Bitcoin (BTC) white paper.

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If major node vendors colluded, Web3 would lose all the advantages it has over Web2, from censorship resistance to trustworthiness, and be left with only its disadvantages, from relatively high fees to low transaction throughput.

Not only that, the reliance on centralized providers also leaves the door open to failure. For example, an Infura outage actually forced crypto exchanges and wallets like Coinbase Wallet, Binance, and MetaMask to suspend payouts of Ethereum and ERC-20 tokens as they could not fully rely on their nodes.

It’s also worth noting that Amazon, the backbone of many of these centralized providers, has suffered a number of outages in the past, which has created another vulnerability. Ethereum’s Infura outage isn’t the only one. More recently, the move from Ethereum to Ethereum 2.0 was set back by a 7-hour outage due to the hardware failure of a single node on the network. A risk that really decentralized networks don’t have to worry about.

Decentralization is a core tenet of the Web3 economy, and a centralized blockchain infrastructure threatens to undermine it. For example, Solana has suffered multiple outages due to a lack of sufficiently distributed nodes to handle the surge in traffic. This is a common problem with blockchain protocols trying to scale.

Related: Scalability or Stability? Solana network outages show that work is still needed

And it’s not just Solana. Many of the leading blockchain protocols are struggling to find a way to scale and become more decentralized. While big blockchains like Ethereum and Bitcoin have stood their ground in the battle for decentralization, smaller blockchains lost the battle, suffering 51% attacks from overly centralized node providers.

For example, on June 8, 2013, Feathercoin (FTC) suffered a 51% attack. This means that a single entity could control more than half of the total processing power of the FTC network. This allowed them to reverse confirmed transactions and even stop the passage of new transactions.

Simultaneously with the FTC attack, the website suffered a DDoS attack. This made it difficult for users to access information about the attack or try to get their money off the network. Since then, FTC has been forgotten. Its price has dropped and it is no longer listed on any major exchanges.

This historic centralization is due to over-reliance on Web2 cloud providers such as AWS and Infura, which have been the main infrastructure providers for the Web3 economy. But now, to avoid the centralization and proverbial “single point of failure” of blockchain, decentralized infrastructure providers are gaining momentum. This is good news for the prospect of keeping Web3 ecosystems healthy and decentralized.

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A decentralized infrastructure offers better solutions

Fortunately, recent innovations are leading to a new breed of providers that are much more decentralized. These providers operate nodes on-premises or even in users’ homes instead of relying on centralized cloud providers.

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While centralized providers have a head start, decentralized providers are emerging as a highly viable alternative. Their main advantage is that they cannot be shut down by a single point of failure and in many cases provide faster connections for global users. Also, decentralized node infrastructure providers create new economies where independent providers process requests for data and earn rewards in their native tokens. This new breed of provider is rapidly gaining market share and may eventually displace even the currently incumbent Web3 infrastructure operators.

Related: Decentralization, DAOs and the current Web3 concerns

The competition is heating up

There are a number of different vendors in the space like Ankr, Flux, and QuickNode competing for market share. This competitive environment is good for the Web3 economy as it drives innovation and lowers prices. It also ensures that providers are constantly striving to improve their services and offer their customers the best possible experience.

More importantly, the competition for decentralized infrastructure is leading to more decentralization of the Web3 economy. This is good because it makes the economy more resilient to attacks and censorship. The 51% past attacks should be a thing of the past as infrastructure providers are spread across different regions.

Related: Web3 relies on participatory economics, and that’s exactly what’s missing – participation

This competition between providers will be crucial to maintaining a healthy and decentralized ecosystem.

Realizing the promise of Web3

Web3’s promise is not just to build a better Internet, but a better world. Decentralized infrastructure providers create the basis for a new Internet that is fairer, more secure and more resistant to censorship.

By maintaining the status quo, centralized hosting providers fail to innovate and are vulnerable to censorship. Decentralized infrastructure providers, on the other hand, are encouraged to push the envelope and provide the best possible service with a democratic structure that makes them more resilient to censorship and attacks.

This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Gregory Gopman is a tech entrepreneur working in the blockchain space, where he serves as Chief Marketing Officer at Ankr and runs a blockchain consultancy called Mewn, which helps launch projects and boost their valuation. Greg has been working in startups for 15 years – 10 years at Silicon Valley technology companies and 5 years building crypto projects. He is best known for co-founding the Akash Network and AngelHack, and helping Kadena grow from $80 million to over $4 billion in 100 days.