Has the Ethereum blockchain become too decentralized for some to use? Reports show 60% of validators are managed by only four companies, following the shift to proof-of-stake.
The crypto ecosystem is becoming less decentralized, Morgan Stanley said in a research report on Wednesday.
The underlying blockchains themselves may be decentralized, but as crypto regulation develops the need to run a large part of the blockchain on a single or small group of cloud providers becomes a potential risk, the report said. The report said 65% of Ethereum’s nodes are cloud hosted, and half of these use Amazon Web Services . If certain service providers decide to censor some participants or crypto products or if there are lengthy server outages, this could become a problem.
The crypto ecosystem has evolved “with many applications, code, services and companies feeding into the underlying decentralized blockchains,” which Morgan Stanley says is causing some parts of the ecosystem to become less decentralized and more dependent on individual services. The bank says this isn’t surprising as “centralization is a natural evolution of the financialization of cryptocurrency markets,” although it does bring new challenges.
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