Even though dYdX is decentralized, meaning it allows direct peer-to-peer transactions unlike a centralized exchange where investors have to use the company’s designated wallet, it still depends on AWS (Amazon Web Services), a centralized service.
Proponents argue that this undermines the whole objective of being a decentralized platform. The ideology is that a decentralized network will ‘technically’ never face an outage since the nodes are distributed among users. However, once the platform’s web site front-end uses AWS — it negates this aspect.
Meanwhile, the dYdX exchange governance token (DYDX), which had started to recover after last week’s outage, fell another 5% during the outage, and then recovered later in the same day.
Traders have been out of the loop for hours in a 24/7 online marketplace
AWS issues prevented customers from accessing or negotiating for a period of time. Retail traders are claiming losses of up to $ 200,000 due to multiple outages. Some have even launched a campaign to seek damages from Binance, the world’s largest cryptocurrency exchange with transaction volumes of $ 23 billion, according to CoinMarketCap.
Since cryptocurrency and its derivatives are known to be volatile, traders’ strategies for “timing” their buying and selling are entirely dependent on keeping the exchange accessible for surveillance. For example, on December 4, the ETH token on the Ethereum blockchain went from $ 4,100 to $ 3,600 in 50 minutes, before recovering most of the drop an hour later. Executing the desired trades exactly on time would decide whether a trader profited or lost market moves.
To support such 24/7 operations that can see huge increases in traffic within minutes, large cloud-based providers like Amazon’s AWS or Microsoft’s Azure have a number of features to increase reliability.
With server farms located all over the world, they claim better reliability than small vendors or self-hosted data centers. However, they are not entirely immune to disruptions or human error and have numerous service outages over the years.
When a person’s cloud backup or funny chat memes website is temporarily inaccessible, it’s just annoying. But when governments and large corporations have business interruptions, the outages become a problem. Finally, a “decentralized” service that suffers an outage due to centralized systems, only adds another layer of irony.
The importance of decentralization to the crypto community
Most of the big names on the internet haven’t made much of yesterday’s outage, as it is just another disruption covered by Amazon’s service level agreement (SLA). However, the disruption of service and the loss of money for retail investors has turned out to be a egregious event for the cryptocurrency community.
Keep in mind the belief of the crypto community in a “ground-up” architecture with a “decentralized” philosophy. After all, crypto believers are drawn to Bitcoin because no entity can control it. They figured out how to transact money with each other without a central bank.
They’re drawn to a Web3-based metaverse that isn’t controlled by big business and is open to everyone. They are developing a decentralized Internet naming system (ENS), decentralized file storage (filecoin), decentralized finance systems and more without external control.
Ironically, Coinbase’s chief product officer Surojit Chatterjee told Forbes that he wanted the company to become the “AWS of cryptocurrencies” with Coinbase Cloud, which will – again – be centralized.
Amazon Web Services (AWS) was down for almost half a day on December 8. As a result, centralized exchanges of cryptocurrency such as binance, coinbase, and others have come to a standstill. Additionally, even decentralized cryptocurrency exchanges, such as dYdX, have not been able to process transactions.
This post has been originally published on Business Insider.