Amazon outage causes seven hour disruption at crypto exchanges, raises questions on 'decentralisation'
- Cloud service
AmazonWeb Services (AWS), which runs around one-third of the internet, saw a massive outage.
- Not only were centralised crypto exchanges hit, but decentralised players like
dYdXwent down in the chaos that followed.
- The time-sensitive nature of transactions on crypto exchanges has users questioning what ‘
decentralisation’ truly entails.
AdvertisementAmazon Web Services (AWS) was down for nearly half a day on December 8. As a result, centralised crypto exchanges like Binance,
Even though dYdX is decentralised, which is to say that it allows for direct peer-to-peer transactions unlike a centralised exchange where investors need to use the company’s designated wallet, it is still dependent on AWS — a centralised service.
Due to a major AWS outage, dYdX exchange is currently down. We are experiencing greater latency across services and… https://t.co/rF8tx8Of28— dYdX (@dydxprotocol) 1638903438000
Proponents argue that this undermines the entire objective of being a decentralised platform. The ideology is that a decentralised network can ‘technically’ never face an outage since the nodes are distributed among users. However, when the platform’s website front-end uses AWS — it negates this aspect.
Meanwhile, the dYdX exchange’s governance token (DYDX) , which had begun recovering after last week’s dip, fell by 5% again during the outage, and then recovered later the same day.
Traders were left out of the loop for hours in a market that’s online 24/7
AWS’ glitches left customers unable to login or trade for a period of time. Retail traders are claiming losses of up to $200,000 due to multiple outages. Some have even started a campaign to seek damages from Binance — the largest crypto exchange globally with transaction volumes of $23 billion, according to CoinMarketCap.
Since cryptocurrency and its derivatives are known to be volatile, trader strategies of ‘timing’ their buys and sells depend entirely on the exchange remaining accessible to monitoring. For example, on December 4, the ETH token on the Ethereum blockchain dropped from $4,100 to $3,600 within 50 minutes, before recovering most of the drop an hour later. Executing desired trades exactly in time, would have decided whether a trader profited or lost from the market moves.
To support such 24x7 operations that may see massive traffic increases in the space of minutes, large cloud-based providers such as Amazon’s AWS or Microsoft’s Azure have a number of features to increase reliability.
With server farms located across the globe, they claim better reliability than smaller providers or self-hosted data centres. Yet they aren’t entirely immune to disruptions or human error, and have had many service outages over the years.
Because AWS powers almost one-third of the internet according to Statista, yesterday’s outage affected a wide cross-section of the internet, including Netflix, Disney+, Slack, and Amazon’s own shopping site.
When a person’s cloud backup or a fun website of cat memes is temporarily inaccessible, it is merely inconvenient. But when governments and large companies have business interruptions, the outages become a concern. Finally, a ‘decentralised’ service suffering an outage due to centralised systems, just adds another layer of irony.
Unfortunately, parts of the exchange still rely on centralized services (AWS in this case). We are deeply committed to full decentralization and this remains one of our top priorities as we continue to iterate on the protocol.
The importance of decentralisation to the crypto community
Most of the big names on the Internet have not made a big deal about yesterday’s outage, as it is just one more disruption which is covered in Amazon’s SLA (Service Level Agreement). However, the service disruption and the loss of retail investors’ money stood out as an egregious event for the cryptocurrency community.
Keep in mind the crypto community’s belief in a ‘ground-up’ architecture with a ‘decentralise’ philosophy. After all, crypto believers are drawn to Bitcoin because no single entity can control it. They have worked out how to transact money with each other without a central bank. They are drawn to a Web3-based metaverse which is not controlled by big corporations and is open to all. They are working out a decentralised internet naming system (ENS), decentralised file storage (filecoin), decentralised finance systems, and more with no external control.
Ironically, Coinbase chief product officer Surojit Chatterjee, told Forbes that it wants the company to become the “AWS of crypto” with Coinbase Cloud, which will — again — be centralised.
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