Crypto’s Reliance on Centralized Infrastructure Uncovered by AWS Outage

Earlier this week, an outage at Amazon Internet Companies (AWS) led to short-term downtimes for an unlimited variety of internet apps and providers, including end-to-end encrypted messenger Signal. In response, many technologists pointed to the scenario as yet one more instance of the supposedly decentralized web’s reliance on centralized infrastructure.

Whereas crypto is meant to be a decentralized different to a lot of that centralization, significantly by way of monetary functions, even that section of the online skilled massive quantities of downtime. Centralized exchanges, corresponding to Coinbase and Robinhood, have been inaccessible for a time period, which shouldn’t be considered as too stunning, however it didn’t cease there. 

AWS is down after which the web stops working.

However the blockchain, it by no means goe … wait a minute. Scratch that.

This sector is a joke.

Everybody preaching decentralization and censorship resistance however in actuality … it is all 100% reliant on the cloud. pic.twitter.com/6yUHP5bll3

— Lefteris Karapetsas (@LefterisJP) October 20, 2025

Precise crypto infrastructure, corresponding to web-based wallets and so-called decentralized finance (DeFi) functions, was also inaccessible. Maybe most troubling, complete blockchain networks stopped working, because the overwhelming majority (all?) of the nodes on these particular networks have been operating on AWS.

Monetary decentralization was the important thing innovation made by Satoshi Nakamoto with the launch of the Bitcoin blockchain in 2009; nonetheless, decentralization was not the tip objective, it was a way to an finish. Beforehand, centralized digital money methods have been shut down by governments or just failed and went bankrupt over time, so the usage of the decentralized blockchain construction is what enabled Bitcoin to persist as an experiment with a brand new financial and monetary system. On this approach, Bitcoin is commonly in comparison with the peer-to-peer file sharing protocol BitTorrent, whereas earlier digital money methods are nearer to Napster of their designs.

For fintechs which might be keen on crypto, a lot of the innovation of blockchain know-how has to do with regulatory arbitrage. Customers are capable of onboard themselves to blockchains rather more simply than conventional monetary establishments, as the method works rather more like downloading an app slightly than signing up for a checking account or making use of for a bank card. On this approach, fintechs seem like extra within the lack of anti-money laundering laws round blockchain-based exercise than the rest.

Properly yeah, they should name it a stablecoin and say blockchain just a few occasions in order that they don’t must do KYC/AML compliance on each transaction.

— Kyle Torpey (@kyletorpey) October 10, 2025

Coinbase’s Base blockchain is a clear example of this kind of phenomenon, as they accumulate all the charges generated by the Ethereum layer-two community they developed with out having to gather detailed private details about the customers. After all, Coinbase claims it’ll enhance the extent of decentralization discovered on the Base blockchain over time, permitting different events to gather charges for collaborating in what’s generally known as transaction sequencing.

Notably, Base is without doubt one of the blockchains that turned inaccessible through the AWS outage earlier this week.

To be clear, there’s nothing fallacious with making tradeoffs in relation to enhancing the usability and mass attraction of Bitcoin and different comparable applied sciences. For instance, a brand new upper-layer protocol for Bitcoin was launched on Tuesday that entails rather more centralization by way of cost processing, but additionally permits customers to withdraw to the bottom blockchain in a scenario the place a service supplier tries to steal from their prospects or just turns into inactive.

Nevertheless, there’s a rising concern that the crypto trade extra usually has embraced far an excessive amount of centralization, as highlighted by an Ethereum Foundation researcher’s recent move to work on a stablecoin-focused blockchain incubated by fintech big Stripe. And Bitcoin itself, which is meant to be the gold normal for crypto decentralization, is not at all immune from this push towards more centralization, as Wall Avenue’s embrace of the crypto asset as a retailer of worth has led to centralization by means of the reintroduction of the third-party custodians Satoshi meant to keep away from.

the cypherpunks manifesto. with bitcoin adoption, will we re-inure ourselves defensively to what we expect the institution would favor. focus on. pic.twitter.com/TYClLq2NwP

— Adam Again (@adam3us) October 22, 2025

Cypherpunks have confronted points in relation to constructing software program that each will increase consumer privateness and sovereignty whereas additionally being user-friendly for many years. And the scenario with Bitcoin and crypto extra usually isn’t any totally different. The worth proposition of this new monetary know-how turns into much less clear the extra its underlying, basic utility is abstracted away from the tip consumer, however the actuality is that the typical particular person tends to make use of apps that make issues user-friendly and handy over all else.