As it turns out, several of the components of “web3,” which includes DeFi, are reliant on centralized web backbone to function properly. Several websites, including Disney+ and VICE’s own backend, were disrupted by an outage in Amazon Web Services’ critical US-East-1 area on Tuesday. The disruption also hampered Amazon’s warehousing operations, which were also impacted.
dYdX, a so-called “decentralized exchange” on Ethereum for cryptocurrency derivatives that has received millions of dollars from investors such as Andreesen Horowitz, has been caught in the crossfire of the controversy. A massive AWS outage has caused the dYdX exchange to be temporarily unavailable, according to a tweet from the company on Tuesday.
“We are witnessing increased latency among services, as well as degraded performance, with ports failing to operate and the website failing to load.”
Generally speaking, decentralized exchanges operate right on top of a blockchain, which implies that they have certain usability concerns (such as excessive fees), but they also benefit from the advantages of a decentralized blockchain, such as the absence of a link failure. However, in many circumstances, complete decentralization is more of a long-term dream than a practical reality.
As dYdX pointed out in a tweet, “Unfortunately, there are still certain portions of the exchange that depend on centralised services (AWS in this instance).”
“Despite the fact that we are iterating on the protocol, we remain dedicated to achieving complete decentralization, which continues to be one of our key priorities. Please accept our apologies for this inconvenience.”
dYdX stated that the issue had been fixed many hours after first stating that the exchange had been offline for maintenance. The exact nature of the exchange’s activities that are hosted on AWS is unclear, however the exchange does indicate that its order book (which pairs buy and sell orders) is consolidated on the cloud platform.
Another kind of decentralized exchange, such as Uniswap, does not operate on the order book paradigm, and instead allows users to trade with “liquidity pools” at prices that are decided by an algorithm. dYdX isn’t the first cryptocurrency project that makes use of Amazon’s web-based infrastructure. A large number of Ethereum nodes are hosted on Amazon Web Services, and Bitcoin nodes may be hosted on Amazon’s web infrastructure as well.
There does not seem to have been any significant impact to any of these networks as a result of the AWS outage. The outage affected centralized cryptocurrency exchanges such as Coinbase and Binance as well. Both the United Kingdom and the United States were affected by the interruptions.
Clearly, the “decentralized” portion of “decentralized finance” has a long way to go in certain circumstances, and Amazon’s cloud supremacy is now very much a key component of the web, whether it’s web1, 2, or 3 at this point. And this may lead to a variety of complications.