Amazon’s Server Outage Took Down a ‘Decentralized’ Crypto Exchange

With the rise of so-called “decentralized finance” or DeFi, a wave of new cryptocurrency projects seeking to replicate financial services on the blockchain without intermediaries, an important question has arisen: how “decentralized” is all this, actually ?

It turns out that part of what constitutes “web3”, within which DeFi sits, depends on the centralized web infrastructure. On Tuesday, Amazon Web Services experienced an outage in its key US-East-1 region that affected numerous websites, from Disney + to VICE’s own backend, as well as Amazon’s warehouse operations. Caught in the crossfire was dYdX, a so-called “decentralized exchange” on Ethereum for cryptocurrency derivatives that has raised millions of investors, including Andreesen Horowitz.

“Due to a major AWS outage, the dYdX exchange is currently down,” dYdX he said in a tweet on Tuesday. “We are experiencing increased latency on all services and impaired functionality with terminals not working and the website not loading.”

Decentralized exchanges generally run directly on top of a blockchain, which means they have some usability issues (such as high fees), but reap the benefits of a decentralized blockchain, such as not having a single point of failure. But in many cases, full decentralization is more of an exaggerated goal than a current reality.

“Unfortunately, there are still some parts of the exchange that rely on centralized services (AWS in this case),” dYdX tweeted. “We are deeply committed to full decentralization and this remains one of our top priorities as we continue to repeat the protocol. We apologize for this disruption.” dYdX announced that the outage was resolved several hours after saying that the exchange was down.

As to how much of the exchange’s operations run on AWS, it’s not entirely clear, but the exchange notes that its order book (which matches buy orders and sell orders) is centralized. Other decentralized exchanges, such as Uniswap, do not use an order book model and users instead trade “liquidity funds” at prices determined by an algorithm.

dYdX isn’t the only encryption project using Amazon’s web infrastructure. A good portion of Ethereum nodes are deployed on AWS, and Bitcoin nodes can also run on Amazon’s web infrastructure. None of these networks appear to have experienced a significant outage due to the AWS outage. The outage also affected centralized crypto exchanges such as Coinbase and Binance.US, which experienced outages.

It’s clear that the “decentralized” part of “decentralized finance” has a bit to do in some cases, and Amazon’s cloud dominance is now a fundamental part of the web, be it web1, 2, or 3. And that’s it. it can cause all kinds of problems.

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