Morgan Stanley: crypto increasingly centralized
Crypto is becoming more and more centralized. That reports the investment bank Morgan Stanley. A trend that is familiar to many people could be fatal for cryptocurrencies.
Morgan Stanley: Cryptocurrency decentralization is waning
When Satoshi Nakamoto released Bitcoin in 2009 , he used various measures to ensure the decentralization of the digital currency. This should resist manipulation against all actors.
If there is sufficient decentralization, no state actors can bring the network under their own control. However, this situation is increasingly endangered, writes Yahoo , citing a report by Morgan Stanley.
Ethereum is a cause for concern
The investment bank’s assessment is essentially based on the circumstances of the second-largest cryptocurrency . Ethereum is experiencing growing centralization, so the tenor. In fact, even before the landmark merge, TokenTopNews is reporting on potential censorship issues .
In the meantime, the merge has been successful and the situation has long since proven to be threatening. About half of all blocks are now censored. This applies above all to the Tornado.cash dApp, which has recently been the subject of a legal dispute .
The proportion of censored blocks has recently increased significantly. A technical detail is to blame. Although Morgan Stanley does not refer to this fact, the bank also believes that certain technical elements are causing problems.
Crypto more centralized through cloud hosting of nodes
Morgan Stanley identifies node cloud hosting as a serious threat. The line of argument is very simple: cloud hosters are centralized companies. If cryptocurrency regulation continues to increase, it could affect hosters.
Accordingly, the state could enforce measures at this point. For example, governments could force the network nodes to be shut down. In the worst case, it would even be conceivable that the nodes would be hijacked and the network manipulated.
The fact that 64 percent of the Ethereum nodes are operated by four different providers proves that this idea is not so far-fetched. Amazon accounts for the largest share of this . Hetzner is also popular. This is followed by Google and OVH.
Only 33 percent of the network nodes are operated by private individuals. Another problem becomes apparent here. Hetzner, the second largest node operator in the network, announced just a few weeks ago that it would ban crypto nodes entirely .
Responsible is the trend among users to rent a cloud and set up a network node there. Although the stability and connection of these nodes is usually very good, it is not particularly beneficial for a decentralized network – at least not to this extent.
Operators from industry and educational institutions only make up a negligible proportion of the network .
Morgan Stanley believes centralization is normal
Although Morgan Stanley warns of the changed circumstances, the analysts consider these events to be normal. Accordingly, centralization is a normal part of the maturation process of crypto.
The hard core of the crypto scene sees it differently. The Ethereum Foundation also believes the criticism is justified and has long declared that it is working on a solution. If the German hoster Hetzner is his threat, there could be a sudden shutdown of six percent of the network, which may then draw more attention to the risk.