When we talk about blockchain networks or Web3, one crucial aspect that has been missing in this space is decentralized infrastructure — the underpinning of the entire blockchain ecosystem — which refers to a cloud network of numerous independent computing nodes, ranging from personal computers to entire data centers, distributed across the globe.

Unlike centralized cloud service providers like Google and Amazon, decentralized infrastructure relies on a decentralized network of many computers and hardware devices (“nodes”) working together to meet user needs, with each computing node managing only a portion of the computing or storage task.

Decentralized infrastructure offers advantages such as enhanced privacy, reliability, and cost-effectiveness. This is what makes cryptocurrencies such as Bitcoin different from central bank digital currency experiments. On the other hand, technologies that rely on decentralized infrastructure must face unique challenges related to complex security trade-offs, performance (often too slow), and (often unclear) regulation.

Core advantages of decentralized infrastructure

Privacy — Decentralized infrastructure offers better privacy than traditional cloud service providers in the enterprise world. In decentralized networks such as Oort, users’ data is stored, processed, and encoded in a unique way. First, users upload their raw data. Then, the data is encrypted, replicated, and sharded (divided) into hundreds of thousands of pieces at the “edge” of the network — i.e., at the nodes closest to the user. These pieces of the encrypted file are then distributed to hundreds of network nodes. Each node stores only a few pieces of the file, and no single node holds the entire file. On this serverless infrastructure, users can be confident that their data is completely unreadable to any node responsible for storage. Only the user can retrieve, decode, and decrypt the file through a private key. The privacy provided by decentralized infrastructure means that users ultimately own their data. Privacy guarantees ownership.

Reliability — Traditional cloud networks are centralized, which means they are vulnerable to attacks. The failure of a single node in a centralized network can bring down the entire system. Even the largest cloud service providers can run into this problem. For example, Alibaba Cloud was recently down in Hong Kong for more than 24 hours. Decentralized infrastructure enjoys a comparative advantage in reliability because data is hosted on hundreds of nodes rather than one vulnerable server.

Cost — Decentralized infrastructure can take advantage of low-cost and idle resources around the world. According to research by Anthesis Group and Stanford researchers, 30% of servers are in a “comatose” state. With decentralized infrastructure, users can take advantage of servers and other resources from Virginia to Nigeria, Dubai to Vietnam, taking advantage of cheaper and idle computing and storage resources to process their data, allowing users’ money to go further.

Challenges associated with decentralized infrastructure

Security — Security is the most important concern when users consider whether to use cloud services. Cloud networks are not impenetrable, and hackers frequently attack giants like Google. However, since Google and Amazon are often hacked, they continue to improve and prove their security. With the exception of the Bitcoin BTC network, decentralized infrastructure is too new and has not undergone the same amount of stress testing and security upgrades.

Performance — If a decentralized service provider cannot match the performance of the systems provided by AWS or Google Cloud, it will have a hard time winning any users. Performance is a key difficulty. Performance is usually defined as latency, availability, and durability. Ironically, the advantages of decentralized infrastructure in the area of ​​privacy reversely affect its performance. It's a trade-off: when you increase the privacy of users, you lose some speed and convenience.

Regulation — The decentralized nature of decentralized infrastructure presents challenges in complying with traditional regulation (e.g., FINRA) due to the geographic distribution of nodes and the fragmentation of file data across multiple nodes. While some regulatory frameworks may already exist, they may lack clarity or enforceability to apply to decentralized networks. Technological innovation often evolves faster than regulation.

Decentralization shapes the future of Web3

In summary, decentralized infrastructure offers both opportunities and challenges. While it offers enhanced privacy, reliability, and cost-effectiveness, there is still much work to be done in terms of security, performance, and regulation to win users from Google Cloud, AWS, and other centralized cloud giants. However, as technology advances and regulators respond to these developments, the potential for decentralized infrastructure to reshape the cloud computing landscape remains high.

Max (Chong) Li

I am the founder and CEO of Oort, a Web3 data cloud company, and a faculty member of the Department of Electrical Engineering at Columbia University. I hold more than 200 international/US patents. I have published many academic papers in top journals such as IEEE Transactions, IEEE Transactions on Information Theory, IEEE Communications Magazine, Automatica, etc. In addition, I am the author of the book Reinforcement Learning for Cyber-Physical Systems. I also serve as a reviewer, committee, and co-chair of the most prestigious journals and conferences in the blockchain field, the Communications and Control Association.

By Max (Chong) Li, Founder and CEO of Oort

Translation: King Arthur