Morgan Stanley Claims Crypto Has Become Less Decentralized
- Morgan Stanley believes DAOs and blockchain platforms have moved away from decentralization.
- The financial institution reported that only 4 firms are responsible for the bulk of Ethereum’s validators.
Decentralization has been the guiding ideology behind cryptocurrency since Bitcoin debuted in 2009. The industry has increased significantly from what it was more than a decade ago. However, experts such as Morgan Stanley believe the concept of decentralization is fast becoming a thing of the past.
In a new report, the investment company noted that the crypto industry has become less decentralized despite enjoying remarkable growth. The report noted that while the underlying blockchain might be decentralized, the introduction of regulation has made the industry less decentralized. The study also remarked that running a significant portion of the blockchain on a single or a limited number of cloud providers is potentially risky.
According to the analysis, more than half of Ethereum’s nodes are cloud-hosted, and most of these use Amazon Web Services (AWS). This could pose a challenge if specific service providers decide to ban particular users or crypto products or if there are protracted server failures.
According to Morgan Stanley, as the crypto ecosystem has developed, various applications, codes, services, and businesses are feeding into the core decentralized blockchains. This has led some parts of the ecosystem to become less decentralized and more reliant on specific services.
Although the situation presents new difficulties, the bank claims that it is not surprising because “centralization is a natural evolution of the financialization of cryptocurrency markets.”
Last month, the Ethereum blockchain transitioned to proof-of-stake [PoS]. So, transactions are now verified by validators. According to the study, only four firms are in charge of operating 60% of these validators.
The Ethereum network was reportedly criticized for its degree of centralization. Ethereum supported such claims and noted that it was considering remedies to the situation.
Morgan Stanley also pointed out that even decentralized autonomous organizations, or DAOs, were moving away from decentralization.
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