Morgan Stanley analyst Sheena Shah argued Wednesday that the cryptocurrency ecosystem is becoming more centralized, though the underlying blockchains remain decentralized. That's partly because the "reliance of the running of a large portion of the blockchain on a single or small group of cloud service providers becomes a non-negligible risk to consider," Shah wrote in a note to clients. For instance, 65% of ethereum's (ETH-USD) nodes are hosted by a cloud provider, with Amazon Web Services accounting for half of them, the note said. And problems could emerge if service providers decide to censor certain participants or crypto products, or if there are lengthy server outages. "The crypto ecosystem has evolved over recent years with many applications, code, services and companies feeding into the underlying decentralized blockchains, which we would argue is causing parts of the broader crypto ecosystem to become less decentralised and more dependent on individual services," Shah explained. As part of ether's (ETH-USD) centralization issue, 60% of the blockchain's validators are managed by just four companies, Shah pointed out. Note that since ether's transition to Proof-of-Stake from Proof-of-Work in mid-September, transactions have been approved by validators, canceling out the need for miners as part of the software update. Another reason why the crypto world is becoming less decentralized is because the ecosystem has develop...
