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A Cosmos Ecosystem Peers Decentralization Analysis
The strength of the Cosmos Ecosystem lies in its unparalleled interoperability, made possible by the Inter-Blockchain Communication (IBC) Protocol wich seamlessly connects not only Cosmos-SDK based blockchains, but also various other ecosystems, fostering a truly interconnected blockchain landscape. Validators and Nodes play a crucial role in the ecosystem by providing interchain security and the necessary infrastructure for Explorers, Relayers, Wallets, and DApps.
However, based on Hedrun's public peer analysis of over 117+ Cosmos blockchains, involving a total of 9176 peers, significant decentralization issues within the infrastructure have come to light.
The following table shows the distribution of Providers across the infrastructure:
| Provider | Peers | % |
|---|---|---|
| Hetzner Online GmbH | 2524 | 27.51% |
| OVH SAS | 989 | 10.78% |
| Amazon.com, Inc. | 492 | 5.36% |
| Amazon Technologies Inc. | 465 | 5.07% |
| Contabo GmbH | 432 | 4.71% |
| Google LLC | 428 | 4.66% |
| DigitalOcean, LLC | 404 | 4.40% |
| Allnodes Inc | 314 | 3.42% |
| Full Data | ... | ... |
Understanding Hetzner's Significance
Hetzner Online GmbH, a leading web hosting and data center provider based in Germany, has become a prominent participant in the Cosmos Network. With a robust infrastructure and competitive pricing, Hetzner has attracted numerous validators and service providers to host their nodes within its data centers. As a result, Hetzner's influence within the Cosmos ecosystem has grown significantly.
It is worth noting, however, that Hetzner's ToS prohibits the hosting of blockchain nodes:
The operation of applications for mining cryptocurrencies remains prohibited. These include, but are not limited to, mining, farming and plotting of cryptocurrencies.
The topic was discussed also on their Reddit, and the Support Team provided a direct response:
Using our products for any application related to mining, even remotely related, is not permitted. This includes Ethereum. It includes proof of stake and proof of work and related applications. It includes trading. It is true for all of our products, except colocation. Even if you just run one node, we consider it a violation of our ToS.
While Hetzner's reputation for reliability and affordability has undoubtedly fueled its popularity, the growing dominance it holds within the Cosmos Network, comprising 27.51 % of its infrastructure, warrants closer scrutiny.
Moreover, the concern escalates when considering that running blockchain nodes violates their ToS, despite the fact that they have not yet taken action against Cosmos Nodes..
Centralization Risks
Centralization within a blockchain network undermines the core principles of decentralization, leading to potential vulnerabilities and control by few providers. The top 2 providers alone, Hetzner and OVH, own a total of 38.29 % of the infrastructure, and this may lead to serious risks:
Single Point of Failure: Relying solely on a single provider like Hetzner increases the network's susceptibility to disruptions. Any issues, bans, outages within Hetzner's infrastructure could result in widespread disruptions to essential services like explorers, dApps, and validators, potentially compromising consensus integrity.
Reduced Geographic Diversity: A significant concentration of nodes within a handful of countries exposes the network to regulatory risks and potential cryptocurrency bans enforced by specific jurisdictions or regions.
Addressing Centralization Concerns
To uphold the principles of decentralization and mitigate the risks associated with centralization, the Cosmos community must actively address the dominance of providers like Hetzner. Several strategies can be adopted to promote a more decentralized network:
Incentivizing Decentralization: Introducing incentives or penalties, especially when Foundations run Delegations Programs, to discourage excessive concentration of validators within a single provider's infrastructure.
Encouraging Geographic Diversity: Promoting the establishment of nodes across diverse geographic locations reduces the reliance on specific data centers and enhances the network's resilience.
Supporting Independent Validators: Providing support and resources to independent validators and smaller service providers, in order to create a more inclusive ecosystem and prevent monopolization by larger providers.
Conclusion
The centralization of providers, particularly Hetzner, poses a significant challenge to the decentralization goals of the Cosmos Ecosystem. While Hetzner's reliability and infrastructure have undoubtedly contributed to its popularity among validators, steps must be taken to ensure a more balanced distribution of nodes across diverse providers.
By actively addressing centralization concerns and promoting decentralization initiatives, the Cosmos community can safeguard the network's integrity and resilience for the future.