While the term “Web3” can be subject to differing interpretations, we will aim to describe what we mean when we use it. Web3 describes the next generation of the internet, where decentralized applications (dApps) are built on top of different blockchains. The main difference between Web3 applications and traditional web applications is that dApps are designed to operate without a central authority. Instead, they rely on the underlying security of the blockchain they were deployed to.

In the world of Web3, decentralization is critical in ensuring the network’s security, reliability, and resilience. However, even though Web3 has grown in popularity, the underlying infrastructure that supports it is still broadly centralized. Achieving complete decentralization is a challenging task that adds a lot of complexity to any system.

This article will explore the importance of decentralized infrastructure in Web3 and why it’s still centralized in many areas. We will discuss how centralization in the Web3 infrastructure can be problematic for the ecosystem and how we are trying to help resolve this issue.

Where does decentralization come from?

Blockchains are used to provide security and decentralization for dApps. An essential part of a blockchain is nodes, responsible for validating transactions and executing smart contract code. Nodes are the way of communicating with a blockchain, and if you are developing a dApp, you will need to communicate with a node to send transactions or execute code on-chain. In a decentralized network, nodes are distributed, making it difficult for any single entity to control the network. They all constantly communicate with each other to come to an agreement on what the current state of the blockchain is.

A consensus protocol is used to reach an agreement on the state of the blockchain i.e. which transactions are valid, and which blocks are added to the chain. Consensus mechanisms ensure that all nodes in the network agree on the true state of the network. These mechanisms rely on a combination of incentives and penalties to encourage nodes to act in the network’s best interests. You might have heard of Proof-of-Work (PoW) or Proof-of-Stake (PoS). These are just two examples of consensus mechanisms.

Anyone can run their own node, which is good for decentralization. If a single entity were to control more than 51% of the power of the network, they could perform what’s called a 51% attack and manipulate the state of the blockchain almost as they please. That is why nodes need to be independent and spread around.

Node providers, the problem and solution

Running a node is available for anyone worldwide, but it’s not an easy task. Depending on the consensus algorithm, it might be easier or more complicated, but setting up and running a node is generally not effortless. It requires specific knowledge of the network, you need to be running it 24/7 to avoid penalties, and it can be costly.

This is the issue that node providers are trying to solve, helping people lower the entry barriers to participating in the consensus algorithm by offering access to blockchains. 

Node providers are projects that offer access to blockchain nodes for a fee. They provide an essential service for developers who want to build dApps but don’t want to go through setting up their own node. However, node providers are becoming increasingly centralized, with a few companies controlling most of the market. If there is only one big node provider company that everyone uses, then that company has control over the blockchain, and the decentralization is lost along with all its benefits.

It is crucial to differentiate centralized and decentralized node providers from one another. Centralized node providers set up lots of nodes and manage them to offer them as a service to developers. Decentralized node providers define a protocol to have a network of independent nodes that subscribe to the protocol to offer their resources. As a user of node providers, you will have to decide which type of provider is better for your use case. Both types will probably have similar interfaces and features but very different underlying inner workings.

Off-chain storage 

Blockchains are known for being easily auditable and being a public ledger that anyone can access. But keeping track of all the different events happening on-chain is not an easy task. It requires software to constantly listen to events and read transactions to then save the information in a database. This is called indexing the blockchain. Indexing helps dApps have a better UX and faster access to past data. 

When creating a dApp, developers not only store on-chain events or transactions but also require a storage solution for storing data. You could use a regular storing solution but again, that would be a single point of failure and not truly a decentralized application. There are some decentralized storage solutions with different approaches to solve this issue.

Decentralized storage allows data to be distributed across multiple nodes on a peer-to-peer network, making it censorship resistant and avoiding single points of failure. Decentralized storage systems usually use cryptographic techniques to ensure the security and integrity of the data being stored, and often rely on incentivization mechanisms to encourage participants to store and maintain the data.

How much decentralization is good enough?

Decentralized applications are not always completely decentralized. If you are a beginner building your first dApps you will most likely end up using at least one centralized service in your stack. Depending on the solutions you decide to use, your application will be more or less decentralized. Decentralization is a spectrum. 

An application may be decentralized on its majority but it can still have centralized single points of failure. When building a dApp you will have to decide which technologies to use and build on top of them. If those underlying technologies are centralized, then your application will be less decentralized. This is not inherently bad but if you are aiming for full decentralization you have to take into account how decentralized is the infrastructure you are building with.

Depending on the use case of your dApp, you will need to solve different problems while building one. Since Web3 is still in the early development stages, there might not even exist a decentralized solution for your dApp. If there is a decentralized option to choose from, it may also not be good enough for your application. The Web3 ecosystem is constantly evolving and pushing for decentralization in the whole stack. There are reasons why one would sometimes choose a centralized solution over a decentralized one, but we are moving towards a fully decentralized blockchain tech stack.

Conclusion

Decentralization refers to the distribution of power and authority away from centralized entities, such as corporations, governments, or institutions, and toward a more distributed network of participants. This can bring more security, censorship resistance, reliability, and privacy. 

The decentralized nature of blockchain technology allows for the creation of trustless, tamper-proof systems that are not reliant on a single entity for control. This is crucial for dApps to maintain their decentralized nature and avoid the centralization pitfalls of Web 2.0. 

Decentralized infrastructure also promotes transparency and openness, which are key values in building a fairer digital world. As we continue to explore the potential of Web3, it is essential that we prioritize the development of a decentralized infrastructure to ensure the long-term success of the ecosystem.