Why Cloud Providers Are the New Mining Pools

Blockchain infrastructure is clustering in a handful of US-East-1 and EU-West-1 data centers. This creates systemic risk and jurisdictional vulnerability.

• >60% of Ethereum nodes run on centralized cloud services (AWS, Google Cloud, Hetzner).
• A single provider outage can cripple RPC endpoints and sequencer availability for major L2s.
• Creates a single point of failure, contradicting the core value proposition of distributed systems.

Projects like Akash Network and Render Network are creating marketplaces for commoditized compute. This shifts the economic model from capital-intensive data centers to permissionless resource pooling.

• Enables geographic distribution by incentivizing global node operators.
• Reduces protocol capture risk by eliminating reliance on corporate SLAs.
• Creates a new staking primitive where hardware provides network security.

The extraction of Maximal Extractable Value is dominated by a few sophisticated players with proprietary infrastructure and low-latency connections. This centralizes a core revenue stream of the blockchain.

• ~90% of Ethereum MEV flows through a handful of searchers and builders.
• Relies on colo facilities adjacent to validators, replicating the mining pool hierarchy.
• Creates an information asymmetry that disadvantages retail users and simple bots.

Flashbots' SUAVE chain aims to democratize MEV by creating a decentralized mempool and block builder network. It separates the roles of searcher, builder, and proposer.

• Creates a competitive marketplace for block building, reducing extractive margins.
• Enables cross-chain MEV flows without centralized relays.
• Uses encrypted mempools to prevent frontrunning and protect user transactions.

Application access to the blockchain is filtered through a few giant RPC providers like Alchemy, Infura, and QuickNode. They become de facto gatekeepers with the power to censor or degrade service.

• Controls the data layer for >70% of DApp traffic.
• Creates a dependency risk where protocol uptime is outsourced.
• Introduces privacy leaks as user queries are visible to a centralized intermediary.

Networks like POKT Network and Lava Network incentivize a decentralized set of RPC providers. Coupled with light client protocols (e.g., Helios, Succinct), this returns sovereignty to users.

• Pay-per-query model breaks the subscription lock-in of incumbent providers.
• Proof-of-stake slashing ensures provider performance and data integrity.
• Direct client verification via light clients eliminates the trusted RPC middleman entirely.

When a major cloud region fails, entire networks built on it go dark. This isn't theoretical; Solana, Avalanche, and others have suffered multi-hour outages due to AWS disruptions. The failure domain shifts from thousands of independent miners to a handful of cloud data centers.

• >60% of Ethereum nodes run on centralized cloud services.
• ~70% of Solana RPC traffic routes through a single cloud provider.
• Recovery is gated by a third-party's SLA, not the protocol's consensus.

Cloud providers are regulated entities that can be compelled to censor transactions or deplatform validators. This creates a protocol-level compliance risk that bypasses decentralized governance. The threat isn't just from governments; cloud TOS changes can unilaterally blacklist entire chains.

• Infrastructure for Tornado Cash was removed from centralized hosting.
• Providers like AWS and Google Cloud actively block services based on internal policies.
• Creates a soft fork where only 'compliant' nodes can participate.

Cloud providers control the physical layer, giving them privileged access to transaction ordering and data. This allows them to extract value through latency arbitrage and data selling, recreating the MEV problem at a more centralized, opaque tier. The profit is captured off-chain, offering no protocol benefit.

• Providers can sell low-latency access (<1ms) to searchers for front-running.
• Data analytics from aggregated RPC traffic becomes a proprietary product.
• Incentivizes protocol designs (e.g., SUAVE) that must explicitly route around this capture.

AWS, Google Cloud, and Microsoft Azure now host the majority of Ethereum and Solana RPC nodes and validators. A coordinated takedown or regional outage could cripple major L1s and L2s.

• ~60%+ of Ethereum nodes run on centralized cloud services.
• Creates a regulatory honeypot for sanctions and censorship.
• Undermines the core value proposition of geographic and political decentralization.

Cloud providers offer the low-latency, co-located infrastructure that maximal extractable value (MEV) searchers and builders require. This centralizes economic power.

• Enables sub-100ms arbitrage and front-running bots.
• Consolidates block building into a few entities like Flashbots and Jito, which run on AWS/GCP.
• Turns decentralized consensus into a centralized profit extraction layer for cloud customers.

Hyperscalers are the backbone for institutional staking providers like Coinbase, Kraken, and Lido node operators. This recreates the mining pool problem with higher barriers to entry.

• $50B+ in ETH staked via cloud-dependent services.
• Creates trust dependencies on major corporations, not open-source software.
• Renders solo staking economically non-viable for many, pushing further centralization.

The counter-movement is protocols that incentivize physical hardware diversity, like EigenLayer AVS operators, Akash Network, and Helium. The goal is to commoditize the cloud.

• Pay validators in native tokens for running critical services (oracles, bridges).
• Leverage decentralized physical infrastructure networks (DePIN) for bare metal.
• Makes censorship a coordinated attack across thousands of independent operators.