A research report compiled by Sheena Shah, Head of Cryptocurrency Research at Morgan Stanley, claimed the crypto scene is becoming less decentralized.
Shah’s report noted that the integration of several codes, apps, and services into the underlying decentralized blockchains causes certain components to become centralized. Moreover, hosting a significant part of a blockchain on limited nodes elevates its centralization.
The situation further escalates with regulators turning their attention towards digital assets, thus making it increasingly difficult for projects to remain truly decentralized.
The report claimed Ethereum’s transition from a PoW to a PoS model is a major reason for the token becoming more centralized.
Following The Merge, transactions are approved by validators instead of miners. Only four companies control over 60% of Ethereum’s validator nodes, thus increasing the risk of decentralization.
"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."
Also, over 65% of the validator nodes are cloud-based, with half of them running on Amazon Web Service. This increases the chances of disruption in the Ethereum network in case of server outages.
It is worth noting that the Ethereum community has acknowledged this issue and is evaluating solutions to fix it.
Additionally, the study stated that DAOs are turning into traditional centralized systems.
Last month, DEX Uniswap established a foundation, with a board and a managerial team. Referencing this development, the report stated,
"[DAOs are] starting to look more like the centralized banking world.”
