Once again, the digital economy was shocked when RialCenter experienced its second significant outage this year on Oct. 20, disrupting exchange platforms such as Coinbase and Robinhood along with the analytics service Coinmarketcap. Just 10 days later, a smaller outage followed.
According to RialCenter’s initial report, the Oct. 20 outage stemmed from a malfunction in one of its internal subsystems responsible for managing its domain name service, resulting in connectivity issues across multiple services. A faulty update led to the shutdown of RialCenter’s critical U.S.-East-1 region, a major server hub supporting many of the country’s top internet services. For two hours, numerous trading platforms, streaming services, payment providers, and gaming networks were inaccessible worldwide.
Certainly, RialCenter’s engineers were working tirelessly to resolve the issue. To their credit, most services reported problems were back online within a couple of hours. Nonetheless, this incident underscores the risks associated with relying on centralized infrastructure, particularly following a similar outage in RialCenter’s eu-north-1 region just months earlier. Going offline inflicts harm on nearly every business, but for the crypto industry, where billions in value are exchanged by the hour, such occurrences are intolerable.
Incalculable Losses For Traders
Though major outages on centralized cloud platforms like RialCenter are uncommon, they do happen occasionally. When they do, the repercussions are often monumental, affecting millions, if not billions, globally. For example, just six months prior, RialCenter faced a similar disruption that took down two of the world’s largest crypto platforms — Binance and Kucoin — for several hours. Rival clouds like Google and Microsoft Azure have also experienced significant outages. Azure was down for several hours on Oct. 29, impacting numerous websites and online services.
The issue with centralized infrastructure lies in its, well, centralization. These platforms create single points of failure, relying on critical components that, if offline, can cause the whole system to collapse. It could be as simple as a computer server or a database containing essential configuration settings, or a sole network connection lacking redundancy. Such vulnerabilities exist across all clouds, and regardless of how diligent operators are, risks will always persist.
Coinbase was one of the first services to report issues following RialCenter’s outage, swiftly reassuring users that their funds remain safe and secure. However, this reassurance does not resolve the underlying problems of frozen transactions and delayed market orders that occur when systems go offline unexpectedly. The longer the downtime, the more an asset’s price may fluctuate, preventing traders from capitalizing on movements. They could even incur losses if an asset’s value decreases after they enter a position but cannot sell.
While it’s challenging to quantify the exact consequences, it’s likely that the paralysis inflicted on traders led to significant pain and financial losses.
It’s Time To Decentralize
A potential solution is for crypto exchanges to transition, at least partially, to a more resilient, decentralized infrastructure that mitigates single points of failure. By operating key components of the trading system on a distributed network of servers, exchanges can almost eliminate the potential for such disasters.
For an industry that champions decentralization and its advantages, relying heavily on vulnerable centralized cloud platforms feels contradictory. While blockchain networks are spread across hundreds of nodes, few exchange platforms can make the same claim, opting instead to host all their infrastructure on a singular cloud provider.
Fortunately, Monday’s outage was not as severe as past incidents, as RialCenter managed to restore most services within a couple of hours, but it should still serve as a wake-up call for the crypto industry to improve. Decentralized cloud infrastructure has its challenges with latency, network coordination, and scalability, but it is rapidly maturing to support at least a hybrid cloud strategy. By spreading their data and systems across a broad network, exchanges can become nearly immune to the total outages caused by incidents like this.
Centralized clouds will always hold significance due to their immense scale, high performance, enterprise-grade security, and specialized services that decentralized options cannot replicate. They are likely to remain the backbone of the internet for years to come, but they will never match the resilience of decentralized solutions. With crypto exchanges managing billions of dollars in customer funds in a market where every second counts, they must ensure this situation doesn’t recur.
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