Cloud computing

Before 2006, the operation of online systems and services involved the use of server computers, which had to be purchased and installed in traditional data centers. This involved capital expenditure on equipment and hardware maintenance and configuration skills. To remove these requirements, Amazon Web Services was launched in March 2006, which allowed customers to spin up virtual server computers at the click of a button.

The customers of cloud computing services are provided with an admin interface through which they can spin up and destroy cloud computing instances at the click of a button. These are virtual server computers, which the customer is given a username and password they can use to login and install software for their purposes.

In practice, cloud services run multiple instances on each physical server computer that they operates, and different customers share the same hardware devices. This is possible because instances are only guaranteed a fraction of the computing power available to a physical server computer. In principle, an instance can even be transparently moved from one server computer to another — the customer has no interaction with the cloud computing provider's underlying infrastructure, which remains under their full control.

Cloud computing customers no longer have to purchase, install, configure and maintain their own hardware. This greatly improves convenience, reduces the skills they need, and provides the flexibility to scale their computing activities up and down with need. For example, a startup social media service that suddenly becomes successful, can quickly scale in the cloud, without which they would need to purchase server computers, ship them to data centers, and install and configure them en masse at short notice.

Not surprisingly, cloud computing has become enormously successful, and economies of scale have driven consolidation among a few big tech cloud computing service providers, comprising Amazon Web Services, Google Cloud and Microsoft Azure. Between them, they now run several million server machines from a handful of centralized mega data centers that they own.

The Internet Computer blockchain's network has a sovereign network that does not involve cloud, and it provides an architecture that allows web3 services and applications to be built that run entirely on-chain, without the need for cloud computing or traditional IT.

Outside the Internet Computer universe, web3 services and applications perform the vast majority of their data processing and storage on cloud services. In fact, even the blockchains they use run in the cloud. For example, most Ethereum nodes run on AWS.

For this reason, Amazon Web Services could shut down most web3 services and applications and even entire blockchains.

Just as cloud computing instances can be spun up in an instant, they can also disappear in a puff of smoke. Their continued operation depends on the goodwill of the cloud computing service. Moreover, since those operating a web3 service, or a blockchain node, did not have to make an investment in hardware or time to create them, there is often little cost to turning them off.

Cloud computing has provided an easy tool for those wishing to juice the value of a blockchain's native token, in which the number of nodes is used in a similar manner that the TVL metric has been abused in DeFi.

Those behind certain blockchains perform tricks with DeFi to increase the apparent TVL (total value locked) look larger. These same people often spin up thousands of nodes using cloud instances, at the click of a button or run of a script, in order to create lots of nodes that allow their blockchain to claim far greater decentralization than it really has — which also juices the value of its native token.