The widespread collapse of Microsoft’s Windows operating system, which disrupted key services worldwide, is being touted as a vindication of blockchain and decentralized technology.
Zain Cheng, the chief technology officer of Web3 development firm Horizen Labs, told Cointelegraph the Microsoft outage “underscores the vulnerabilities of centralized systems, where single points of failure can lead to widespread disruption.”
As Cheng points out, the disruption was indeed widespread. From July 18–19, businesses, supermarkets, broadcasters, airlines and banks ground to a halt as 8.5 million systems encountered the blue screen of death.
In the aftermath, the technical issues were blamed on everything from CrowdStrike cybersecurity software to a regulatory deal with the European Union.
However, cryptonians view the problem as something far more existential: centralization.
Wes Levitt, head of strategy at decentralized cloud network Theta Labs, told Cointelegraph:
“Everyone knows that single points of failure are dangerous, but these events serve as a reminder of the severity of these failures, and they are getting worse over time as systems become increasingly complex.”
Cheng added, “In contrast, decentralized blockchain networks like Bitcoin and Ethereum remained fully operational during the outage, highlighting their resilience.”
“This incident demonstrates the benefits of decentralization, where distributed trust and verification processes reduce the risk of widespread failures and enhance system stability,” Cheng said.
Eroded trust
Whatever the narrative and the precise nature of the system flaw, Microsoft and CrowdStrike are pointing the finger of blame elsewhere.
They may have a hard time convincing the public, who are less than impressed with the consequences of their failure. Levitt says that even if these companies’ public relations attempts fail to shift public perception, there’s little an unhappy public can do.
“Ultimately, the CrowdStrike debacle will lead to some erosion of trust in legacy systems, but there isn’t much the average consumer can do about it — these are services that you rely on every day that (for now) usually don’t have a viable alternative,” Levitt said.
Cheng again compared centralized and decentralized systems in terms of reliability.
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“Public trust in centralized services has already been steadily eroding, and the CrowdStrike crash has intensified frustrations. Critical services like airlines, banks and shops were incapacitated, but DeFi [decentralized finance] continued on decentralized platforms,” Cheng said.
Developers will need to invest considerable time and effort to make decentralized alternatives to existing systems.
“As Web3 matures, the reliability and security of decentralized alternatives will become even more relevant. Individuals and businesses are increasingly seeking more dependable and resilient solutions to counter centralized system failures,” said Cheng.
“These events will likely spur increased interest and development in hardened, decentralized alternatives such as those built on blockchain networks,” said Levitt.
Bitcoin and decentralization
In the wake of the Crowdstrike crash, decentralized advocates are enjoying their “told you so” moment.
The banking sector is one of the major industries disrupted from July 18–19. Cointelegraph asked Cheng if it is possible to argue that Bitcoin is now more reliable than traditional finance.
“Bitcoin kicked off the movement of immutable blockchain platforms, decentralized applications and continuous globally accessible networks, setting the stage for these innovations to outshine traditional finance,” Cheng said.
“We’ve now seen how single points of failure in centralized systems can cause catastrophic disruptions. Decentralized technologies are needed now more than ever. Their reliability, combined with a solid tech foundation and robust security measures, makes them the natural choice for scalable, future-proof systems.”
Levitt remains slightly more cautious about extolling the virtues of decentralization, pointing out that any discussion about blockchain networks should also come with a few caveats.
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“It is possible to argue that Bitcoin is more reliable than TradFi, and that certainly was the case this week, although we should be quick to remember that we still have our own work to do to battle the ills of network congestion on blockchain networks before we start bragging too much about network effectiveness,” Levitt said.
As Levit pointed out, not all blockchain networks are created equal or enjoy the same level of robustness as Bitcoin.
Levitt said: “This event should also call attention to concerns about centralization and single points of failure on blockchain networks; Bitcoin may have never gone down, but that isn’t true of many other chains.”
Meanwhile, centralized exchanges and other sectors within crypto are not likely to be quite so invulnerable, leading to calls from within the industry to consider moving to decentralized cloud-based architectures.