The Web3 contender looking to decentralize the cloud. Meet Akash Network

There's a pretty surprising truth about how Amazon makes most of its money if you haven't been paying attention.

You might think it's all the stuff we buy on Prime — but the bulk of Amazon's profit actually comes from all the web hosting they do on their centralized servers. (Yes, servers.) Big stacks of computing power to host and store data for all the websites we all use (like, a shocking amount of the internet's traffic.)

Amazon Web Services, or AWS, was introduced in 2006 and has ballooned with the explosion of everything on the internet since. In fact, just to put it in perspective, in 2021, Amazon generated $24.8 billion in operating profits ... and AWS was responsible for $18.5 billion of it. That's 74%! It's also growing at an insane clip (37%) as more and more services move online and have to host their stuff somewhere. Rather than run clunky servers and hire out IT staff on their own, most companies turn to Amazon to run it all for them.

Google and Microsoft offer similar services, but AWS reigns supreme with about 33% of the market share. That's almost as much as the rest of the market that's left after Microsoft (21%) and Google (8%.)

So, it's big business and a growing business for Amazon and the other tech giants. In fact, their concentration of control in web hosting market is so huge that sometimes when their infrastructure hits snags, it's not uncommon to see a lot of our favorite sites simultaneously run into issues at the same time.

The problems with that

From a failure perspective, that centralization is not great. As more things "come online," everything being dependent on the same servers is frankly kind of dangerous. Also, as tech companies strangle control into just a few giants, pricing pressure becomes easier to control as an oligopoly (just look at what's happened with ridesharing in Uber and Lyft.)

As consumers, neither of those things are great. So what's the solution?

Enter the potential Web3 "David" facing 3 Goliaths

A Web3 project that has caught my eye for a while called "Akash Network" is looking to challenge the status quo. As a simplified explainer, the builder behind Akash, former IBM consultant Greg Osuri, calls what he's shepherding an "Airbnb model for cloud computing."

(Source: Akash Network)

Rather than relying on centralized providers, Akash allows people with unused server space to loan it out to whoever is looking for it. It's a pretty good metaphor. Akash doesn't own the servers, they are just the thing connecting people in need of servers with people who have spare capacity.

In that sense, Greg told me in a recent Twitter spaces for my community-owned crypto show Coinage, that Akash isn't necessarily even a competitor to AWS or Microsoft, but maybe just an alternative that even they could use as needed. Interestingly, as I was promoting the Spaces on Twitter, Amazon's Global Tech Lead for blockchain tweeted his interest in the project (Web3 is a friendly place!)

We didn't save a recording of our Twitter Spaces, but that's not the end of the world because I interviewed Greg last year on Yahoo Finance. Back then, I framed that interview more around the other potential positive (or negative) that comes with decentralized options for cloud hosting.

In that sense, I'm talking about censorship. We've seen censorship take down a few different sites in the past. The conservative social media site Parler was one recent example, which went down after AWS said they would no longer host the site in the wake of January 6. Apple also said they wouldn't allow Parler's app downloads. Now, I'm not taking a stance on whether that was good or bad, but objectively, it raises some questions over tech giant's power to take down any idea. And in a democracy that values freedom of speech, it also raises the question of control by a few companies to dictate what can and cannot be "said" in a digital sense.

Osuri has mentioned Akash offers a potential solution to that whereby server operators themselves can opt in or opt out of hosting certain content (though that does raise potential questions about content that is objectively bad, or illegal that still gets hosted.) Osuiri told me that the people offering server space on the network for that type of content would be on the hook for that. But in Web3, generally a move on-the-margin towards less centralization and less censorship is a mostly an incremental positive for humanity.

If you believe that, then Akash is even more interesting as a solution. But let's talk about tokenomics, or the value proposition of Akash.

Akash uses a native token for people looking to loan or use server space called the Akash token, or $AKT. It has gotten absolutely smacked just like almost everything else in crypto this year. The token is down 86% on the year, which sounds surprisingly bad, but isn't really when you consider how these cycles go. Ironically, I find the things that actually have utility often get hit harder in bear markets than the purely speculative tokens (*cough, cough* DOGE!)

On the sidelines of the Messari crypto conference last week, Osuri told me Akash has been seeing interest from some big players in the space though he didn't want to name names just yet. It seems like Akash has been growing fine even without huge customers, though. In their 2021 recap, Akash noted the growth they've seen in "deployments" or people using Akash was up 400x:

We saw a 400x increase in deployments throughout the year and hit the 100 mark in just 112 days after the launch of Akash Network. From there, we saw daily active deployments more than triple. Q2: 100 average daily active deployments Q3: 312 average daily active deployments Q4: 448 average daily active deployments

And to be clear, I am not trying to give financial advice on buying or selling $AKT token right now or ever, I'm just trying to explain what I have found to be a real use case for a token, in what is an interesting example to point to as a real use case for "Web3." It's a fascinating solution to what could become a larger and larger problem as more of the web is centralized in just a few giant cloud providers (and apparently fascinating enough that Amazon's blockchain guy has noticed!)

Furthermore, as the size of the market for cloud continues to grow as things continue to move online (and AI and internet-of-things require more compute power) it's conceivable that Akash might be needed out of necessity. It might not even need to take AWS or Microsoft down. If you believe the projections that the cloud market will be worth $1.5 trillion worldwide by 2030, that means even capturing 1% of the market would still be $15 billion.

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