In December of 2017, Coinbase, one of the most popular cryptocurrency exchanges, experienced a major outage that left users unable to access their accounts or execute trades. The outage was caused by an issue with the underlying infrastructure that Coinbase uses to power its exchange.
While the issue was resolved relatively quickly, it highlights the fragility of the infrastructure that supports the still-nascent cryptocurrency industry.
The Coinbase outage was caused by what is known as a “flash crash.” A flash crash is a sudden and dramatic drop in prices that can occur when there is a sudden influx of selling pressure.
In the case of Coinbase, the flash crash was caused by a problem with the Amazon Web Services (AWS) platform that Coinbase uses to power its exchange. According to Coinbase, “a small number of AWS servers became unavailable” which caused “a degradation in service” for the exchange.
While the issue was resolved relatively quickly, it highlights the fragility of the infrastructure that supports the still-nascent cryptocurrency industry. The industry has grown rapidly in recent years and is now worth billions of dollars.
However, it remains largely unregulated and unsupported by traditional financial institutions. This lack of infrastructure makes it difficult for exchanges like Coinbase to scale their businesses and makes them more susceptible to outages like the one experienced in December.
It is still unclear what exactly caused the AWS servers to become unavailable. However, this incident highlights the need for better infrastructure in the cryptocurrency industry.
Exchanges like Coinbase need to invest in more reliable and robust systems if they want to continue to grow and attract new users. Otherwise, outages like this will become more common and could damage confidence in cryptocurrencies as a whole.