Cloud computing may be a relatively new concept for some, but it won’t be long before it overtakes the traditional enterprise data center. In an article warning that “the data center is dead,” Gartner forecasts predict that by 2025, 80% of enterprises will rely on cloud computing services rather than their own servers.
The disruptive powers of cloud computing are evident, but now the distributed computing element of blockchain could disrupt the disruptor. Today’s cloud computing services are dominated by big players like Amazon Web Services (AWS) and Microsoft Azure, which sell their own computing power to enterprises.
Now, savvy entrepreneurs are seeing the potential for blockchain to harness decentralized computing power—without incurring the costly overheads of centralized servers and storage.
However, given that AWS and its competitors sell a range of different cloud computing options, then all clouds are not created equal. Combining these options provides some intriguing possibilities for how a blockchain-based cloud computing service could play together with today’s big providers.
Cloud Supplied On-Demand
Like many other services, cloud computing is priced based on the level of service required and the level of commitment. The most expensive option is ‘On-Demand’, which buys the cloud computing as needed but without any ongoing contractual obligation from the client side.
For an ‘On-Demand’ service, the vendor agrees to provide the necessary computing power to the client as and when they need it. ‘On-Demand’ services should be scalable, so the client can assume that the required server capacity will always be available. The only event that should interrupt service to an ‘On-Demand’ client is if there is a severe outage of multiple servers.
Amazon cloud computing. Image source: recode.net
Many enterprises require on-demand computing services. Whether it is a brick-and-mortar company or a streaming service like Netflix, it will need an uninterrupted service to ensure business continuity. This can only happen with a guarantee of the necessary available compute power.
Reserve pricing is a less flexible form of ‘On-Demand’ service, requiring an up-front commitment from the client that they will use the service for a fixed period, typically one to three years. For reserve pricing, the cloud computing providers will generally offer discounts of 40-60% compared to the fully flexible on-demand option.
‘Spot’ services are an exciting development in cloud computing, and their existence reflects the growing need for tech developers to access compute in the most cost-effective way possible. They represent the other end of the scale from ‘On-Demand’.
Someone wishing to buy spot computing power will make a bid for when that instance of power is available from the provider. The provider will set the market rate for computing power at any given moment in time based on the demand from its clients. So at peak time, market rates will be highest.
Once the market rate for computing power falls below the bid value, then the provider supplies the required computing power charged at the market rate. If the market rate once again goes above the bid value, then the provider pauses the service until the price falls again.
By using a ‘Spot’ service, clients can benefit from significant discounts compared to on-demand services. AWS lists several clients which have achieved discounts between 75-90%, including ride-sharing company Lyft.
‘Spot’ services may not be a viable option for many enterprises. However, for companies developing and testing new solutions like artificial intelligence (AI) or big data programs, they provide an extremely cost-effective way to obtain the necessary computing power.
Cloud on the Blockchain
While AWS and its competitors sell space on their own servers and infrastructure, blockchain offers the opportunity to harness decentralized computing power. This could be from a game server, or a mining rig, or just an idle home computer.
Tatau is one example of a blockchain-based cloud computing platform. The company aims to use blockchain to pool together unused GPU resources for sale to clients such as AI developers. Anyone wishing to buy computing services through Tatau can do so using the native token of the platform.
Because a blockchain platform like this doesn’t host its own servers, it could prove to be a more agile solution in the long-term than a centralized provider. A company like AWS must ensure that it always has the necessary hardware available to service its clients and take on any new clients. Similarly, when demand is low, a centralized provider may find they have a lot of server capacity suddenly sitting idle.
Reducing computing prices. Tatau.
For this reason, the big players in cloud computing could actually take advantage of a blockchain solution. For example, AWS could purchase low-cost spot compute from a blockchain provider like Tatau, and sell it to their premium on-demand clients.
Conversely, AWS could sell idle capacity to a blockchain platform, thus increasing profitability. There is even the mind-bending theoretical possibility that AWS could first sell its own spare capacity to a blockchain provider, and then repurchase it to sell on at a profit.
Getting Ahead in the Cloud
Developments in AI and big data are driving massive increases in demand for cloud computing services, generating vast income for big tech players like AWS and Microsoft.
However, the entry of blockchain technology offers the potential to change the nature of the game. Amazon already declared their recent partnership with blockchain giants, Qtum. This will be allowing Amazon to be creating and developing their own smart contract, enabling easier access to the AMI (Amazon Machine Image) services.
Blockchain based Qtum and AWS collaboration. Image source: bitcoinexchangeguide.com
In addition to this, if the demand for flexible compute power continues to grow as predicted, there will be plenty of prizes for everyone playing.