What is Decentralized Storage? (IPFS, FileCoin, Sia, Storj & Swarm)

Tom Terado
Jul 4, 2018 · 8 min read

Decentralized storage has fascinated me for a while after coming across the Filecoin ICO which raised over $250M dollars with leading investors such as Y Combinator, Naval Ravikant, Andreessen Horowitz, Union Square Ventures Sequoia and Winklevoss Capital. Considering how much they raised, there must have been a reason as to why industry leaders are betting on its success so I started to read more into the protocol it uses: Inter Planetary File System (IPFS) and understand what other projects in the space are doing.

What is Decentralisation + Storage?

Decentralization is understood as the transfer of authority from a central entity to a more localised and ‘liberal’ system. The concept itself has been around for awhile and an earlier concept could be paralleled to the introduction of the Internet where the spread of information was democratised. The term is now being coined against Blockchain technologies and applications such as Bitcoin and Ethereum which decentralise financial transactions and computing power.

Storage is defined as the retention of retrievable data on a computer or other electronic system. We use storage on a daily basis from the mobile phone and computers we use and it is easily understood from the files we put onto a USB stick. From the days of having to put files on a floppy disk to being able to place files in the ‘cloud’, storage has come a long way.

So why Decentralized Storage?

The current solutions of Google Drive and Dropbox still work great there is no reason to change something if it works just fine. However there have been growing concerns as to why users want to switch from these systems due to the restrictive nature of some services as well as the more commonly understood reports of recent company data leaks. Examples include:

  • Equifax (Data costs of up to $400M)
  • Facebook Cambridge Analytica (Up to 87M user data leaked)

There were of course several factors that contributed to the data breach regarding the security measures, however, one major factor revolves around the central server storage of such information. Data breaches have been happening since the Internet started and companies have learned to deal with them but it also comes to attention that new infrastructures might help fix parts of the solution (i.e. decentralized storage).

Decentralized storage is a potential solution that Blockchain companies are researching and implementing. It is a system of being able to store your files without having to reply on large, centralized silos of data that don’t undermine important values such as privacy and freedom of your information.

Back in the day of P2P file sharing, torrenting and services such as Limewire were popular in downloading music and video files. It worked as a system where many users maintain copies of the file and seed (send fragments of the file) to participants on the network. However there were no mass-scale consumer [1] incentive mechanisms for the network participants to stay online. Decentralized storage networks operate in a similar manner with further advanced cryptography and encryption as well as the added incentive mechanism.

Remember this awesome software :O

Now I will go into further detail on the current projects in the space that are trying to tackle the decentralized storage problem.

  • IPFS + Filecoin
  • Sia
  • Storj
  • Swarm

IPFS + FileCoin

The InterPlanetary File System (IPFS) is a protocol started by Protocol Labs to create a new way to server information on the web. Currently the Internet works off a location based addressing where you go to a URL like medium.com which has an IP of X.X.X.X and then you get served your articles. These URL’s are pointed to certain servers around the world (US, Singapore, UK, etc).

Instead, what IPFS does is it serves information based on what it is as opposed to where it is (location). With their routing algorithms, you can choose where you get your content from and you can set your privacy of what peers/nodes you trust to receive your files which is quite interesting. So What is the advantage of that?

  • Hash addressing makes the content immutable. Does not disappear like current HTTP protocol
  • Saves bandwidth by collecting content from multiple nodes and pieces instead of from one server
  • Access to content “offline” or in low connectivity 3rd world or rural areas, in the same sense that git works offline.
  • Censorship resistant
  • Caters to the decentralization ethos

To further utilise technology, FileCoin was proposed as a way of creating a decentralized storage network by using the unused storage lying around and incentivising users to be part of the sharing economy through FileCoins (FIL) by using the IPFS protocol.

They did their Initial Coin Offering (ICO) in September 2017 and they are still in building their product so will be interesting to see how they build with their proposed Proof of Space and Proof of Replication consensus algorithms.

Similar to other decentralized storage solutions, FileCoin opens up a whole new economy and way of thinking around incentives and particpation through networking. Inviduals are essentially rewarded for serving and hosting content on their space harddrives in reward for FIL. It also has potential to work with other Blockchain networks as a decentralized off-chain storage solution which would be really interesting to see.

Key facts:

  • Stage: In development
  • Tech: Proof of Spacetime and Proof of Replicaton
  • Token Economics: Max supply of 2 billion


Sia is an early project that started back in 2013 at HackMIT and officially launched in 2015. It aims to leverage underutilized hard drive capacity around the world to create a data storage marketplace which is more efficient and cheaper to current solutions. They have a working product and have interesting design features.

They have preference for the Proof-of-Work(PoW), have their own ASIC chips for Siacoin mining and utilise file contracts to set rules and requirements for storage (similar to a smart contract). Their Proof of Storage algorithm is utilised to further protect and validate proofs and file contracts on the network.

Key facts:

  • Stage: Live
  • Tech: File Contracts, Proof of Storage
  • Token Economics: Maximum token supply of 425 Million
  • Token Circulation: 98.5 / 425 Million


Another decentralized storage project built on the Ethereum network that has quite a lot of community users and is dedicated to the open-source and user-experience ethos. Storj is a platform, cryptocurrency, and suite of decentralized applications that allows you to store data in a secure and decentralized manner.

Their technology revolves around file sharing, similarly to how torrents work and separates parts of the files to users in the network. When a user wants the file, they request it and Storj uses a distributed hash tables to locate all the shards and piece them together. These files are also encrypted before sharing and the person uploading it has their own private key to validate ownership.

The other entity of the company Storj Labs is the for-profit side that rents out it’s network to thousands of users and charges for the network usage. This is a slightly more centralised model and competes with the likes of Dropbox and Google Drive. They also have partnerships with Microsoft Azure and Heroku to deploy some of their development tools which is a great initiative for the open source developer ecosystem.

Key facts:

  • Stage: Live
  • Tech:
  • Token Economics: Maximum token supply of 425 Million
  • Token Circulation: 29.78 / Uncapped


Swarm is another protocol which is part of the Ethereum’s vision for a decentaralised web. It works alongside Whisper for Messaging, Ethereum for the computation power and Swarm for storage. They are still a bit behind in development compared to IPFS/FileCoin but are soon expected to deliver and has the advnatage of being able to integrate directly with the Ethereum network.

  • Stage: Building + Proof of Concept (Go)

Similarities and Differences

All projects are similar in the way they are trying to achieve decentralized storage to the massed through an incentivising model which makes it quite a competitive marketplace. The technical aspects, design and their consensus algorithms are the differentiating factors between them so the ones that will lead the market is the community and amount of participants they get onto their network which will be interesting to see.

Concluding Thoughts

With any new emerging technology, it’s very difficult for the masses to take the leap of faith for a new ‘decentralized’ model because there will always be a need for centralisation in order to control XXX. Whether it is the small to large change in the way content and file storage is addressed through IPFS or a new peer-to-peer version of Dropbox gets made, it will be really interesting to see what unfolds in the years to come.

[1] MojoNation was working these incentive mechanisms. https://en.wikipedia.org/wiki/Mnet_(peer-to-peer_network)


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