Decentralized Storage 4x4 Analysis: Current Players and Industries Ready for the Revolution

In a trustless environment where dapps must meet a level of functionality despite potential malicious actors, decentralized file storage enables these dapps to perform with improved speed, security, censorship resistance, and superior network scaling but there is plenty to be improved before that promise is realized.

Each decentralized storage network currently offers different benefits but also comes with disadvantages:

  1. Sia, the original pioneer of decentralized storage, offers significant cost reductions but trades off some network security since many of the miners are owned by the company due to the unprofitability of mining. Sia’s network is also relatively slow, and it’s interface is difficult for developers to use.
  2. Storj, one of the most well-known projects in the industry, has a decentralized network of miners, performs better than Sia in terms of speed, but has other points of centralized weakness and does not offer a large enough cost advantage to warrant companies switching off centralized cloud solutions. Storj’s interface is an improvement to that of Sia but is still difficult to use compared to those of centralized players.
  3. Filecoin, famous for it’s record-breaking $257 million ICO raise in 2017 and currently branded as IPFS, is somewhat decentralized as many enthusiasts are hosting files for free but many of the nodes are also run by the parent company, Protocol Labs. IPFS is unreliable in terms of speed and uptime as unpopular files tend to load slowly and larger files tend not to load at all. Some of these problems may be solved by adding in Filecoin’s proposed incentive layer but the network may continue to have difficulty scaling due to underlying architectural issues. Lastly, since the incentive layer hasn’t been implemented yet, we have little insight into the cost profile of the product.
  4. Archon, an exciting new decentralized storage player, is currently building a betanet with benchmarked speeds comparable to centralized players, improved developer usability, interoperability across public chains, and superior network scaling due to their proprietary file format and architecture. However, the product is still too early to determine cost advantages and decentralization benchmarks.

Assuming these issues are solved, many industries stand to gain more from the benefits of decentralized storage. Here are four industries that can benefit most from decentralized storage:

1. Industries with Heavy Data Needs (e.g. Biotechnology/IoT/Machine Learning)

Biotechnology, IoT, Machine Learning, and Big Data are fast growing, data-heavy industries expected to experience exponential increase in demand for data storage. Storage demand from these industries are expected to grow at a 20%+ YoY from 2019 to 2027. This brings the current data storage demand of exabytes to zettabytes and data bandwidth consumption to hundreds of zettabytes.

Looking at this from an enterprise user’s cost perspective, in Genomics, sequencing a single tumor creates roughly two terabytes (TB) of data. Assuming we store this data on Amazon S3 Standard — Infrequent Access for $0.0125 per gigabyte per month, just 1,000 cases would cost a lab $300,000 annually. These Genomics services are necessary for research advancement and patient treatment but the amount of data needed will only continue to grow as will the costs.

Decentralized storage currently offers a significant cost advantage. Sia currently offers 1TB of storage annually for $2.84. If we apply this to the previous Genomics service example and assume each tumor sequencing (~2TB) is downloaded from the Sia Network twice per month at a cost of $0.04, the annualized lab cost would be $6,640 compared to the previous $300,000. This is a massive cost reduction of 98%!

Source: https://siasetup.info/tools/renting_calculator

However, for these companies to actually utilize decentralized storage and realize these cost savings, decentralized storage a few steps must be taken. Developer usability improvements, general enterprise education on how fault tolerance outperforms traditional security in terms of preventing data leaks, uptime, and regulatory compliance, as well as improvements to certain areas of the technology such as access control and privacy are just some of the current issues.

2. Cybersecurity

The Cybersecurity industry has its hands full as concerns over data leaks and hacks have lined the front pages of major news websites. In the current architecture, companies rely on centralized servers to hold their valuable or sensitive data. However, these servers are susceptible to hacks or downtime. Even well-known and fully funded companies such as Equifax, Cloudflare, and Verizon have been victims to data theft or unavailability.

Security companies are working around the clock to educate their clients on security measures and implement the proper tools and infrastructure to combat malicious actors. However, these seem to be band-aid solutions as malicious actors tend to also evolve and find innovative ways to attack centralized targets. Decentralized storage significantly increases security around these files due to the fact that the network has no single point of failure and is able to tolerate a relatively high threshold of malicious activity. Decentralized storage effectively raises the cost of an attack from a few thousand dollars to fund a hacktivist group to hundreds of millions to launch a 51% attack on the entire network as well as the necessary technical expertise. Though it is unclear how decentralized storage will affect security companies from a business model perspective, the technology will vastly improve the service level they are able to offer clients.

With the coming technological boom in data needs, decentralized storage offers a superior solution to security than does centralized cloud storage whose only scaling option is to build additional data centers that become increasingly profitable as targets of cyber attacks.

3. Industries Handling Sensitive Information (e.g. Financial / Healthcare)

The Healthcare and Financial industry must manage large databases of sensitive files and deliver these files to multiple authorized parties in a secure and efficient manner all while preventing data leaks and hacks. This operation is expected to become increasingly difficult as the number of these files grow and the minimum security implementations to protect these files become more and more advanced. Currently, existing decentralized file storage solutions do not offer a fully private option nor access control for these companies to utilize but there are a handful of projects including Archon that are researching and building private implementations to solve this issue. This will allow these companies to confidently store long-term files in a completely secure and private manner whether it’s for patient confidentiality, legal compliance, or hypersensitive deals. However, this technology requires companies to completely rewrite the standard protocol for privacy requirements in terms of regional storage, security level, and access. This requires years of education and experience working with decentralized systems.

4. Logistics (e.g. Manufacturing / Distribution)

Manufacturing and distribution companies must manage a global supply chain that requires these companies to connect anywhere with the critical infrastructure necessary to serve those locations. The expected service level and sheer scale require these companies to invest heavily in infrastructure. Decentralized storage is able to provide localized caching of metadata and identifiers of products and services at a level of service and scale necessary to slash capital expenditures, effectively expanding EBITDA margins and benefiting shareholders.

Decentralized storage also synergizes with companies such as EximChain, Shipchain, and Tael which are working to enable supply chain applications and businesses to connect, transact, and share information more efficiently and securely while bringing visibility and trust to the global supply chain due to their decentralized nature.

Decentralized storage creates an opportunity to rethink the current cloud architecture. Companies, dapps, and users alike can benefit from significant cost advantages, increased security, superior scaling, and censorship resistance. In the long run, decentralized storage lays the groundwork necessary to create a better decentralized internet.

About the author:

Darion grew up in San Francisco and graduated UCLA with a degree in Business Economics. He began his career in Deutsche Bank’s Technology Investment Banking Group. He was an early investor in Ethereum and co-founded Taureon Capital where he led multiple seed stage investments in blockchain projects and worked directly with management at these companies to scale. He is currently leading operations and finance as COO at Archon, a decentralized cloud storage service based in San Francisco.