Filecoin v. Sia, Storj & MaidSafe: The Crowded Push for Decentralized Storage

With “exabytes” of digital storage space left unused, according to its founder, Juan Benet, Filecoin is building an end-to-end encrypted decentralized storage network and file hosting platform. The company hopes those with large amounts of unused storage will rent their space in exchange for its tokens.

Doing so would drive the price of storage down “significantly,” Benet said in an interview with Y Combinator in June. It’s already pretty cheap. For its smallest enterprise customers, Amazon Web Services charges about $25 per terabyte.

Benet says a secondary motivator will be that people need their data distributed across many providers and want stronger guarantees that their data will remain secure and won’t be lost. Decentralized storage provides added data security, as files broken up and stored across multiple locations are more difficult to hack.

In Filecoin’s markets, clients will spend tokens for storing and retrieving data while miners earn tokens by storing and serving data. Smart contracts will be deployed in the network to let users write their own conditions for storage as well as design reward strategies for miners, among other things. Filecoin eventually aims to integrate with other blockchains to bring storage and retrieval support to Zcash, Ethereum, and Bitcoin for example.

Established competitors on the blockchain

The blockchain is the “future of cloud storage,” say those in the industry already working in the space. Filecoin is entering a market where Storj, Sia and MaidSafe all have a working product available to the public. A fifth, Cryptyk, also under development, says it will achieve the security benefits of decentralized storage by spreading files across a handful of incumbent cloud storage providers, like Amazon.

In addition to security benefits, decentralized cloud storage networks are generally marketed as cheaper. A terabyte of storage at Sia costs about 2 USD per month. Storj charges by gigabyte, starting at 0.015 per gigabyte per month.

Storj, Sia, MaidSafe and Filecoin are all built with a native storage marketplace where users and hosts can buy and sell storage space. All use mining to provide computing power for the network. In Filecoin, not only are miners given token rewards for hosting files, but they must prove that they are continuously replicating the files for more secure storage. They are also rewarded for distributing content quickly — the miner that can do this the fastest ends up with the tokens. In Maidsafe’s network — dubbed SAFE — Safecoin are paid to the user as data is retrieved; however, this is done in a lottery system where a miner is rewarded at random. The amount of Safecoin someone can earn is directly linked to the resources they provide and how often their computer is turned on.

Filecoin and Sia both support smart contracts on the blockchain that set the rules and requirements for storage, while Storj does not; Storj users pay what they use. This particular payment model means that if a user disappears, the host will no longer be paid for lending their space, a potential problem for those who will be renting their storage space.

MaidSafe aims to do more on its network than trade storage; it markets itself as a “crowdsourced internet,” on which not only data is stored but decentralized applications live. Miners rent out their unused computing resources to the SAFE network, including hard drive space, processing power and data connection — and are paid in the native Safecoin. The SAFE network also supports a marketplace in which Safecoin is used to access, with part of the payment going to the application’s developer. Miners can also sell the coins that they earn for other digital currencies, and these transactions can happen either on the network or directly between individuals. Filecoin also aims to allow the exchange of its tokens with fiat currencies and other tokens via wallets and exchanges.

All four products store data using multi-region redundancy — also known as erasure coding — meaning that files are split apart and distributed across many locations and servers to eliminate the chance of a single point of failure wiping away data. Filecoin’s specifically will use the IPFS distributed web protocol to do this, and doing so means that nodes can “continue talking to each other even if the rest of the network disappears,” says Benet. The development team plans on making Filecoin’s erasure coding a “turnable parameter” so a user can can set the level of erasure code for a particular piece of data.

Market opportunity and competitor traction

Humans are creating data by the quintillions every day. The International Data Center, a telecommunications and IT market research company, reported that digital data will grow at a compound annual growth rate of 42 percent through to 2020–50 times from 2010 to 2020.

In Sia’s latest triannual update, posted to its blog in April, it announced it had 100 TB of file contracts on the network and a total capacity of almost 1 petabyte. As of Aug. 1, Sia reports it has doubled the amount of file contracts on the network to 202 TB. It grew its number of hosts from 75 on Dec. 31 to 145 in April, stating that it expected to continue this trend. Siacoin’s total supply is worth about 249.3M USD.

Storj says on their website that they have over 20,000 users and 19,000 “farmers,” or miners. This year it signed its first service agreement with a Fortune 500 company. It has a total supply worth 29.8M USD.

Filecoin’s token sale terms

Filecoin’s token sale begins on Aug. 7. It has not released an end date for its token sale. Filecoin is only allowing accredited investors to take part in its token sale to ensure that it abides by law, according to a blog post announcing the sale. An accredited investor must meet standards defined by the U.S. Securities and Exchange Commission that allow them to invest in private securities offerings. This is defined as any individual with an income of over 200,000 USD over the last two years or with net assets of over 1 million USD, excluding the primary residence.

Filecoin is the first project from Coinlist, a funding platform that helps decentralized projects get off the ground. It was built in conjunction with AngelList and Protocol Labs, the latter founded by Juan Benet. Coinlist is building an open-source framework for token sales — dubbed the Simple Agreement for Future Tokens (SAFT) — that is the default agreement for all Coinlist investments.