What are Decentralized Storage Tokens?
Companies and individuals often store large amounts of data in centralized objects. Large corporations such as Amazon, One Drive and DropBox offer data storage services as an alternative to storing data on local hardware or servers. Although these services are often useful, their use has a number of disadvantages.
The data stored in a centralized database represents a single point of failure. If one organization is subjected to a cyber attack or stops working for technical reasons, it can affect thousands, if not millions of users. In turn, a large number of people may not be able to access their data or services. Moreover, giant cloud storage companies often use or sell data without the owner’s knowledge. When users transfer their data to centralized data storage services, they usually waive their rights and permissions regarding how companies can use this data.
As blockchain technology can alleviate the problems associated with centralized data storage providers, solutions for decentralized file storage are becoming more accessible. Decentralized storage platforms increase transparency, eliminate the threat of data theft and offer users a secure way to store their data. In addition, some decentralized data storage networks provide users with the opportunity to receive passive income using cryptocurrency. This process includes proprietary storage tokens and storage coins that protect decentralized data storage platforms.
How does decentralized storage and coins for storage work
Decentralized storage solutions exist without centralized storage nodes. Decentralized data storage platforms distribute data across multiple hosts in different locations, rather than in a single object that controls and tracks disparate information. In addition, the servers operate using a network of independent nodes. Often these nodes use free storage space on computers, which can be a great way to generate passive income.
Many decentralized data storage platforms rely on blockchains to maintain an immutable register of data transactions. This includes the use of both public and private blockchains. When using the blockchain for a decentralized data storage network, participants have an incentive to earn a coin of their own storage or a storage token of a specific network.
Some tokens and coins of the decentralized storage act as bonds, that is, users can delegate to stacking, or block them as collateral to protect the network. In turn, node operators who try to act maliciously may lose their share. This encourages nodes to behave honestly.
In addition, since decentralized cloud storage can be distributed over large networks, changing or censoring data is much more difficult than when they are located on a single centralized server. In addition, blockchain-based decentralized storage networks use private-key encryption to ensure data security.
Moreover, the efficiency of immutable decentralized file storage solutions helps to increase download speed, avoid bottlenecks and reduce costs. In addition, when files are split into several parts and distributed across several nodes, no node can read the entire file without permission. As a result, decentralized data storage solutions provide a higher level of security and privacy than centralized solutions.
In addition, users of decentralized storage platforms pay for transactions using coins and tokens of decentralized storage. Moreover, these tokens and storage coins serve as a reward for node operators for providing data storage services.
Tokens VS Storage Coins
Cryptocurrencies are divided into many categories, and many terms in this industry are not actually distributed. Tokens and coins are among the most common. Although they are similar, there is a difference between them.
First, coins are cryptocurrencies that are launched directly from their own block chain. For example, a decentralized storage platform hosted on the Sia blockchain has its own Siacoin (SC) coin. On the other hand, tokens are cryptocurrencies that are launched through applications created on the basis of the blockchain. For example, the DATA Streamr token is a storage token. The DATA token works through the Streamr application, built on the Ethereum blockchain.
There is no major difference between coins and storage tokens, except for their deployment origin. Both types of cryptocurrencies are regulated using individual tokenomics and management parameters to match a specific decentralized storage network.
Decentralized storage systems
There are many types of decentralized storage systems. Below we will discuss several major players in the decentralized storage industry.
IPFS
The Interplanetary File System (IPFS) is a peer-to-peer “decentralized cloud and file system for the blockchain environment”. Although the protocol does not use blockchain technology directly, IPFS can host, manage and exchange data suitable for storage in the blockchain.
The Interplanetary File System (IPFS) uses a process known as “content-based addressing”. This is instead of the most common “location-based addressing” model. In short, location-based addressing is when users tell computers the desired location of content by entering an IP address or domain name. The computer then receives the called content by following the address.
On the other hand, with content-based addressing, users request content directly from the Interplanetary File System (IPFS). Content is downloaded from a peer-to-peer network instead of a single centralized server requested by location. A unique hash represents each file using cryptography and computer science to ensure security in a decentralized network. Moreover, IPFS creates only one file, even if several users publish the same content to IPFS. This is done in order to avoid duplication and increase the efficiency and speed of the protocol.
The Interplanetary File System (IPFS) uses a distributed hash table (DHT) in combination with a content-based addressing system. Users can request content via DHT to see which node on the network has the desired file. The network is transparent (that is, it is publicly available, and anyone can view it), secure and decentralized.
Filecoin
Filecoin, running on its own Filecoin token (FIL), is an open source decentralized file storage protocol running on Ethereum. After a successful Initial Coin Offering (ICO) in 2017, Filecoin welcomes the support of ConsenSys and Protocol Labs to facilitate interaction on the Filecoin network.
Filecoin provides users with another option for centralized data storage providers. In addition, Filecoin offers its users a way to earn passive income with the help of its computer storage.
Filecoin is the brainchild of Juan Benet, a well-known computer scientist and engineer. Benet is also responsible for the creation of Protocol Labs (an open source research and development company) and the Interplanetary File System (IPFS). Filecoin aims to create an “enabling layer” for IPFS by creating a” shared storage cloud ” of the storage network.
As an open source protocol, anyone can use Filecoin to store their data or monetize their free storage. Filecoin uses a unique consensus model called Proof-of-Spacetime (PoSt), using a Proof-of-Replication (PoRep) system to verify files stored on the network.
In short, PoRep means that storage providers must publicly prove that they own the file at the request of the algorithm. The new Proof-of-Spacetime (PoSt) consensus model allows miners who store data to generate blocks on the network and receive rewards in the form of FIL tokens in return.
Siacoin
Nebulous, a blockchain software and hardware solutions company founded in 2014, is responsible for launching the Sia storage platform in 2015. As one of the first decentralized storage platforms based on blockchains, the idea of Siacoin was born in 2013.
The Sia storage platform offers a number of solutions for decentralized storage. In addition, the Sia blockchain is the host for the Sia network, SiaStream (a peer-to-peer media streaming platform) and Skynet, Sia’s Layer 2 solution and Content Delivery Network (CDN).
The Sia Network is a decentralized cloud storage network that offers a decentralized market for data storage. Tenants can use their own Siacoin (SC) to pay for secure hard disk storage provided by decentralized hosts. In addition, hosts can become nodes of the Sia blockchain by providing unused storage on the hard disk.
The result is a more reliable service compared to centralized solutions. In addition, the cost for users and operators is much lower. In addition, users have their own private keys, which means that the data is resistant to censorship and manipulation. Sia’s decentralized cloud storage network is also more secure than centralized alternatives. This is due to the fact that data distribution works in such a way that in the event of a hard disk failure in the network, no data will be lost or compromised.
Streamr
Streamr is a decentralized peer-to-peer data storage network and data marketplace that helps process real-time data streams used for various solutions. In addition, the Streamr Marketplace allows users to buy and sell scalable, privacy-preserving datasets, known as”Data Aggregations”. Data Unions are crowdsourced datasets that do not require a custom infrastructure.
In addition, the Streamr ecosystem provides access to the new data economy, contributing to the monetization of unhindered data flows. Operators of streamer nodes receive a reward in the form of their own DATA token for honest behavior when delivering data to the Streamr network.
The encrypted data provided by Streamr nodes is very accessible and secure. In addition, it can reach thousands of users in milliseconds without any third-party intermediaries. In addition, Streamr uses crowdsourcing to encourage the creation of valuable data sets that would otherwise be difficult to obtain and compile. Thus, the Streamr network contributes to the democratization of the Internet, offering users the opportunity to control their data.
Passive income with decentralized storage tokens
Another advantage of decentralized storage is the ability to receive passive income and monetize free storage space. Several decentralized data storage platforms offer users different opportunities to increase the revenue stream from storage tokens.
For example, you can become a “host” participating in the very heart of the Sia ecosystem by providing hard disk space for a distributed file storage network. This allows “tenants” to securely store their files in a decentralized manner. Organizers can set their own bids for hard disk space.
In addition, hosts are compensated for their contribution to the network in their own Siacoin (SC). Users can convert SC rewards into an alternative cryptocurrency or fiat currency using a crypto exchange. Hosts can use the rewards to purchase additional storage space in the Sia blockchain.
Another way is to become a network node of a decentralized file storage platform. Depending on the decentralized storage network, some technical basic knowledge may be required to become a node. Moreover, to become a mining node, sometimes certain equipment is required. However, network nodes can accelerate the generation of multiple revenue streams by verifying transactions, generating blocks, providing storage space, and receiving transaction rewards, often in their own storage coin.
Summing up
According to ZDNet, there are 295 billion gigabytes of data storage worldwide. For the most part, this is an untapped potential for exchanging, renting and hosting data through a decentralized storage network. Projects like the ones mentioned in this article and others like Storj, Ocean Protocol and Internet Computer Protocol (ICP) are working together to create a decentralized Internet.
As the introduction of blockchain is gradually becoming more widespread, the potential of distributed storage is huge. A user thousands of miles away can effectively rent out free space. Moreover, the transaction process is cryptographically protected in a peer-to-peer network. This will significantly increase the capacity of the global data storage, offering ordinary users the opportunity to monetize unused hard disk space and make money with distributed storage.