What Is Decentralized Storage and Why Is It Important?

By Anush Jafer
11 Min Read

As the world embraces the digital age, the capacity for storing large swaths of data on servers worldwide continues to evolve. The process of keeping track of records and vital information has developed to become more compact and more efficient, moving from punch cards, floppy discs, USB drives, and today’s cloud storage solutions. However, the status quo for cloud file storage remains in the hands of monolithic centralized entities such as Microsoft and Amazon. Therefore, despite centralized storage solutions offering accessibility and simplicity, centralization has many drawbacks, such as privacy concerns, data loss, cyber-attacks, and censorship. With blockchain technology, decentralized storage solutions have emerged as viable alternatives.

Decentralized storage is an application of blockchain technology. It is a type of file storage solution that is not dependent on a single centralized entity. Instead, data is stored on a distributed network run by computers across multiple locations, effectively eliminating single points of failure while enhancing privacy and data security. 

Understanding the Ethos of Decentralization 

Decentralized storage represents a narrative shift in how individuals and businesses globally manage and store information and data. It represents an evolution of the web2 cloud storage solution and highlights the slew of flaws in the current centralized model. Before delving into how decentralized file storage solutions function, it is vital to address the philosophy of decentralization that underpins the blockchain-powered solution. 

Decentralization is a core tenet of blockchain technology and web3. Within the context of this technology, the ethos and philosophy of decentralization advocate for a democratic or liberal form of governance in which no single entity has absolute power. Therefore, web3 applications allow individuals greater autonomy and control over their data and transactions, away from the prying eyes and oversight of centralized authorities and intermediaries. The fundamental principle of decentralization is therefore grounded in the idea that power should be distributed rather than condensed in the hands of a few.

Google Drive, Dropbox, iCloud, Amazon Web Services, and Microsoft Azure are a few examples of the numerous modern cloud file storage options. These services stand in contrast to the liberal ideals promoted by decentralized storage powered by blockchain technology. 

The State of Modern Cloud Storage Solutions

Cloud computing and storage development has undeniably redefined how individuals and businesses store, access, and manage their data. Modern cloud storage delivers flexibility and scalability to businesses. Cloud storage bolsters productivity and collaboration by enabling companies to access their data from any location, at any time, and on any device. Additionally, by doing away with the need for physical storage devices, cloud storage offers a more affordable way for both individuals and businesses to store data. This innovation has created a sizable market for cloud storage. According to a Fortune Business Insights report, this market is projected to reach over $376 billion by 2029.

Cloud-Storage-Market-Size
Forecasted size of the worldwide cloud storage market. Image via: Statista

Despite the convenience that modern cloud storage solutions offer, the level of centralization still poses the most significant drawback. Centralized cloud storage poses several risks that can have substantial detrimental consequences to businesses and individuals. One of the main issues of storing large amounts of data in one place is the higher vulnerability to security breaches and data leaks by hackers. Countless hacks have evidenced this in recent years. Web2 powerhouses like Meta (formerly Facebook), Dropbox, and Google have all been the subject of data leaks in recent years. Data leaks can have severe repercussions for organizations and individuals, including identity theft, reputational damage, and financial loss.

Furthermore, censorship and government surveillance are significant problems with modern file storage platforms. Since centralized cloud storage applications store data on servers of a single host, this imparts disproportionate powers to the entity controlling the data. For instance, these entities can disclose information to third parties without consent. This damages privacy and civil liberties, a problem that is compounded especially in countries with anemic or non-existent data protection laws. Centralized entities may also increase prices for their services at a whim. This is a case in point when Google decided to hike prices on their cloud storage platform in March, 2022.

Google announcing today that they are as much as doubling prices on some of their cloud storage products. If its not decentralized, you have no control over whether it will remain viable.

David Vorick, Co-founder and lead developer of Sia, a leading decentralized storage platform

Decentralized Storage Explained

Since blockchain technology gained traction since Bitcoin’s inception emerging as a payments network, its utility has expanded to several real-world applications. The technology’s potential has permeated several sectors, including healthcaresupply chain, traditional finance through DeFi, and disrupting the art world via Non-Fungible Tokens (NFTs). As the technology matures and gains widespread, more novel applications are bound to emerge. 

Decentralized file storage represents another emerging and revolutionary application of blockchain technology. It reflects an evolution from centralized cloud storage platforms. By leveraging the immutability and transparency features of blockchain technology, decentralized storage safeguards the integrity, accessibility, and security of data by dispersing the hosting of files across a distributed peer-to-peer network of multiple computers, also known as nodes. In other words, no single node is responsible for storing all the data on the network. This is in stark contrast to centralized data storage options, wherein data is stored on multiple servers that are hosted in a centralized database.

Enhanced Data Security 

Each node in the network stores a small piece of the data, and the blockchain ensures that the data remains accessible and tamper-resistant. Since the data is spread across multiple nodes across different geographies, it significantly increases data security and is highly resistant to censorship. This makes it a more secure and reliable option than traditional centralized storage systems for users.

Furthermore, decentralized data storage solutions typically incentivize individuals to become node operators to provide storage and retrieval of data in exchange for payment in the form of cryptocurrency or tokens. This not only encourages participation in the network but also emboldens a network that is resilient, self-sufficient, and further decentralized. This, in turn, increases the efficiency and security of the decentralized storage network. 

Privacy and Complete Ownership of Data

In addition to enhanced security, the decentralized system of file storage powered by blockchain technology fixes the problem of privacy and surveillance concerns. It provides users with complete control of their data. Unlike centralized storage services, users of a decentralized storage system are the sole custodians to encrypt and decrypt their data using their private keys. This allows users to retain full data ownership by preventing non-authorized entities from decrypting their information. 

Cost Effective

Traditional cloud storage services require large database centers that incur additional overhead costs such as hardware, maintenance, staff, electricity, and security costs. To cover these extra expenses, centralized storage systems often charge a storage cost or fee that is more than their decentralized counterparts. 

Cost-of-Decentralized-Storage
Image via: CoinGecko

Decentralized storage solutions typically offer a more affordable alternative for their users. This is due to the fact that this model eliminates the requirement for large data centers and the associated extra costs. 

Conclusion 

Decentralized storage networks are still in their early stages of growth. The sector as a whole has carved a niche in the world of blockchain and crypto with a current market cap of $4.5 billion, a drop in the ocean compared to the traditional centralized cloud storage market. 

Nevertheless, several noteworthy projects have helped highlight the need for a democratized and decentralized alternative to the current model for file storage.

Filecoin’s mission is to build a decentralized, efficient, and robust foundation for humanity’s information.

Juan Benet, Founder of Filecoin, one of the largest decentralized storage networks

Projects like Filecoin, Arweave, Storj, and Siacoin are frontrunning the growing decentralized storage narrative. There is no doubt that adoption in this sub-sector is growing. For instance, as quoted by Sam Williams, the co-founder and CEO of Arweave:

90 million individual pieces of data were permanently stored on Arweave last month! Growth coming from the use of Arweave as a layer for other decentralized services (from smart contracts, to decentralized DBs), as well as NFT storage. Arweave is at the base of the web3 stack.

Sam Williams, Co-founder and CEO of one of the fastest growing decentralized storage networks, Arweave

Although centralized storage may have established itself as the standard for years, the emergence of decentralized storage solutions enabled by blockchain technology has exposed glaring flaws in the established order. Data privacy, security, and ownership are brought into sharp focus when data is stored, managed, and shared through a network of distributed nodes. Disruption is around the corner.