Decentralized Storage - Is it the future of data storage?

By: Zaw Min Htet (Backend Software Engineer)25 October 2021

The adoption of cloud computing and cloud storage has been increasingly popular among enterprises. Cloud services offer better scalability, accessibility, agility, performance, and durability over on-premise or traditional web servers. Thus, many people and organizations host their systems and store their data in the cloud.

However, there have been raised concerns over the privacy, integrity, security, governance, and ownership of the data over cloud storage as the physical storage and environment are typically owned and managed by a cloud provider.

Decentralized storage, an alternative solution, aims to address the current issues of conventional cloud storage.

What is decentralized storage?

Decentralized storage works by encrypting the entire file and breaking the encrypted data into tiny pieces and then distributing them to many different computers (also called nodes) across the decentralized network. This process is called sharding.

As a result, even a node owner is virtually unable to read and retrieve the entire file as only a few encrypted pieces of the file are stored in its node. Only the private encryption key owner can retrieve and decrypt the file from the network.

The nodes are hosted by different people, rather than a single company or organization. Anyone can participate in the decentralized storage network by providing their networking bandwidths and storage spaces. People are incentivized to participate via tokens.

Many decentralized storage platforms operate based on a blockchain network while using peer-to-peer networks for decentralized data storage. The function and operation of the services may vary depending on the platform.

There are a few advantages of decentralized storage over conventional cloud storage:

  • Private key encryption and sharding make the storage data highly resilient to cyber-attacks such as Ransomware, Denial-of-Service (DoS), and data breaches.
  • Only with the private encryption key, the data can be retrieved and decrypted from the decentralized network, so that the ownership of data is always with the user.
  • The potentially higher storage capacity and the efficient use of underutilized storage lead to lower storage costs compared to conventional cloud storage.
  • Multiple copies are generally stored in different nodes of the decentralized network. This avoids network bottlenecks, provides faster download speeds, and eliminates a single point of failure.

Several projects are working on blockchain-based decentralized storage. Among them, Filecoin, Sia, and Storj are the leading companies working on blockchain-based decentralized storage.


Filecoin is an open-source decentralized cloud storage network that is powered by blockchain technology. Filecoin builds on top of Interplanetary File System (IPFS), a distributed system, for storing and accessing files and data.

Filecoin allows anyone to share their unused storage space and a developer or user rents file storage from Filecoin and pays to store their data. There are two types of miners, (i) storage miners who store the data and (ii) retrieval miners who provide the bandwidth to retrieve the data from the network. Another type of miner called “repair miner” will be introduced in the future according to Filecoin.

Miners can earn native tokens called Filecoin (FIL) once a storage or retrieval deal is executed. Filecoin is a cryptocurrency that can be traded at crypto exchanges. Gateway systems like Estuary and offer a way for developers to automate their storage onto the IPFS network and the Filecoin network.


Sia is an open-source decentralized cloud storage platform that provides its own blockchain, peer-to-peer network, and utility token called Siacoin (SC). Sia allows people to rent out their unused storage space. Renters use Siacoin to buy the storage space from hosts, and make a file contract deal for storage capacity and duration, typically lasting 90 days.

At the end of a file contract, the host must prove that the renter’s data is stored throughout a certain timeframe. Sia uses Merkle Tree verification proofs to verify the host’s claim, and if the storage proof is valid, the host will get paid otherwise a penalization will be imposed.

When a renter uploads a file on the Sia network, the file is divided into 30 segments and the segments are encrypted by default using the Threefish algorithm and spread out to multiple hosts across a region. Sia software requires 10 out of 30 segments to fully recover a user’s file. Sia automatically moves renter data to new hosts if individual hosts go offline.

Sia launched a new hosting platform called Skynet that makes it easy to join Sia’s network for web applications and data storage. Sia has over 4.1 PB storage capacity, more than 640 storage providers, and over 1.7 PB data storage is used.


Storj decentralized cloud storage (DCS) is open-source, being built on the Ethereum blockchain. Storj DCS offers an enterprise-grade cloud storage platform, affordable and predictable pricing model, AWS S3 compatibility, and a wide range of support for developers to integrate with Storj’s platform.

Storj DCS applies the default AES-256-GCM symmetric encryption on the uploaded file, breaks it down into 80 pieces, and then distributes them across thousands of nodes in multiple regions. Storj DCS just needs 29 of its distributed pieces to reassemble the file so that users do not need to worry about a single point of failure.

Storj allows people to rent out their storage space and bandwidth and gives back Storj coins to node owners as an incentive. Storj uses Satellite to monitor and audit the metadata of distributed file pieces and nodes.

In the case of file pieces or nodes corrupted or unavailable in the network, when the file reaches the repair threshold level, the Satellite will automatically create new pieces and store them into the new nodes. Storj offers an impressive service level agreement (SLA) with 99.999999999% (eleven 9s) of durability and 99.99% (four 9s) of availability. Over 430 million objects, 5.5 PB storage capacity, and more than 12,000 active nodes are currently running on the Storj’s network.


In addition to the above list, several projects are working on decentralized storage solutions including 0Chain, Arweave, Genaro, Internxt, Lambda, OneThing Cloud, Safenetwork, Swarm, TrustSQL, ThunderChain, and more.

Decentralized storage is a rapidly growing technology along with blockchain, however, it is still in the early stage. Many start-ups, researchers, and tech companies are working hard on decentralized storage by building the platform based on blockchain technology.

Due to its features of greater security, preserving data ownership and privacy, faster download speeds, and potential lower storage costs, it could represent the future of data storage, perhaps an evolution of conventional cloud storage. It will be really interesting to see many great applications and systems with decentralized storage when the maturity of the technology increases in the coming years.


Smart Systems Institute
National University of Singapore
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