Decentralized storage has gained traction in 2017. Year-to-date its market cap has increased from $90 mil – $397 million (excluding FileCoin). The traditional, centralized cloud storage market is estimated to be $25.17 billion once Q4 numbers are input, according to BusinessWire. On top of that, they project the market to sustain a 29.73% compound annual growth rate through 2022, culminating in a $92.48 billion market. Impressive growth for sure, but in calculating it they forgot to factor in the most crucial catalyst: the disruptive power of blockchain.
More and more users are shifting away from centralized cloud storage services — and for good reason. Centralized hosts like Equifax and Google have proven time and again that they cannot be trusted with our data, whatever the type. Either they fail to secure it (Equifax) or they end up using it against us (Google). Blockchain technology is more properly equipped to manage this sector.
What Makes Blockchain-based Storage So Special?
Decentralized storage offers several critical advantages over centralized storage.
Decentralized storage guarantees SECURITY.
Instead of hosting data on a massive centralized server which can be targeted, blockchain is able to fragment, encrypt, and distribute data securely. It relies on hundreds of thousands of users who voluntarily encrypt and secure the data through a process called mining. Even if a hack was to occur (blockchain has NEVER been hacked to date), the hacker would only earn access to a small portion of highly fragmented, encrypted data — not an inclusive data bank. While the underlying technology makes it seemingly impossible to steal data, fragmentation acts as deterrent to prevent an attack from happening in the first place.
Decentralized data is FAST.
Fragmented data benefits from vastly improved speeds. Because it can be saved and retrieved concurrently, throughput is much more nimble. Decentralized storage platforms have been known to advertise speeds up to 10x faster than their centralized counterparts.
Decentralized data is IRREPRESSIBLE.
With decentralized storage, not only is the data fragmented, but it is also fluidly communicated between nodes. As a result, if a node fails, no data loss will occur. Data can be retrieved and reconstructed even without 100% fragment representation.
Decentralized Storage: Undervalued and Underappreciated
Let’s compare the market cap of decentralized cloud storage to that of the traditional storage space. We’ll use the same figures from BusinessWire: $397 million for crypto, $25 billion traditional. Crunching those numbers reveals that the traditional storage space holds roughly a 16:1 market cap distinction over crypto. Is this justified?
For the time being, it is appropriate. It properly reflects the traditional storage market’s share advantage over crypto as it presently stands in terms of monetary value. But what we are targeting here is the future, not the present. Reading the signs suggests that decentralized storage is the future, as it is rapidly gaining market share through adoption while showcasing superior technology. As investors we want to lead and innovate in the crypto space, so we strive to identify market trends and position ourselves early, riding euphoria to the top as it surfaces. Presently we are witnessing the very beginning of a trend shift as awareness increases. Let’s take a look at the technical shifts with some visual aid.
Join the revolution | Top Players in the storage space
The decentralized storage sector is currently comprised of four main players: Siacoin (SC), Storj (STORJ), MaidSafeCoin (MAID), and FileCoin (FIL). We will only address the first three, as the FileCoin network is not currently operational, will not be for quite some time, and differs in functionality and objective from others in the space. It did raise over $200 million in its ICO, but is not trading on any exchanges currently.
MaidSafe is the largest player in the decentralized storage space, carrying a $183 million market cap at press time. Self-proclaimed the “World’s First Autonomous Data Network”, MAID brings more to the table than just storage. It is web hosting, encrypted email, and storage rolled into one platform. Participants in the system will be able to contribute their unused computing resources to MaidSafe. In return they will be compensated in the native currency. The concept is fantastic. Unfortunately, the light at the end of this particular tunnel seems distant. As of now, the program is in the ‘Alpha 2’ phase.Functionality is not expected until Alpha 4, and since their road map lacks even rough dates, it is hard to guesstimate timeline within any acceptable margin of error. Community estimates dating back to early 2017 project full functionality by early 2020. Currently, 452.5 million MAID trade on the open market, with 4.3 billion the max supply. With that in mind, expect some hefty inflation as circulating supply approaches the max supply in coming years.
The idea behind Sia is simple. It enables anyone, anywhere to rent out unused storage space, creating a decentralized peer-to-peer network on which data can be fragmented, stored, and accessed seamlessly. For providing this service, hosts are paid by users in Siacoin. The currency itself is capable of executing file storage contracts on the Sia blockchain. In doing so it extends the immutable trust of blockchain to all users, allowing them to confidently participate in the system knowing that they will undoubtedly be compensated for their contribution.
Unlike MAID, Siacoin’s road map is very clear and updated frequently. As a matter of fact, it has several updates planned before year’s end, including simplified file sharing and file contracts. Sia has a total of 15 updates planned in the next 6 months, on top of the 16 updates completed this year. It goes without saying that its development team is highly active and deeply committed.Perhaps the most attractive benefaction Sia offers is its ability to offer secure storage at the best price. It compares its 1TB storage cost of $2 with that of Amazon at $23. If Sia can offer a price that is 10x better, secured by better technology, what gives?
Back to the timeline, the project is not complete. It is usable but does not offer all of the necessary features. Video streaming, automatic pricing, file sharing, tiny file support, and macro storage are all crucial in driving adoption moving forward, and guess what! They are next up on the road map. As these features are integrated and the product becomes more streamlined, more users will migrate to the network. Naturally, positive price action will ensue.
Currently 30 billion Siacoin (SC) are in circulation comprising its $138 million valuation. Instead of controlling its inflation through a hard cap, Sia uses a different mechanism called ‘Proof of Burn.’ In compliance with this instrument, contributors who wish to host user data must prove their legitimacy by voluntarily burning (destroying) Siacoins. This procedure prevents sybil attacks by removing the monetary incentive for attempting them. Additionally, coin incineration is the perfect counter to inflation. As with other cryptographically secured currencies, Siacoin rewards its miners in its native currency, and this produces an inflationary effect over time. Sia is a low-inflation coin, however, averaging just 2.2% over the course of its life. Burning reduces that figure further, and could potentially push it into negative territory resulting in price appreciation through deflation.
Following the ‘hype’ phase of trading, SC sold off steadily, a common pattern in cryptocurrencies. It appears that seller sentiment has exhausted now, however, and we may be witnessing a trend reversal.Sia has yet to launch a marketing campaign. It is quietly and humbly refining its platform before seeking that sort of attention. This tactic has earned the developers even more respect from the community, as they have proven that they plan to deliver a no-hype, speaks-for-itself product that outshines the competition.
Aptly named, STORJ is also a storage coin. It boasts its speed above all else, claiming to be “up to 10x faster than traditional datacenter-based cloud storage solutions.” Its pricing structure is also tantalizing, and for users who require only nominal storage capacity, STORJ is hands down the best option. While Sia offers storage priced per terabyte, STORJ users may opt to store as little as 1GB costing $0.015/GB per month ($15/mo for 1TB). On the back end, users must also pay to access the stored data.
STORJ currently holds a $76 million market cap through its circulating supply of 105 million coins. This ranks it 79th overall on CoinMarketCap’s tracker. It carries much heavier trade volume recently compared to its competitors, with nearly $10 million worth changing hands today alone. This represents an advantage in awareness and investor faith. Much of this is driven by both its working model and its consortium. While its system is not perfected, they have integrated it natively with browsers and prepped it for testing (no live launch) through its partnership with Heroku (Salesforce.com subsidiary) and Microsoft. No other player has managed a partnership with such notable figureheads in the close knit storage space.
Of the three coins, STORJ showcases the strongest bullish trend. It’s slow ascension on strong volume over the past several weeks indicates smart money initiating long positions.
The strong bullish trend becomes even more apparent when viewing the macro chart:This appears to be a cup developing which would culminate near $2. If it further develops into the traditional cup-and-handle formation, the bullish breakout could send the price closer to $3. Putting that in perspective, if that postulate is fully realized, STORJ would find itself nestled in first place, just above the current leader, MaidSafe.
STORJ is post-beta, meaning the platform is usable as is. With that in mind, it is not surprising that STORJ is receiving the bulk of the trade volume and appreciation at this point. It benefits from both speculative trading and utility purchases.
Whether you are looking to secure a quick profit or add to well diversified long portfolio, storage coins are worth a shot. As with any investment, doing so in this space does carry risk. Fortunately, the risk appears to be limited in the near term, while the rewards could be exponential. All that is left to do is pick your favorite based on their fundamental offerings. Spreading your investment across the three may be prudent, and here is why.
Much of the success of each project will be based on long term enterprise adoption. Currently, enterprises can not build their infrastructures around decentralized storage because they must comply with several regulatory requirements. These projects are not fully audited and are not primarily intended to be accessed through the fiat money system, effectively alienating large enterprises to an extent. As crypto sees widespread adoption this will become less of a factor, and large scale ventures could start to buy in. Once that begins, they will be committed to their initial choice, as migrating enterprise storage infrastructure from one network to another is very cumbersome. If large players begin to rally around one particular project, the others could suffer, and it is too early to know which will be which.
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