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Talking to Storj about its new version made me curious about decentralized storage. On the one hand, there are factors that could help boost its adoption. On the other, it also seems at odds with other trends, such as sovereign clouds. Here’s what I learned. — Anna

Slashing cloud bills

The volume of data generated by companies seems to be ever-increasing, but concerns about cloud costs are rising, too.

Earlier this month, we learned that AWS’ year-on-year revenue growth dropped into the mid-teens in January as customers sought to reduce their spending. “As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters,” Amazon CFO Brian Olsavsky said during the company’s earnings call.

While this preoccupation reignited the bare metal debate, it also creates tailwinds for another option: decentralized storage. Represented by players such as Arweave, Filecoin, Internxt, Sia and Storj, it offers a cheaper alternative to hyperscalers.

Talking of Amazon and other giant cloud providers, Storj CEO Ben Golub argued that these are “the best in the world at deploying billions of dollars of capital and building out data centers and running them efficiently.” This means that they can only be challenged by adopting a radically different approach. In Storj’s case, that’s decentralized storage.

A common analogy for decentralized storage is to compare it to Airbnb, where guests use a spare room in someone else’s space. For those of us who are old enough to remember the heydays of torrenting, peer-to-peer might be an even closer comparison, except that decentralized storage is also using cutting-edge advancements when it comes to encryption and performance.

Whether this will be enough for decentralized storage to go mainstream is an open question, but this option is currently enjoying several tailwinds that go beyond cost savings.

On-par security and performance

According to Storj, using its network costs “1/5 to 1/20 the price of hyperscalers.” But no matter how much cheaper decentralized storage is, it wouldn’t be considered by most organizations if it weren’t enterprise-ready.

Internxt CEO Fran Villalba Segarra has been touting the benefits of decentralization and encryption since at least 2021.

“[What we do] is we fragment data and then distribute it around the world. So essentially what servers host are encrypted data shards — which is much more secure because if a hacker was ever to access one of these servers, what they would find is encrypted data shards, which are essentially useless. Not even we can access that data.”

Decentralization could also make it easier for the data to be closer to where it’s needed. “Instead of being in one big data center, it’s near your house or near your car,” Golub said. His company introduced performance improvements as part of its new version, Storj Next, but already claims that it’s “consistently faster than AWS.”

Open questions

Decentralized storage might also be more sustainable, considering the current environmental impact of traditional data centers. However, the jury’s still out: The sector’s reliance on crypto means that it is too early to have a full view of its ecological footprint, especially until it becomes clear whether most storage will come from idle drives or from dedicated satellites that might be more akin to data centers.

What does this mean for sovereign cloud? When companies and regulators alike seem to be more and more concerned with where data is stored and which foreign entities might access it, are globally distributed nodes really that appealing? Storj can restrict decentralization to certain territories, Golub said, but the company’s users are more interested in getting their data closer to where it is being consumed.

Of course, geo-replication is also possible with mainstream cloud solutions, but it comes at a price. And when costs are involved, less savvy users are more likely to forgo what others consider must-haves, such as redundancy and remote backups.

For instance, when French cloud hosting provider OVHcloud lost a major data center in a fire in 2021, millions of sites went offline. But with decentralized storage, redundancy is built in by default.

Still, it is hard to foresee decentralized storage becoming the norm for storing personally identifiable information or in industries operating under regulations such as HIPAA. But startups offering decentralized storage are going after a diverse set of use cases.

Emerging use cases

The State of Filecoin Q4 2022 report, published by Messari and commissioned by the Filecoin Foundation, notes that “Filecoin is primarily geared toward providing cold storage solutions to enterprises and developers.” Cold storage is used for data that is accessed infrequently, purportedly making Filecoin “an appealing choice for Web [2.0] clients seeking cost-effective alternatives for storing large amounts of archival data.”

“​​By the end of Q4’22,” according to the report, “a total of 1,320 clients have onboarded datasets on Filecoin, out of which 271 clients have onboarded large datasets (e.g., datasets that exceed 1,000 TiB in storage size), up 96% from 138 clients in Q3’22. Filecoin clients range from New York City and the USC Shoah Foundation, to web3 platforms such as OpenSea.”

Web3 is definitely a big use case for decentralized storage, and several companies are going after it. Storj has a slightly different focus: It is going beyond both cold storage and web3, instead focusing on being a bridge between Web 2.0 and web3.

One of its growing use cases, Golub said, is video. “If you’re creating video, those are large files that need to be delivered super fast to people who are [using] phones anywhere.” There are also applications for scientific data that research institutions weren’t previously able to share. This hints at a broader use for large machine learning data sets, said Rosie Pongracz, Storj’s chief marketing officer.

Its compatibility with S3 helped Storj onboard Web 2.0 customers, but some of its competitors hope to take the focus on user friendliness even further. For instance, Internxt told TechCrunch it hopes to be “the Coinbase of decentralized storage” and make usability by nontechnical customers a priority.

Meanwhile, Variant investment partner Mason Nystrom noted in a tweet that “firms like [Pinata and Filebase] leverage decentralized storage networks like IPFS, Storj, and Sia but provide cleaner interfaces [plus] enterprise features.” That may be yet another reason for people to adopt decentralized storage.

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