Crypto Basics Crypto Knowledge

What are Storage Tokens?

How do you store your digital data? It’s an issue we’ve all had to consider at some point. Blockchain technology has enabled decentralized data storage platforms that use storage tokens and coins to create markets for users looking to buy and sell data storage services.

Blockchain-based storage projects make for an ideal alternative to conventional cloud solutions for several reasons. If you’re lagging in this area, it’s time to learn more about storage tokens.

What is Decentralized Data Storage?

Gone are the days when users would keep their personal photos, videos, and other files on physical hard drives exclusively. Individuals and entities today don’t usually own sufficient space on their devices to meet their digital data storage needs. Companies, in particular, rely on cloud storage providers to keep their data safe and sound. However, centralized cloud storage comes with limitations too.

Only a handful of corporations own the popular centralized cloud storage solutions like Google Drive, OneDrive, and Dropbox. In the corporate model, users get little insight into how providers use their data and whether it gets sold to third parties.

Besides privacy concerns, all of these options bear the single point of failure (SPOF) risk by virtue of being centralized. Hacker attacks and technical defects like electricity outages can prevent all users of the service from accessing their data. 

Decentralized storage systems (dStorage), on the other hand, share a set of benefits:

  • reliable, secure and accessible
  • maximum transparency
  • minimal risk of data security breaches
  • resilience to censorship and government surveillance
  • significantly reduced storage costs

A decentralized storage platform enables any computer running its software to lease unused hard drive space to users who want to store files. These networks feature peer-to-peer (P2P) connectivity, where a user’s computer not only requests but also provides services. The P2P architecture allows each individual computer on the blockchain to process any information necessary for network operation, eliminating the need for a central governing entity.

Moreover, the way information is stored and retrieved by DWeb protocols differs from the currently used HTTP protocol. In DWeb protocols, links point to information based on what it is, not where it is located.

Storage tokens and storage coins power the participation on decentralized cloud storage platforms and serve to secure the network. 

Decentralized Storage Tokens Explained

Participants in a decentralized data storage network need to own its native storage token or coin to use the services. Storage crypto, therefore, serves as a specialized form of payment used in exchange for storage space. 

Anyone can offer their devices’ excess storage space by becoming a node on the network. Some storage platforms allow node operators to stake storage tokens, so by participating in the network and amassing tokens, users can earn a passive income. 

Storage Tokens vs Storage Coins

Similar to the distinction between crypto coins and crypto tokens in general, storage coins are directly based on a native blockchain. In contrast, storage tokens get launched via applications built on an existing blockchain. 

For instance, Storj (STORJ) is the storage token that powers the Storj Decentralized Cloud Storage (DCS). Initially launched on the Bitcoin blockchain, Storj moved to Ethereum in 2017. In contrast, Siacoin is the storage coin of the Sia blockchain’s decentralized storage platform.

Apart from this, there’s no fundamental difference between storage tokens and coins in terms of their functions. Both are technically cryptocurrencies.

Can Crypto Storage Platforms Access your Data? 

Decentralized storage guarantees maximum data security by employing encryption technology based on using a private key, also known as a secret key. Moreover, data files get split into smaller parts, which then travel across several different nodes (user devices) on the network. A single node cannot assemble and download the full file without authorization. 

These aspects mean that even if somebody wanted to gain unauthorized access to user data, it’s impossible. Cyber attacks are becoming a thing of the past with blockchain-based storage.

Crypto Hot and Cold Storage

The type of decentralized data storage we’re discussing in this article is different from crypto hot and cold storage. Cold storage refers to a wallet for storing cryptocurrencies that isn’t connected to the Internet. The cold wallet stores the user’s private key offline, which provides for greater security. In contrast, hot storage includes crypto wallet apps and wallets provided by crypto exchanges. Both terms, however, only refer to the storage of crypto assets and not data files.

We review some of the most successful players among decentralized data storage platforms that have managed to disrupt the market dominated by tech giants like Google and Microsoft.

Arweave

Arweave aims to provide permanent data storage across a distributed network of computers, while creating mechanisms to encourage efficient data transfer. Users can access files stored in Arweave via traditional web browsers. 

Arweave isn’t exactly a blockchain. Instead, it’s based on the blockwave, an alternative to the blockchain. Each block is linked to the previous two to form a block-based structure called a “network of blocks”. This contrasts with Bitcoin (BTC), where the blocks form a chain.

Areweave’s design makes validating transactions different from most cryptocurrencies. While BTC uses a process called “proof of work”, Arweave has developed a new mechanism called “proof of access”. This verification method is fast, highly scalable and consumes less energy.

Other important features include a voting mechanism that allows users to moderate illegal and offensive content. The tools to this end are built into the Arweave protocol, so network users can decide what content should be excluded.

BitStorage Box

All BitStorage Box (BSB) participants act as entities that produce, consume, and share content, creating a self-sustaining blockchain ecosystem. 

The platform creates quizzes and surveys on any type of human knowledge, distributes them to users and rewards participants in line with the results. Anyone can participate for free, register their own quizzes or polls, and generate consistent advertising revenue.

Participant rewards get paid in the BSB platform token known as a BSBT. Users become part of the blockchain ecosystem through BSBT, increasing the usefulness and value of the digital asset and accelerating the development of the BSB platform.

Sia

In contrast to some of the other platforms, Sia provides a decentralized storage marketplace in which storage providers compete for business. As a result, storage pricing is less predictable.

Before a file is uploaded to the Sia network, it gets split into 30 segments that travel to hosts around the world. The software uses the so-called Reed-Solomon coding, which is mainly used on CDs and DVDs. When applied to Sia, these codes create file segments without any loss. Any 10 out of 30 segments are sufficient to recover files. As a result, even if 20 segment hosts go offline, the remaining 10 segments will be enough to download the transferred file.

Filecoin

Filecoin is a P2P network developed by Protocol Labs. Users pay competitive prices to storage for secure file storage. Any person or organization with free disk space on a computer connected to the Internet can become a storage miner on the Filecoin network.

The Filecoin blockchain logs transactions to provide file storage verification and native FIL cryptocurrency transfer. The Filecoin protocol eliminates the need for each vendor to create a different Application Programming Interface (API) or advertise their offering, reducing entry barriers.

Top Storage Tokens and Storage Coins

Arweave (AR)

AR is the currency of the Arweave network. Users who wish to store data must purchase AR to pay for distributed data storage, and computers on the network that provide storage services must accept payments in AR tokens. 

The number of AR tokens in circulation is limited to 66 million. The first tranche of 55 million AR came in June 2018, when Arweave launched. Another 11 million AR tokens will gradually become available to computers with storage services on the network.

Network payments are generally calculated assuming that storage costs will decline over time. Paying for storage on the Arweave network thus resembles paying a one-time upfront fee for permanent data storage. Payments are not made directly to each user. Instead, they are grouped together and gradually distributed to computers.

BitTorrent Token (BTT)

BTT is the native token of perhaps the most popular distributed file sharing platform. It currently has one of the largest market cap among its kind. BTT is a token based on the TRON (TRX) blockchain. Users can exchange their BTT for TRX on a decentralized exchange or sell them on any centralized exchange that supports the token.

You likely know BitTorrent as the widely popular platform for sharing pirated content. As a pioneering project started in 2001, BitTorrent has evolved and now includes the BitTorrent File System (BTFS), a blockchain-based distributed storage platform with over 100 million nodes!

The BTT token came after TRON bought BitTorrent in 2018. It resulted from the so-called Project Atlas implementation, which assumes complete integration of the BitTorrent network with the TRON blockchain.

Bit Storage Box Token (BSBT) 

BSBT is a token used to reward, pay and exchange digital assets for all users who take part in quizzes and surveys on the BSB platform. Based on ERC-20 with a total issuance of one billion, the token is the BSB platform’s main currency. It converts quickly and conveniently, just as some common cryptocurrencies such as Bitcoin and Ethereum do. As such, it bears real economic value. Users can reply, share, create quizzes and polls, thus receiving BSBT.  

Filecoin (FIL) 

The 2017 Filecoin ICO was one of the largest token sales in history, raising USD 257 million. The fact that FIL was one of the first tokens to comply with US securities law attracted several large investors that lent the project early credibility.

FIL allows its holders to use the Filecoin network, make transactions on the data market and run data storage or nodes. FIL’s supply is limited to 2 billion tokens. The number could decrease as bad behavior is discouraged through penalties. A user’s FIL holdings get burned in case of code of conduct breaches.

Holo (HOT)

This is an Ethereum-based token that powers Holo, the distributed hosting platform for Holochain apps (hApps). Holo has infinite scalability and it features “distributed” computing rather than decentralized. 

Storj (STORJ)

STORJ is the native token of the Storj network, where it works as the preferred form of payment. Users can buy and spend STORJ on file storage, and storage nodes can receive and sell STORJ in exchange for additional space and bandwidth.

The token runs on top of the Ethereum blockchain and uses a proof-of-work consensus mechanism. It has a maximum supply of 500 million.

Storj performs a random hourly audit, which ensures that files are constantly hosted by storage nodes. During the process, Storj sends requests to the node operators, who must send a cryptographic proof that the data is still in their possession. Upon receipt of this proof, the nodes receive payment for storing and maintaining the file.

Siacoin (SC)

You can “mine” Siacoin by making free disk space available on your own computer. You only need to install the appropriate software that’s available on the Sia project’s official website. Users can pay in SC to store their files. Likewise, users looking to sell excess bandwidth and storage capacity can earn extra money by accepting SC.

Storage Tokens Takeaways

Decentralized storage is an attractive use case for peer-to-peer networks and distributed technologies. Competing blockchain-based cloud storage systems have continued to draw users to their networks and native cryptocurrencies. 

Privacy-aware web users can store files securely, without having to worry that their data is analyzed or sold for targeted advertising. Most decentralized storage tokens and coins’ future appears promising.

Was this post helpful?

Related posts

3 pigs yellow red black w
5 Fragen zur Besteuerung von Non-Fungible Tokens (NFTs)
Non-Fungible Tokens (NFTs) sind spätestens seit einer vom Auktionshaus Christie’s durchgeführten Versteigerung in New York...
What Are ERC-20 Tokens?
Overview Bitcoin (BTC) and Ethereum (ETH) are often mentioned in the same sentence as they...
What Are ERC-1155 Tokens?
ERC-1155 tokens are native to the Ethereum blockchain and can exist in the form of...