Why is the Storage Market Going Decentralized?

Why is the Storage Market Going Decentralized?

The rise of cloud storage services like Amazon S3, GCP, and Azure has transformed how we store digital data, leading to a shift towards storing data online rather than on local devices. While this sector has grown significantly, there has been little innovation since the introduction of cloud storage. Large corporations provide most services with data centers globally.

Major corporations such as Meta, Google and Microsoft are accumulating an unprecedented amount of data, ranging from our messages and work-related files to important documents and passwords. 79% of the cloud market is held by only eight companies, with the top three holding 64%. This is what Web 2.0 looks like now.

Web3 Storage Emerging as a Big Market

However, a new trend is emerging - decentralized storage, aka web3 storage. Decentralized storage has been around for some time, dating back to the early 2010s when computer scientists started developing its foundations. According to recent projections, the global Web 3.0 blockchain market is expected to grow at a moderate pace, with an estimated compound annual growth rate (CAGR) of 44.9%. The market size for web 3.0 blockchain technology is valued at approximately US$ 2.86 billion in 2023. As adoption continues to increase, the demand for this technology is predicted to skyrocket, reaching a staggering US$ 116.51 billion by 2033.

Famous decentralized storage protocols include IPFS/Filecoin, Sia, Storj, Arweave, etc. These protocols aim to disrupt traditional cloud storage models by eliminating intermediaries and using P2P software and cryptography to operate storage networks. As Bitcoin challenges traditional banking systems, Web3 storage protocols seek to replace conventional cloud storage services with a more democratic, secure, and efficient approach.

What is Decentralized Storage?

Many of us use cloud storage regularly. For instance, we upload photos taken with our Phones to iCloud or Google Photos, send emails with files stored on Google Drive and Gmail, and post our thoughts on Twitter or Facebook. These actions rely on cloud storage. Major companies like Apple and, Twitter, Facebook use centralized cloud storage services provided by Google Cloud and Amazon Web Services (AWS). On the other hand, there's a different type of storage called decentralized storage, where files are kept on numerous personal computers linked together in a network. A prominent example of this is IPFS (Interplanetary File System), a system for storing and sharing files, websites, apps, and data across a network of computers.

Instead of depending on a centralized service like AWS, iCloud, or Google, IPFS relies on individual computers connected to its network to store and retrieve files. However, Decentralized storage in the Web3 framework is characterized by the use of a network of nodes that anyone can join and contribute storage capacity to. This creates a permissionless system where participants can freely add storage capacity and earn rewards. An advantage of this setup is that it fosters an open market for storage providers, promoting competition and innovation.

The core principles of Web3 promote transparency and decentralization, offering several benefits that appeal to cloud users in varying degrees based on their specific needs. These advantages include:

  • Resistance to censorship - By eliminating a single point of control, content cannot be easily removed or censored, ensuring freedom of expression.

  • Resilience - The open-market approach prioritizes data integrity by offering storage redundancy. This is particularly crucial in challenging conditions, as it provides additional protection compared to traditional cloud storage systems.

  • Cost-effectiveness - In an open market, prices are competitive, potentially resulting in lower costs compared to centralized cloud services. This is because competition drives innovation and efficiency, ultimately benefiting consumers.

These properties are highly valued by cloud customers who prioritize data security, affordability, and unfettered access to information.

How does Decentralized storage work?

Decentralized storage systems utilize blockchain or distributed ledger technology (DLT) to govern a network of nodes that contribute storage resources. Nodes can be individuals or organizations that offer extra capacity in exchange for cryptocurrency incentives. A blockchain maintains a tamper-proof record of all data transactions and access, promoting transparency and preventing malicious activity.

When a user wants to store a file, it's broken down into smaller pieces called "chunks" and spread across several computers in the network. Each computer, known as a "node," stores a chunk of the file and can provide access to it later, and everything gets encrypted with a personal key. The encryption key is then dispersed among the nodes. The location and structure of the file are recorded in a separate set of data called "metadata."

When the user needs to access the file, their request is sent out to the network, and the user must present the private key pieces. Then, the necessary chunks are retrieved from various nodes. This method guarantees that only authorized parties may access the data while preserving confidentiality against unauthorized access attempts.

Participants in decentralized storage systems are often motivated to contribute their storage resources by receiving rewards or tokens. This encourages more people to participate, making the network more reliable and available.

Exploring the Blockchain-Powered Decentralized Storage Market

Decentralized storage utilizing blockchain technology has gained significant interest and widespread adoption since the start of 2020. This coincided with the rise of the mainstream NFT market, dApps, and increased focus on Web3. Developers are quickly exploring this new data storage and processing approach that eliminates reliance on centralized services like AWS, Azure, or GCP.

The latest generation of blockchain-enabled cooperative storage clouds align with the decentralized principles of Web3 but also offer potential technological advantages over centralized alternatives. Although it's still early in their development, some protocols show promising potential.

One prominent project in this emerging market is Filecoin, which stands out regarding usage and storage capacity. It has been dubbed as a "P2P version of AWS". Filecoin represents just one example of the growing market. Other notable competitors include Sia, Storj, and Arweave, a leading alternative protocol catering to permanent storage needs.

The underlying technologies powering these decentralized storage protocols are designed to achieve the two primary goals of any data storage service: data availability, ensuring quick and reliable access to stored data, and data integrity, maintaining accuracy and consistency throughout the data's lifespan.

What decentralized storage can provide, which centralized storage lacks?

Decentralized storage has several unique features that differentiate it from traditional centralized storage options. Here are some of the key features:

  1. Data Immutability: Decentralized storage systems often utilize technologies such as blockchain or distributed ledger technology (DLT) to ensure data immutability. Once data is stored on the network, it becomes tamper-proof and cannot be modified or deleted without proper authorization. This feature is particularly valuable for applications that require data integrity and auditability, such as supply chain management or healthcare records.

  2. Increased Security and Privacy: Decentralized storage offers enhanced security and privacy compared to centralized storage systems. In a decentralized network, files are broken apart and distributed across multiple nodes, making it more difficult for attackers to compromise the data. Additionally, decentralized storage systems often use encryption to protect data, ensuring that only authorized users can access the stored information.

  3. Improved Data Retrieval Speed: Decentralized storage systems can provide faster data retrieval speeds compared to centralized systems. In a decentralized system, the data is stored across multiple nodes, and the system can query the network and fetch data from the closest nodes, resulting in optimal data retrieval speeds. This distributed approach reduces the reliance on a single server and can improve overall performance and responsiveness.

  4. Lower Costs: Decentralized storage can help reduce infrastructure costs for maintenance, utilities, and bandwidth. By leveraging underutilized resources at the edge of the network, smaller operators can provide affordable and geographically distributed cloud storage. Additionally, some decentralized storage systems allow individuals to rent out their unused storage space for incentives, creating a cost-sharing model.

  5. Resilience and Fault Tolerance: Decentralized storage systems are designed to be fault-tolerant, with intentional data redundancy techniques built-in. This ensures that there is no single point of failure and data security and recovery are not affected by nodes joining or leaving the network. Even if one node fails or goes offline, the data can still be accessed from other nodes, preventing data loss.

  6. No Central Authority: Unlike centralized storage systems where data is stored and controlled by a central server, decentralized storage systems distribute data across multiple nodes, and only the data's owner holds the private encryption key. This means that storage providers cannot access the data without authorization, providing users with greater control and ownership of their data.

  7. Content Addressing: Decentralized storage systems often use content addressing techniques, such as hash functions, to uniquely identify and retrieve stored data. Instead of relying on traditional file paths or hierarchical structures, content addressing uses the content itself to generate a unique identifier (hash) for each piece of data. This approach eliminates the need for centralized file systems and enables efficient data retrieval and deduplication.

  8. Community-driven Governance: Decentralized storage systems often have a community-driven governance model. This means that decisions regarding the system's development, maintenance, and improvement are made collectively by the community of users and developers. This open and transparent governance model allows for greater user participation, innovation, and alignment with the needs and values of the community.

New Ways of Accessing The Future of the Internet

Decentralized storage has the potential to support a wide range of innovative use cases beyond traditional storage solutions, thanks to its inherent benefits like immutability, persistence, and transparent transactions. Emerging decentralized storage ecosystems are exploring various applications, including but not limited to:

  1. Decentralized Content Delivery Networks (IPFS, Filecoin)

  2. Decentralized Web Hosting and Storage Platform (Spheron.network)

  3. Audio and Video Streaming (Livepeer, dTube, Audius, Rocki)

  4. Decentralized Identity Management (ION, Selfkey, Magic)

  5. Decentralized finance (DeFi) platforms (Uniswap, Aave, MakerDao)

  6. Gaming and Virtual Worlds ( Axie Infinity, Decentraland, Web3 Warriors)

  7. Social Networking Platforms (Diaspora, Matrix, Peepeth )

  8. Content Publication and Distribution (Mirror, Subcocial, Koii)

These examples demonstrate the vast possibilities of decentralized storage, and many more projects are underway, such as DeNet's Open Economy 3.0 concept, which highlights the potential for a decentralized storage-based ecosystem.


In conclusion, decentralized storage is the future of data management and is here to stay! Say goodbye to the risks and limitations of centralized storage and hello to a safer, more reliable, and cost-effective solution. With its unmatched security, scalability, and transparency, decentralized storage is revolutionizing how we store and manage our digital assets.

Decentralized storage is the crown jewel in a world where data is king. It's the missing puzzle piece that completes the picture of a secure, transparent, and robust digital landscape. From gaming and social media to finance and web hosting, the potential use cases for decentralized storage are endless.

It's time to join the movement and experience the power of decentralization for yourself. Don't miss out on the opportunity to take control of your data and embrace the future of data management. The future is now, and it's decentralized!