Sia: A Highly Decentralized Data Storage Solution

Introduction to Siacoin and the Sia Crypto Network

Launched in 2015, Sia is a blockchain-based decentralized cloud storage marketplace that allows users to take advantage of unused hard drive storage space by renting it to consumers in need of data storage services. Siacoin (SC) is the native token of the Sia blockchain network, and is central to the function of the Sia crypto network.

Leveraging the power of decentralized blockchain networks, Sia seeks to democratize cloud storage and increase the flexibility of cloud services while lowering costs for end users. Sia wants to give individuals not only exclusive control over their data, but also the ability to store it securely and autonomously without censorship. Sia’s general ethos of decentralization and autonomy is not unfamiliar in the blockchain space, but the extent to which the Sia crypto project has applied it to data storage is notable.

Sia uses open-source code, does not depend on its own servers to keep the network afloat, does not automatically push updates to the network (users must install them manually), and its core software aims to eschew centralized architecture in general. However, Sia’s commitment to decentralized storage is achieved at the cost of a slightly higher barrier to entry as a user. Sia crypto network participants must generally download a copy of the entire Sia blockchain, run a full node, transact using the Siacoin cryptocurrency, and have a fair amount of technical knowledge to get up and running. These are tradeoffs that Sia seems willing to accept in order to remain a trustless, decentralized application (dApp).

Why Use Decentralized Cloud Storage?

Centralized cloud storage has long since been the standard for hosting data, applications, and websites. Data storage is a field that has been historically dominated by tech giants, and a significant criticism from their customers has been the tendency to force end users into inflexible and expensive cloud services and storage plans due to a lack of viable alternatives. Perhaps the biggest concern with centralized data storage models is that users are required to place trust in the central authority of the provider to keep their data safe, keep websites online, and not tamper with or censor the content that the centralized data providers host. Sia, however, has built a decentralized cloud storage network that relies on individual users running distinct network nodes and offering up their own excess storage space in an effort to foster a highly democratized infrastructure. Instead of renting data storage from a centralized provider, the Sia storage alternative enables peers to rent storage directly from one another.

Sia contends that its decentralized storage model is generally more secure, more flexible, and less costly than dealing directly with a traditional data storage provider. In particular, Sia’s decentralized storage solution provides users with thorough security measures. User data is automatically encrypted. Further, by storing data across a decentralized peer network, users can benefit from enhanced data security through redundancy, which is the practice of storing multiple copies of a particular piece of data in multiple different locations. Data redundancy is considered a best practice to ensure that data is safely kept, and will not be permanently lost should one host or one single copy of the data disappear. The practice of data redundancy on the Sia networks helps users avoid having to place trust in centralized authorities that may present single points of failure for data security.

Sia’s platform allows data providers and consumers to establish flexible contracts with one another on an as-needed basis. Without using existing centralized storage providers, users may experience more flexibility in regard to their data storage needs — and they might also be less likely to get pigeonholed into unsuitable contracts due to a lack of viable alternative solutions. The Sia storage marketplace is also cost-effective for many types of users. It is designed so that providers must compete for storage contracts, with end users often opting for the best available rates and paying lower prices than they would in traditional data storage models. Further, essentially anyone — not just giant data centers — can become a storage provider, which helps drive further decentralization in the cloud storage space.

How Sia Works: Proof of Storage

Sia enables practically anybody to monetize their excess storage capacity by renting it out on Sia’s blockchain-based decentralized data marketplace. Storage providers and clients simply need to enter into smart contracts that define what data will be stored, how long it will be stored for, and at what price. The smart contracts are then stored on and enforced by the Sia blockchain, and thus benefit from the immutability and transparency that blockchain technology affords. To be clear, Sia maintains that it does not store client data, and that its blockchain is simply responsible only for storing the smart contracts between peers.

The contracts between providers and consumers also require the storage provider to substantiate that they are indeed upholding the agreed upon data storage requirements at regular intervals. Providers are compensated each time they submit Proof of Storage, and are penalized for missing proofs. These periodic Proofs of Storage are publicly verifiable via the blockchain, and thus do not require users to personally verify the proofs, as the network itself is responsible for confirming them.

When data is uploaded to Sia, it is automatically encrypted, split up into 30 segments, and sent to various storage providers around the world for the sake of redundancy. Individual data storage providers only receive a portion of the encrypted data, and are thus hindered from viewing, altering, or tampering with it. Similarly, the Proofs of Storage that data storage providers must periodically furnish come in the form of encrypted hashes that don’t reveal what the original data is, but simply that data storage providers have that original data.

Siacoin (SC) and Siafunds

Sia’s native utility token — siacoin (SC) — fuels the Sia crypto ecosystem. Consumers pay for data storage using siacoin, and providers earn siacoin in return for their data storage services. Siacoin relies on a Proof-of-Work (PoW) consensus mechanism, which means that siacoin is minted by miners as a block reward for their effort in producing new blocks in the network. The supply of siacoin does not have a cap, and is slated to increase indefinitely as new blocks are mined in order to scale with the theoretically unlimited amount of data that can potentially be created and stored. The original block reward for the first mined block on the Sia network was 300,000 SC, an amount that decreased by one SC coin with each new block until reaching a minimum block reward of 30,000 SC per block in July 2020. From that point on, the block reward is set to permanently remain at 30,000 SC.

Siafunds represent a secondary revenue-sharing cryptocurrency that is a unique part of Sia’s two-coin system. Siafunds are intended to keep the Sia project funded without the project having to sell siacoin to do so. When a contract is completed, 3.9% of the contract fund is removed and distributed amongst Siafund holders. At the project’s launch in 2015, 10,000 Siafunds were generated. The Sia team originally held about 88% of Siafunds, with other early stakeholders receiving the remainder. The Siafund distribution mechanism also allowed the Sia team to avoid concentrating large amounts of siacoin with a single entity at the earliest stages of the project.

Siafunds function similarly to siacoin in that they can be sent to other addresses and transferred. The key difference lies in the fact that Siafunds cannot be used to fund contracts or miner fees.

Sia’s Layer-2 Solution: The Skynet Crypto Protocol

While Sia’s initial focus has been on providing a platform for decentralized data storage, it has also developed a protocol called Skynet (whose name is a tongue-in-cheek reference to the Terminator movie series). Sia’s Skynet is a Layer-2 network built on top of the Sia blockchain — to facilitate decentralized content delivery and file sharing. Skynet serves as a platform to store and serve content, providing the infrastructure for ddApps and websites. Skynet may appeal to dApp developers who are interested in using a storage layer that is just as decentralized as their application itself. It even presents itself as a potentially viable hosting service for centralized applications that may be seeking to take advantage of Sia’s secure, flexible, and cheap data storage solution.

Practically any type of data can be uploaded to Skynet. Uploading data to Skynet in turn generates a unique identifier, or link, known as a Skylink. Skylinks can be shared with almost anyone — whether they already use the Sia crypto platform or not — to access the uploaded data, whether that’s an image file or an entire website.

Skynet essentially exists as an alternative version of the internet with an innovative data model: data is decentralized and controlled by users, rather than stored on traditional, centralized web servers. This differs from the standards held by traditional hosting servers that can potentially monitor and edit website data. With the traditional model, if a traditional web server goes down, generally the website goes offline with it. Files, websites, and applications hosted on Skynet can only go down if all of the data redundancies are simultaneously deleted — a much less likely scenario. Decentralized Skynet-based data is also protected from censorship and tampering from centralized hosting authorities.

The Future of Siacoin’s Decentralized Data Marketplace

As one of the first data storage blockchains to go live, Sia has been hard at work building the infrastructure for a decentralized data marketplace and has established a reputation of being deeply committed to decentralized data storage. Ultimately, Sia says it hopes to one day render existing cloud storage providers obsolete — taking on the likes of Amazon, Google, and Microsoft — in order to become the de facto backbone storage layer of the decentralized internet. How history will play out remains to be seen, and Sia does have notable competitors in decentralized storage space, including Storj and Filecoin. In the meantime, Sia is providing a robust data storage platform that allows providers to earn from unused storage space, and consumers to improve autonomous control over and access to their data.