The cloud computer storage industry was valued at US$80 billion in 2022 and is projected to reach over US$180 billion in the next five years, according to a 2022 report by Markets and Markets Ltd, indicating it has a winning formula for companies seeking a lower-cost, secure option to store vast amounts of data on the Internet.
Cloud storage is dominated by heavyweight, centralized players, such as Amazon Web Services, Google and Microsoft, but with such revenues at stake, blockchain developers are looking to disrupt the sector with decentralized storage solutions to unseat the incumbents.
The Interplanetary File System (IPFS), powered by the Filecoin blockchain saw the amount of data stored on its network increase x15 in the year to last December. Matt Hamilton, principal developer at Protocol Labs, the firm behind Filecoin, predicts cloud storage is on the road to a decentralized future.
“I see it growing quite significantly in 2023,” he said, “[this year] we’ll see a lot more usage as front-end [solutions] come around to make it easier for individuals to participate within the network.”
Proponents of decentralization argue the model brings advantages such as security, cost and privacy. The latter point is a hot button amid the debate about the control giant technology companies have over enormous amounts of personal information and the selling of that data to advertisers.
Beam me up
The IPFS was created eight years ago as a decentralized way to store data based on its content. The current method of data storage is typically based on location.
“The idea being is that even if you were trying to communicate between different planets, you’d be able to reference a piece of content and it could be fetched from a local server near you, not necessarily having to do an interplanetary roundtrip to fetch it.” Hamilton said.
The Filecoin system is a sister protocol to IPFS, which adds an economic incentive for storage providers on the IPFS to be compensated with the network’s native cryptocurrency, FIL.
This is similar to how miners on the Bitcoin network are incentivized to uphold the network and validate transactions by being rewarded with Bitcoin, a model used by many Web3 projects.
Hamilton told Forkast that Filecoin has added over 4,000 storage providers in the past two years and the network is currently up to 16 exabytes of total storage capacity — about 1% of the total data center storage capacity worldwide.
Some large projects are already turning to this system. OpenSea, the world’s largest non-fungible token marketplace, stores its NFTs on IPFS.
Wikipedia, the online free-access encyclopedia, also stores some of its data on the IPFS, a decision that saved the possible loss of information when it was blocked by Turkey’s government for three years to 2020.
“One of the big overarching goals of what Protocol Labs is doing is storing humanity’s data,” Hamilton said.
“As we’re in a much more data-centric world these days, the ability to be able to store data, retrieve data and be able to verify the veracity of the data and ensure that the data hasn’t been tampered with is key.”
March will also see the Filecoin Virtual Machine (FVM) deployed on the network. Similar to the Ethereum Virtual Machine running on the namesake blockchain, the FVM will expand the use case for the Filecoin network through smart contracts and greater Web3 utility.
Proponents say this will allow for the full scope of decentralized finance (DeFi) functionality on Filecoin, allowing storage providers and clients to engage in the lending and borrowing marketplaces, increasing the flexibility of data storage arrangements. Not everyone is convinced, however.
Athreya Ramadas, chief technical officer of cloud tech company Rapyder Cloud Solutions Ltd., told Forkast that decentralized storage solutions have existed for quite some time, but did not catch on. He cited the early days of the internet and the use of torrenting sites for decentralized storage.
“I am not sure whether enterprises or customers will be happy with the decentralized storage, because you never know where it is getting stored; you don’t have control of your data,” he said.
“When it comes to health care or [other sensitive business] data which I am responsible for as a fintech provider for my customer’s data, I don’t think it will ever go into a decentralized storage,” he said.
Andrew Lokenauth, technology analyst and Founder of Fluent in Finance, said he sees the future of cloud storage as a combination of centralized and decentralized offerings.
“It’s important to note that decentralized solutions are still in the early stages of development and may not yet have the same level of reliability and scalability as centralized solutions,” he said in an interview.
“Centralized solutions will continue to be the go-to option for many businesses and individuals due to their established infrastructure and proven track record of reliability and security,” Lokenauth said.
“However, decentralized solutions will also play an increasingly important role in the industry, providing an alternative option for those who are looking for a more secure and transparent way to store their data.”
(Updates in paragraph 10, 16 to clarify references were to Filecoin.)