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How Will Blockchain Impact IT? Part One: Decentralized Storage

Have you ever thought: “My storage is too centralized”? If you have, look no further than the newest batch of blockchain-powered storage solutions. This group includes companies like Storj, Sia, and Leonovus, all of which seek to bring blockchain’s decentralization into the storage world.

Blockchain-powered distributed storage is a relatively new phenomenon, and worth exploring in some detail.

Consider the case of Storj. Their whitepaper opens with an argument for their product: cloud services, which is increasingly popular with enterprise and mid-market IT but has some serious flaws. They argue that cloud services have a trust problem! Most data in the cloud, the argument goes, isn’t encrypted, making it vulnerable to all kinds of different attacks.

To remediate this, Storj works like a peer-to-peer file share. The data are encrypted on the client side, broken out into “shards,” and distributed across the network. Only the client has access to the private key, and the contents of each data shard is unclear to external observers.

Storj is unique because it’s not really a storage provider. It’s really more of an aggregator. The idea is that Storj facilitates connections between peers who serve as “the cloud” instead of centralized datacenters of large cloud storage providers like Amazon or Microsoft. I shudder to say it, but Storj is kind of like the Uber of storage: software facilitated, peer-to-peer storage. At the very least, it should trigger memories of BitTorrent!

Storj is built on the Ethereum blockchain. While you don’t need a blockchain to do distributed storage, the technology is a handy way to keep track of distributed payments. To that end Storj has developed a cryptocurrency (called, creatively, STORJ), which can be used to pay for storage on the Storj network, along with other services offered on the platform. The data isn’t stored on a blockchain; blockchain serves as an incentive layer.

A competitor, Sia does essentially the same thing (“leverages underutilized hard drive capacity… to create a data storage marketplace that is more reliable and lower cost than traditional cloud storage providers.”), while Leonovus emphasizes security and uptime.

Does It Make Sense for You?

Decentralized storage, distributed across such a wide range of nodes, should help keep competition high and prices down. Distributed storage providers do claim to be substantially cheaper than their centralized competition.

But this comes with downsides. The way the Storj system works incentivizes smaller players for a diversity of nodes – a quantity over quality approach. This has caused some consternation in the community.

Other problems include data sovereignty. These companies encrypt data shards, but organizational data are still spread across a wide variety of potential jurisdictions. Networks aren’t static – if someone unplugs their Raspberry Pi/hard drive rig, your shards will have to be moved. Auditors more than likely won’t appreciate this as much as blockchain evangelists do.

What about illegal content? If someone stores something illegal, like child pornography on your drive, are you liable for it? The way laws are written now, it’s quite possible that you are.

A word of caution: when it comes to cloud providers, remember what you’re paying for: enterprise grade internet connections and redundancy; customer service; someone with deep pockets to sue in the event that something goes horribly wrong.

Distributed storage is an interesting use case, but there’s a reason it hasn’t permeated the enterprise yet: the technology is in its early stages, and it’s not really for the enterprise. There is more to enterprise grade storage than just distribution and redundancy. For casual users it’s fantastic – a decent way to earn a bit of money on the side. For the enterprise, though, the use case isn’t as compelling.


  1. Clearly articulate the case for distributed storage technology. Blockchain is a popular technology subject in the media and in certain circles. That doesn’t necessarily mean it’s right for you. A radical shift from traditional centralized storage to decentralized storage of the sort offered by Storj or Sia deserves close scrutiny and careful contingency planning.
  2. Start with a pilot. Start small. There are some obvious advantages to these services (encryption, wide distribution etc.), but even if they seem right for you, make sure to dip your toes into the water before diving in. There’s nothing worse than an unheated pool in April.
  3. Don’t think of it as a moneymaking operation. Given what we know, it seems unlikely that you’ll make a whole lot of money sharing excess storage on the distributed storage networks. True, in many cases something is better than nothing, but don’t expect the costs to offset much. Maybe a few dollars per terabyte is a realistic estimate.

Bottom Line

Blockchain-powered distributed storage isn’t some far off idea – it’s here, it’s live. But is it useful? There are certainly some compelling arguments for its use. But there’s a reason the enterprise has been reluctant to jump on board. For one, the payout isn’t that great – especially for larger nodes – and there’s limited quality control. With additional concerns about data sovereignty, illegal content, and evolving regulation, distributed storage has a long way to go before it’s viable.

Want to Know More?

How Will Blockchain Impact IT? Part Two: Identity Management

The Back End of Blockchain

Demystify Blockchain: How Can It Bring Value to Your Organization?

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