A Deeper Dive Into Blockchain and Storage Capabilities: A New Frontier

Over the past decade, we have seen an exponential increase in demand for digital storage. Every day, consumers and enterprises are using more data, saving more applications, and consistently uploading more data to the cloud. This existential demand for more online storage has resulted in centralized platforms, where some of the world’s largest players led by Amazon and Microsoft are driving this massive transformational shift to the cloud. We believe overall cloud workloads are set to exponentially increase looking ahead as we are forecasting cloud workloads to go from 35% of the overall landscape today to 45% by the end of 2021 and 55% by the end of 2022. However, as the enterprise/consumer environment shifts more to the cloud environment, skyrocketing data storage demand is sending developers, consumers, and applications to look for cheaper forms of storage. To this point, data is becoming increasingly expensive to store and some security concerns are driving a new focus on decentralized storage capability especially with blockchain technology coming to the forefront. Over recent years, blockchain technology discussions have become more pervasive across the enterprise landscape. In an environment where technology companies are consistently pushing the boundary forward, decentralized storage technology is clearly on the horizon around this area, as we dive deeper into this topic and highlight one of the leading private technology vendors driving this new technology paradigm.

Snapshot of Decentralized Storage

Decentralized cloud storage is a process of storing data on a decentralized network. Data is stored across multiple locations with multiple users and groups, to create a network hosted by many individuals & organizations as opposed to a single company. From a consumer’s perspective, a decentralized network will not look much different to how an individual interacts with websites today. Navigation, downloading, and habitual processes on the web will look almost identical, adding familiarity to this completely new technology. The critical innovation seen with blockchain is what occurs on the back-end. As opposed to traditional centralized storage methods where large corporations are storing critical data on their servers, storage capabilities are completely unlocked, creating an ecosystem of data. Individuals have the capability to store data, while increasing overall speeds and lowering the price of storage, heightening security metrics as well. We believe there are a number of private companies and overall business models attacking this new market opportunity with privately held Filecoin one of the more impressive strategies we have seen in the market.

Filecoin – The Airbnb of Storage

Founded in 2014, Filecoin was developed by Protocol Labs with HQ out of Palo Alto. It is a decentralized storage network design to store critical information and is one of the most complex offerings developed to this day. The company’s goal is to become one of the largest back-end providers for the next generation of the Internet: Web 3.0. With Filecoin, users pay to store their files on storage miners which are computers responsible for storing files and proving they have stored the files correctly and securely over time. The platform facilitates open markets for storing and retrieving files and is accessible to essentially everyone with access to an electronic device. As a result, the price of storage is lowered across the platform, data can be transmitted more quickly, and data storage is evolved from the traditional centralized platform in an iron tight secure process.

How Filecoin Works; A Snapshot of the Future for Decentralized Storage

Filecoin started their platform by building an IPFS (Interplanetary File System), effectively decentralizing the web. In our technology world today, there is a massive amount of unused latent storage with many devices not meeting storage capacities. Utilizing a structure and transaction method very similar to Airbnb, Filecoin is able to create and monetize a decentralized cloud storage network, where all unused storage can be sold on the market. With this platform, resources are optimized dropping the overall cost of storage and providing a more efficient market. Utilizing a similar incentive structure to bitcoin, users spend Filecoin to hire the network to store their files, and storage providers get paid in Filecoin. An IPFS is a protocol and peer-to-peer network for sharing and storing data in a distributed file system. The platform must rely on other peers to store data or on a centralized pinning service which must be trusted as IPFS does not have built-in provisions to verify data is being stored and correctly. IPFS works very well for organizations where there are incentives to sync and store data in multiple nodes, and for situations where strong social contracts can be used to ensure the content remains hosted and maintained long-term. Working hand in hand with the IPFS, clients make storage deals with miners to store data. The network then verifies that the miners are correctly storing the data and payments are made on a regular basis for the duration of the storage deal. Content retrieval can be offered by either storage miners directly or by specialized retrieval miners with Filecoin’s platform offering an incentive for commerce on the IPFS.

IPFS the Foundation

Utilizing the IPFS, the Filecoin ecosystem essentially enables entrepreneurs, application developers, and businesses to build their own platform. The market for blockchain is currently a jump ball with many companies attempting to create a sustainable platform. Filecoin has emerged as one of the potential winners going after this multi-billion dollar market in our opinion, although it’s still early days with many more entrants and winners likely on the horizon.

Current Filecoin Ecosystem

  • Miners
    • 550+ miners on the network ranging from individuals to large data warehouses. This has grown the network power from 0 to ~600PiB, enough to store 170 million HD movies. Power is very distributed, with no miner having more than ~7% of network today.
  • Applications & Clients
    • 90+ professional organizations engaging in Filecoin. Applications are providing a tremendous amount of use cases and more applications are developed every day. Ex: Fleek – a decentralized, peer to peer version of Dropbox.
  • Community
    • 4,500+ project contributors and collaborators contributing to 200+ repos across developer tooling and APIs, products & applications, proofs, and core protocol ensuring security. Collaborators partner with Filecoin in regards to research and spreading word.
  • New Projects
    • 250+ new teams entering the ecosystem through Filecoin Ignite, their educational platform to learn, build, and launch on Filecoin. Various hackathons launched to raise awareness on Filecoin growing new project numbers.

The Blockchain Solution to Cloud

Existing cloud storage providers are burdened with the task of duplicating all user data to ensure security and reliability in case of data loss. A majority of cloud providers today do not have clientside encryption, letting virtually anyone who gains access to the server, access to the sensitive files and information. A number of blockchain companies have already proposed solutions to the existing cloud storage landscape and due to the complex nature and security of blockchain storage, the possibilities of a security breach or hack is extremely unlikely. An individual’s information is saved and stored beyond the reach of hackers. Additionally, blockchain allows users to monitor storage and backup history to confirm that the original data has not been tampered with – a key attribute of blockchain for cybersecurity concerns.

Blockchain & Cloud in the Future

The amount of data that the world currently utilizes is immense, reaching 58 ZB (zettabytes) of global data stored. This number is predicted to triple to reach 175ZB by 2025 according to IDC, providing a large opportunity for decentralized platforms to grow over time along with the cloud behemoths and traditional cloud storage led by AWS and Azure. As blockchain is brought closer to the forefront of discussion in the business world, some of the largest tech names have already started to invest resources into blockchain. We are beginning to witness the beginning of an arms race with stalwarts such as Amazon, Oracle, Microsoft, and Facebook among others starting to explore the blockchain area on a number of different fronts.

Blockchain Just Scratching the Surface

Due to the versatility of blockchain’s technology, corporations are able to create their own products complimenting their current portfolio. For example, Oracle currently offers a blockchain platform through their supply chain suite to help maximize efficiencies across SCM via an on premise, cloud, and SaaS application structure. Although different from fully decentralized cloud storage platforms such as Filecoin, it is important to note the increasing trend of blockchain integration in the business world. As blockchain becomes more relevant in society, we believe technologies and next generation platforms pushing the edges of innovation and storage capacity will have significant opportunities to grow over time.

Tech Stalwarts Have Eyes on Blockchain

In relation to data storage, we currently live in a world where the largest tech players provide a majority of cloud storage available on the market led by Amazon and Microsoft with Google (GCP), Oracle, and IBM vying for third place. As the enterprise industry slowly starts to head down a bottleneck in storage capability, blockchain is posing as a rather plausible solution for some areas and pockets of cloud storage in the future. As current methods of storage are so entrenched in the fibers of our technological landscape today, it will clearly take an extended period of time for developers, application providers, and other organizations to become comfortable enough to consider decentralized storage methods as an alternative (in some cases) to public cloud organizations. However, given blockchain’s paradigm levels of security, its tamper-proof nature and overall capability, we see a bright future and large TAM for this technology with a host of well positioned vendors that can capitalize on this opportunity. We believe as blockchain cloud storage solutions start to enter the market offering increased data security and more efficient processes, corporations will begin to acknowledge the potential benefits that blockchain represents. Stalwarts such as AWS, IBM (a potential leader in this market), Microsoft, and VMware have all started shifting their lenses towards the future with blockchain a key technology area paving the way. Although not focused directly on cloud storage, the appetite for blockchain has started to open up a new era of growth and potential in our opinion across the technology food chain.

Looking Into the Crystal Ball, Blockchain Has a Big Role to Play In Cloud Shift

Over the next few years, we believe we will begin to see the birth of a new, hybrid-format of cloud storage entering the market. In our opinion, we will start to see the beginnings of a hybrid environment between traditional cloud and blockchain as early as 2022 with the largest names in tech as well as pure plays expanding into blockchain via both organic and acquisitive means. Due to the natural structure of a decentralized network, we will likely see competition between the largest tech names attempting to create the best platform for their design on an interplanetary file system/database. Once fully integrated, we envision an environment resulting in a similar cloud structure seen today, just with a decentralized back-end in some pockets of the market. In summary, over the coming years we see blockchain becoming fully immersed in the technology world with decentralized platforms playing a key role in the future of cloud computing thus opening up avenues of growth opportunity for well positioned technology vendors and pure plays attacking this market.

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Dan Ives

Dan Ives
Software and Technology Analyst


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This article was originally published for client use on 1/21/21 and republished for public consumption on 2/09/21. Access the full research disclosure by clicking here.