The world’s largest companies like Meta and Google store more data than ever, from communications to work files to vital documents and passwords. Just as an example, roughly 500 hours of video are uploaded to YouTube every minute worldwide, all of which is stored indefinitely in Google servers across the globe. Not to mention companies like Meta, which hold highly accurate predictive models of people’s behaviors and personalities based on their online activity.
Given that data is such a powerful, valuable commodity, let’s explore options for storing it, specifically decentralized data storage. One of the core visions many have for Web3 is decentralized control. This principle applies to data storage as well; instead of relying on a central server owned and operated by a single company like Amazon or Google, files can be distributed through a peer-to-peer network and stored by participants in this network, incentivized by cryptoeconomics. This is what protocols like IPFS (Interplanetary File System) and Filecoin provide.
IPFS is a peer-to-peer network and protocol which allows content to be addressed and retrieved without relying on a central server. Unlike HTTP (hypertext transfer protocol), which points indirectly to content stored on servers owned by a provider (usually through a URL), each piece of IPFS content is given a unique fingerprint which is derived from the content itself, called a CID or content identifier. The content is retrieved from whichever machine in the network is storing it. This system works on top of any storage solution, including centralized servers, hosting your own local server, and decentralized methods like Filecoin or Arweave.
This is an often overlooked challenge with NFTs. When you purchase an NFT on certain marketplaces, the only thing immutably recorded on the blockchain is your ownership of a link to a piece of content such as a JPEG. While nobody can argue that you own the link, the actual content it points to can be changed or removed by the provider. This is why marketplaces like OpenSea rely on decentralized, trustless protocols like IPFS to avoid the “link rot” that affects many NFTs, where the link and the piece of content are inextricably linked.
However, IPFS is mainly for content addressing. On many Web3 applications, the actual storage of data is done through Filecoin, a decentralized data storage protocol and custom blockchain. Unlike in proof-of-work blockchains like Bitcoin, miners in the Filecoin ecosystem offer their own storage space for other users to utilize, earning FIL tokens in return. The protocol relies on a zero-knowledge proof to verify that miners are actually storing the data, and stores this confirmation as well as other details on the blockchain. The more storage you provide, the higher your chances are of mining the next block and claiming the block reward.
Users and miners meet in a live marketplace to create an algorithmic contract between them, specifying how much data needs to be stored, for how long, the payout, and if the miner needs to offer additional collateral to make sure the data is stored safely. The protocol checks that miners are storing data at regular intervals, and heavily penalizes miners who miss these intervals or disobey contracts. As a result, the Filecoin protocol is optimized for reliable, long-term storage providers rather than somebody with a spare hard drive and spotty internet connection.
The powerful combination of IPFS and Filecoin provides a strong alternative to cloud providers like Google, Amazon Web Services, or Microsoft Azure. The obvious benefit is that you don’t have to rely on a single company, with little to no oversight of how your data is managed. Another key difference is cost: AWS charges roughly $1.34 per 100 GiB per month for hosting, whereas Filecoin charges only $0.00002 for the same amount. This means the cost of storing data on Filecoin for one month as of mid 2022 is roughly 0.0015% of the cost of storing on AWS. One reason for this cost difference is the large number of storage providers compared to the number of users looking to store data. For most people outside of the industry, it is still too difficult to use Filecoin as opposed to streamlined, user-friendly solutions like Google Drive.
OpenSea has already launched a feature for users to store the metadata associated with an NFT using IPFS and Filecoin. This allows users to fully decentralize their asset by “freezing” it onto a blockchain, helping them avoid scams and rug pulls common in NFT markets.
It is certainly useful to have Filecoin on your radar. While the UX (user experience) may be challenging at first, it can be worthwhile to integrate Filecoin into your business or personal life to store important documents or data sets. Powergate is one useful API (application programming interface) that makes the process much easier. Even if you’re set on remaining on centralized solutions like AWS or Google Cloud, keep an eye on Filecoin — the ecosystem has enormous room to grow, and the sheer economics behind the project will drive user adoption and thereby service quailty.