Blockchain 101: Industry Dive – Data Storage


Remember “Blockchain technology represents a potential 3%-10% cost savings on every good that uses it as a medium of exchange

Storing data has a huge issue in today’s world. Centralization. Unfathomable amounts of data is created and stored in data centers around the world. Here is a staggering statistic, 90% of all of the world’s cumulative data has been created over the past two years. We are creating and using more data than ever before. And the data creation explosion is only accelerating. By the year 2020, we will create 44 trillion GBs of data per year.

The growth in data allows companies to be more efficient, for information to be disseminated faster, and for people to connect more quickly. With all of this growth, there needs to be efficient storage systems to both deposit and access the data. Currently we have only found one efficient way to do so. Central hubs and data centers hold and grant access to big data. These hubs usually have smaller relayer-type hubs in major consumption centers.

Inefficiencies with Centralization

As discussed in previous articles, centralization comes with a couple of inefficiencies. These are particularly interesting when applied to data storage. First, inherent to any centralized product, there is a single point of failure. If that point of failure is exploited, the product risks degradation or destruction. For cloud storage, a major central point of failure is the companies themselves that own the data storage systems. Companies like Microsoft and Amazon are under intense pressure to not get hacked. If they do, there is potential to lose terabytes of sensitive data to the attacker. This has happened many times with siloed companies. Think of the Wells Fargo hack, the Sony hack, or any number of attacks that resulted in SSNs, credit card numbers, and other private info being stolen. A second way there could be a point of failure is through government subpoena. Data companies have a duty to keep their customer’s information private. Customers trust that the company will keep their data private. With the threat of force, governments can coerce companies to relinquish safekeeping of data for almost any reason.

A second way in which centralized data storage struggles is that data centers are often geographically placed in areas that have cheap access to electricity and real estate. These are usually not near the endpoint where the data is consumed, causing latency for users. As mentioned earlier, cloud providers try to combat this through relayer networks. They do a very good job at keeping throughput up, but as data grows, these measures will be harder to implement.

How does a distributed version work?

Historically, the most familiar distributed data storage and sharing network was the torrenting system developed throughout the 90s and 00s. Widely used for pirating music, movies, and games, this peer to peer system showed that the market can efficiently manage data storage and transfer without the need for an intermediary. Blockchain technology fits almost seamlessly into this already proven equation. It adds the economic incentive system to make a distributed cloud network efficient enough to work at a massive scale.

The largest example of this is Filecoin and IPFS. IPFS is the next generation internet protocol that is being developed right now. Aiming to replace HTTP, it allows for efficient data transfer on a peer to peer basis. This disintermediation of centralized service providers means that we can more efficiently store, send, and replicate data. Preliminary tests show that IPFS has the potential to be 60% more cost effective than legacy systems. It is a huge undertaking that will be developed over the next 20 years. Filecoin is the underlying cryptocurrency that economically incentivizes the project. Similar to mining, users who provide hard drive space to the public will be rewarded in the form of Filecoin. Last year Filecoin was one of the largest ICOs, pulling in over $200 million. We should see the roll-out of these technologies over the next few years. These applications of blockchain technology promise to break up the control that the current cloud companies have over data.