What is the project?
Storj is a decentralized cloud storage network that was originally launched in 2014 as a dapp built on top of the Counterparty network. After three years of development, the Storj team is holding a second token sale to fund the next phase of their development, the first step of which will be to transfer token holdings over to the Ethereum network.
Ultimately, Storj’s goal is to disrupt the traditional cloud storage industry’s centralized storage model. Today’s largest cloud storage providers, such as Google, Amazon, Microsoft, and Dropbox have invested huge sums of capital into building out data storage centers and other infrastructure. While this gives traditional players in the cloud storage industry strong footing, it also points to the very weakness that Storj and other decentralized cloud computing start-ups will try to exploit–high overhead and network maintenance costs.
The centralized cloud storage model also suffers from security and performance issues. In order to prevent data loss or network downtime caused by a single point of failure (a downed database) network resources have to be reduplicated. This kind of hardware redundancy is expensive and still doesn’t fully solve the single point of failure problem, as demonstrated by the the February, 2017 outage of an Amazon ASW data center in Ashburn, VA.
Decentralized cloud storage: How does it work?
Storj leverages blockchain technology to enable the creation of a community of users, called ‘farmers’, that provide computational storage and bandwidth to the network by setting up and maintaining nodes. When users upload data to the network, it is broken up into equal sized chunks and encrypted. These data ‘shards’ are distributed across farming nodes in the data owner’s network. Pointers to shards’ location on Ethereum’s merkle tree are stored on an off-chain server managed by Storj. When the data owner wants to retrieve their files, they initiate a transaction that scans the merkle tree for the data shards, verifies their identity and the identity of the owner, de-encrypts them, re-assembles them, and delivers the restored file back to the owner.
The server that contains the pointers (the location of the shards on the blockchain) is centralized and therefore more vulnerable to attack than if this information was stored decentrally. However, even though a malicious actor could potentially discover the location of data shards, they would not be able to de-encrypt them without the owner’s private key. In the future, Storj plans on coming up with a decentralized solution that will allow them to store shard location data on the blockchain itself.
This decentralized model has several benefits that may give it a competitive advantage over traditional players in the cloud storage industry.
- Low overhead and maintenance costs: Storj doesn’t have to build or maintain data centers, which minimizes operating costs, allowing them to price their service competitively. Additionally, centralized cloud storage services have to factor in requirements for hardware redundancy. Generally, files in one data center have to be replicated in another data center. Storj can provide the same level of protection by mirroring shards and storing them on different nodes within their existing cloud network.
- Security: Data stored on a centralized server is vulnerable to attack from malicious actors on the outside and from misuse by malicious actors on the inside. On the Storj network, nodes only have access to encrypted shards of data on their own hardware. Discovering where other shards for the same file are located on the network becomes increasingly difficult (approaching impossible) with increasing network size. This makes it extremely unlikely that a malicious actor would be able to construct a readable file from encrypted shards scattered across the network.
Competition from within the blockchain industry
MaidSAFE network, Filecoin, and Sia are all blockchain companies offering cloud storage solutions and potential competitors of Storj. The cryptographic primitives utilized by all four are broadly similar, as is their goal to disrupt the traditional cloud storage industry.
The major difference between Storj and its peers in the blockchain space is that Storj is the only one (so far) that is positioning itself to take advantage of the emerging market for storage on the Ethereum network. Over the coming months, Storj plans on making a push to become the primary cloud storage provider to the Ethereum community of Dapps and developers.
In contrast, MaidSAFE, Filecoin, and Sia are all trying to build up their own independent networks. This gives Storj an advantage in the short run because they will be operating within a relatively well defined market: they will have to do less work to attract potential users. As a result, direct competition for the market segment Storj is targeting would have to come from within the Ethereum network itself. Golem and iEx.ec are the two most probable candidates; however, both projects are focused on providing computational cloud computing resources to specific markets (image rendering and finance respectively), not storage. That being said, either project could potentially pivot to compete with Storj more directly.
The switch to Ethereum
Transferring a network and a community from Counterparty to Ethereum is unprecedented. In a community hangout with CoinFund, Storj CEO Shawn Wilkinson compared the move of an actively traded crypto token to a new blockchain network with forcing a train going 60 miles per hour to jump from one set of tracks to another. Because of the difficulty involved, the Storj team has gone to some lengths to make sure that the switch will be as easy for token holders as possible. Storj tokens on Counterparty will be redeemable for the ERC20 ethereum meta-token at a one to one ratio. Storj will be using a one-click browser app for token transfers powered by Shapeshift.
Switching to Ethereum has a number of benefits.
- Speed: Ethereum transactions are usually confirmed within 15 seconds compared to counterparty’s 10 minutes. This will allow Storj to scale up their operations.
- Lower fees: Ethereum smart contracts have proven to be an effective and efficient way of managing micropayments that are typical of decentralized computing projects. They are already being implemented (or soon will be) by Golem and iEx.ec. On Counterparty, Storj transaction fees significantly reduced the profit margins of farmers.
- Community: Ethereum’s community of developers and users is the largest and most active in the blockchain space right now. The switch could enable Storj to benefit from the Ethereum network’s external economies of scale.
What is the token being sold?
The object of the sale is the Storj token (SJCX) which is used as the sole means of payment on the network. Fees collected over the network are used to pay farmers who contribute storage space and bandwidth to the network.
No new tokens will be created for the token sale. Instead, up to 25 percent of existing tokens on the Storj Labs’ balance sheet will be offered through a one to one token burn mechanism. For every token created in the crowdsale, one token from the Storj Labs’ account will be burned.
Approximately 20 percent more tokens will be made public during the token sale. The remaining 70 percent will continue to be controlled by Storj. 52.5 percent will be placed in a time locked contract for at least 6 months. Eventually, the Storj teams plans on setting up a non-profit foundation to manage a portion of Storj Labs’ token holdings; however, those plans are not yet on their public roadmap. Tokens controlled by Storj Labs may be sold off in future public sales to fund development.
What is the project and technology status?
The Storj network is live and active. They currently have over 25,000 users and 17,000 to 18,000 farmers. All together the Storj network has over 8 Petabytes of storage at its disposal, or roughly 450 GB per farmer. This suggests that most of Storj’s farmers are operating nodes with the storage capacity of an mid range commercial computer.
Who is the team behind the project?
The Storj team have been transparent and active contributors to the blockchain industry since 2014. In fact, Storj is one of the few blockchain projects from 2014 that is still around today. The team includes 14 developers with transparent github accounts, 12 community leaders who act as information resources and Storj evangelists, and a cohort of advisors that includes venture capitalist Michael Cohn and Tyler Scriven, CEO of cloud storage startup Minio Anand Babu Perisamy, and former federal reserve economist Warren Weber.
|Incorporation status:||Storj Labs inc. (2015) Atlanta, GA|
|Team openness:||Team fully transparent|
|Blockchain Developer:||Gordon Hall|
|Technical White Paper:||Yes|
|Available Project Code:||Yes|
|Role of token:||Payment Rights|
|Token supply:||500 million|
|Distributed in ICO:||Up to 25%|
|Emission rate:||No new coins created.|
|Blockchain:||Migrating to Ethereum|
|Consensus method:||Proof of Work|
|Sale period:||May 19th, 2017 to June 19th, 2017|
|First price:||$0.50 USD|
|Accepted currencies:||SJCX (coin swap), BTC and ETH|
|Investment Round:||Second public offering|
|Token distribution date:||June 22nd, 2017|
|Min investment goal:||None|
|Max investment cap:||$30 million|
|How are funds held:||Escrow services provided by TokenMarket|
|Minimal Viable Product:||Storj Network already live|