The Situation

Too Slow Adoption

Despite their extraordinary impact on cloud storage, the Web3 ecosystem has yet to embrace them fully, with even the most extensive network, Filecoin, being utilized at only 1% of its capacity by the end of 2022 (see here). This is mainly because of the technical limitations of the existing solutions focusing on archives. According to depin.ninja and Messari, Filecoin continues to lose storage providers and has limited revenues and token price increases as the network (other solutions) focuses on cold storage instead of hot storage which represents 99% of use cases like AI, web3 gaming, or DeFi.

In Q2 2024, Filecoin is now used at 22% of its capacity, but the available storage capacity dropped from 22,000 to 8,100 Petabytes (PB) because of the lack of utilization and profitability. Messari reports a surge in usage of Siacoin, but the storage used is around 1,900 PB.

We are far from managing the 60,000,000 PB generated every year. The storage providers are fleeing from the DePIN solutions, forcing the new solution to imagine the best scenario, which was building private and centralized solutions. The Web3 companies would only trust the fully decentralized public blockchain, and less than 10% use a Web3 cloud solution sticking with this, citing complex networks, poor profitability, and inadequate user experience as primary barriers.

Projects are pushing hard for lower costs, but the experience with these solutions is primarily criticized for the slow transfer speed because they rely on public IPFS. Certain companies deploys a private IPFS, which leads to extensive infrastructure costs for the project or the service, creates centralized storage that no one wants, and forces the developers to learn new frameworks. Then, developers face steep learning curves, and businesses need help integrating these solutions into existing processes.

The storage providers are fleeing from the DePIN solutions, forcing the new solution to imagine the best scenario: building private and centralized solutions. The Web3 companies would only trust the fully decentralized public blockchain, and less than 10% use a Web3 cloud solution. They stick with this, citing complex networks, poor profitability, and inadequate user experience as primary barriers.

Projects are pushing hard for lower costs, but the experience with these solutions is primarily criticized for the slow transfer speed because they rely on public IPFS. Certain companies deploys a private IPFS, which leads to extensive infrastructure costs for the project or the service, creates centralized storage that no one wants, and forces the developers to learn new frameworks. Then, developers face steep learning curves, and businesses need help integrating these solutions into existing processes.

Why is the adoption so slow?

The file retrieval in existing solutions is too slow, complex to integrate, or incompatible with market demands. They struggle to offer a suitable economy model to support diverse infrastructure providers while ensuring the services have the best-quality hardware provided to the network.

Filecoin, Arweave, and Crust use the storage power principle, respectively. They encourage the storage providers to offer the network the most significant data storage capacity and large amounts of data to win block rewards. This leads to the impoverishment of network quality and decentralization of low-quality equipment that is massively connected in a few nodes. It decreases the file download speed. The protocols intend this because they focus on archives, but as we exposed earlier, they need to meet the world's needs.

Flux, AIOZ, or Storj have centralized systems (limited number of validators or permission-based storage providing system), guaranteeing a good file download speed. The profitability of the storage providers (and the right to participate) depends on an entity that controls the distribution of rewards. Unfortunately, storage providers' experience with these networks is low because of the lack of use. This lack of use is mainly due to a shaky business strategy toward the integration of their solution in businesses.

Siacoin has storage fees explicitly set up by storage providers in an on-chain marketplace. This feature is the best scenario for diverse hardware quality in the network, as it ensures no unfair competition by design. Siacoin uses the proof-of-work (PoW) algorithm for the block validation consensus. This means a storage provider must spend considerable money to benefit directly from the network valuation. Additionally, there is no incentive mechanism to support faster file download speed by the storage providers.

Legal entities claim more privacy and respect for companies' sovereignty in data management and accessibility. DePIN-based cloud storage is the perfect future for the current legal concerns of experts, companies, and individuals.

Unfortunately, DePIN projects decided to respect their network's data compliance and sovereignty by centralizing the rewards and economy in the hands of trusted actors in their ecosystem. This creates an unfair user ecosystem because it is antinomic to Satoshi's decentralized and public blockchain network vision. Finally, this gives the network jurisdiction in certain regions' hands, reducing the governance of businesses in other areas of the world.

Another major problem with the existing solutions is that they force Web3 services to use specific file transfer protocols like IPFS, Tardigrade, or the Arweave protocol. While highly secure and private, these protocols do not allow Web3 services to manage their service performances, and companies can't control where and how the data is stored in the different nodes of the network.

The companies must then be able to choose their protocols, the nodes they want to use, and what to pay, which is the standard framework of the Data Act in the United States, Europe, China, and other regions. Indeed, certain applications, like healthcare, require rigorous data traceability and storage localization.