Bitcoin exists to remove the control of central authorities over our money. However, there has been a great need to bring this powerful innovation into other aspects of our daily lives as well. For instance, there’s been demand for a change in how users store and access their data.
Some crypto projects have emerged to address the problem of centralized data storage with solutions that give users the power to control how they store their data. One of the platforms currently providing this solution is Sia network.
In this article, you will learn about how the Sia network works, how it provides better data storage, and the different use cases of its utility token, Siacoin.
What is Siacoin?
Sia Network exists to store users data in a way that gives them full control over it. It is a peer-to-peer (P2P) blockchain-based network that relies on network participants to provide storage services. It also rents excess data storage space for consumers and Siacoin users.
All the data stored in the Sia network is private but very affordable to use compared to existing traditional options, like Google, Amazon or Microsoft. For instance, it costs $2 a month to store 1TB worth of data in Siacoin. On Amazon, storing the same amount of data requires $23 per month. While Google charges $20, and Microsoft charges $24.
Although Siacoin offers a cheaper data storage option to users, it can’t deliver a faster data storage service for its users like Amazon and Microsoft.
Every piece of data on Sia network is stored by several hosts across the globe to avoid any single point of failure or loss of data. Since every user holds their private keys, they own their data. No external company can access, control or purchase the files.
The Sia storage network makes use of unused hard drive capacity around the world to create a data storage marketplace that is more reliable for users.
Sia’s process of renting and storing data is unique. It takes every new file and splits it into 30 pieces before uploading it, to ensure that the data can be regained if any issue arises. Files can be restored through any 10 out of the 30 segments. Also, the file is encrypted before it is uploaded, providing more security.
Use Case: Renting Space from Hosts
Users who upload files on the Sia Storage Platform are called renters. They upload their files to other users who have made their space available, called hosts. Siacoin is used to pay for data storage services on the Sia network.
Renters store data on the network by setting an allowance and uploading their files.
The Sia network uses a marketplace to find storage for renters data. The cost of this storage, also known as pricing, is often determined by hosts and renters.
Renters and hosts enter an agreement known as a file contract before the transaction takes place. Creating storage contracts on Sia blockchain requires a transaction, and these are often small fees paid in Siacoins. They are one-time per contract.
Renters require a credible method for picking quality hosts to avoid storing their files with fraudulent hosts. Assessing their history is not enough, because their service history could be faked. For instance, a host could continuously form contracts with itself, agreeing to store large “fake” files.
Each renter is free to choose their requirement for picking hosts and can use several factors like lock value, the volume of storage being offered, and the amount of Siacoins hosts are willing to pay for losing files.
Use Case: Hosting Storage for Users
Hosts on the Sia network contribute their excess storage space to the Sia network. They help to keep and send data for those who uploaded it, the renters. They earn Siacoins in exchange for their data storage services.
The file contract terms give hosts some level of flexibility. They can advertise themselves as slightly reliable. This allows them to offer a low price and agree to small penalties for losing files. On the other hand, they can advertise themselves as highly reliable, offering an increased price and agreeing to severe penalties for losing files.
In addition, hosts enjoy some flexibility in setting price points for different activities in the network. The several price points are;
- Storage Price: The base price for storage, per TB/month.
- Contract Fees: A small, one-time fee per contract to cover network transaction costs.
- Upload/Download Bandwidth Price: The price for uploading or downloading bandwidth to and from a host, per TB.
- Collateral: How many Siacoins a host is willing to lose if they don’t fulfil the rental file contract, per TB.
All of these price points are included in the file contract between a renter and host.
Preventing Cyber Attacks
Hosts are often vulnerable to cyber attacks. One of the most common attacks is the denial of service attacks, which could hinder them from submitting storage proofs or transferring files to renters. It is the responsibility of the host to protect themselves from such attacks.
Hosts prove to the network that they have offered their storage by providing a part of the original file and a list of hashes from the file’s Merkle tree. This information is adequate to prove that the segment came from the original file. These proofs are submitted to the blockchain for anyone to verify their validity or invalidity.
Use Case: Reward for Mining
Siacoin is earned by miners who provide their computing power to help process and verify transactions on the Sia network. The Sia blockchain doesn’t just process Siacoin transactions, but also the smart file contracts between renters and hosts.
When miners produce a new block, they earn block rewards which incentivise them to keep contributing their computing power and electricity cost to the network. When a block is successfully verified by the network, an amount of Siacoins is paid out to those who mined the block.
The block reward to miners was 300,000 Siacoins when the Sia network launched. This amount keeps reducing by one, in every new block. The lowest amount of block rewards will be at 30,000 – which was reached at block 270,000.
The Sia blockchain operates on an algorithm called Proof of Work. Just like Bitcoin, Sia Miners need to solve complex mathematical problems quickly so that they can produce a new block on the mining pool.
How to Create Siacoin wallet
Creating a Siacoin wallet is more or less the same process that can be found for most tokens. The trick for Siacoin holders, however, is going to be choosing the wallet that best suits their specific needs. Thankfully, Siacoin has an officially recommended wallet, and a wide array of both software and hardware alternatives to choose from, so you’re likely to find a wallet system that’s perfect for you.
So how do you create a Siacoin Wallet? Let’s take a look at Sia UI, the officially endorsed wallet system created by Nebulous Inc for our example. Firstly go to the official Sia UI download page found here. After downloading, and installing you will be required to sync the Sia UI to the network, this can take some time.
After a lengthy synchronization period, you are offered a ‘create new wallet’ option. After selecting ‘create new wallet’ you will be asked to create a wallet seed. (More information on this can be found here) After creating a seed phrase and the synchronization process you will be enabled to click into the ‘wallet’ tab and be allowed to create a wallet address.
Once you’ve generated your wallet address you will be free to use, store, and sell SC at your leisure.
Siacoin Competitors and Challenges
Although Siacoin offers an incredible platform for data storage, it’s not without its challenges. One of such drawbacks is that it can’t compete favourably with centralized platforms. Centralized options such as Amazon and Dropbox are very fast. It is quite difficult for Siacoin or any platform using blockchain to meet up with the speed provided by them.
For users who want to store and retrieve data quickly or regularly, these traditional options are a better option for them.
In addition to competing with the centralised tech giants, there are a few other cryptocurrencies also attempting to disrupt the cloud storage market with similar a solution to Siacoin. The most common ones are Storj and Maidsafe. However, Sia claims to be more decentralized and secure.
What is Siacoin Used For?
Let’s summarize. Siacoin as a token is primarily used as the means for the overall Sia platform to conduct its decentralized cloud-based storage business.
As discussed in the previous sections, Siacoin is primarily a decentralized cloud hosting service that allows users to rent digital space on each other’s disks. Some even call Sia the ‘Airbnb’ of hard drives. Essentially the creators of Siacoin saw the opportunity in allowing people to capitalize on their own unused disk space, theoretically providing an immense opportunity for customers and hosters.
Cloud technology is a big step forward in data storage, and decentralized blockchain technology and concepts bring new dimensions and possibilities to the space. Siacoin as a native currency can therefore act as the connecting tissue for a web of interconnected users, allowing for the buying and selling of digital space via a decentralized network. This token becomes a means of both incentivizing good hosting practice by its stored wealth and utility, while simultaneously disincentivizing operators from bad hosting practices like disk failure and data drops.
Additionally, the technology of decentralized cloud storage allows for a network without any singular point of entry, which when combined with solid coding and hashing technology makes large-scale attacks on the network extremely difficult.