🤔 What is Sia ?
Sia is a decentralized, peer-to-peer encrypted cloud storage solution. It connects users in need of cloud storage with those who have spare hard disc space.
It is like BitTorrent, a peer-to-peer file distribution system. But unlike BitTorrent, users pay Sia coins to storage providers for storing files.
Just how Airbnb allows anyone to rent out extra room in their home, Sia allows anyone to rent out unused space on their hard discs.
💡 What role does Siacoin (SC) token play
Siacoin is the native currency of Sia ecosystem. It is used for:
- All the transactions are denominated in terms of Sia coin. Users pay Sia coin to storage providers for using their disc space.
- Storage providers have to stake Sia coin to take part. Their stake is slashed if they fail to store data as per the contract.
📝 Origin of Sia
- David Vorick and Luke Champine met at Rensselaer Polytechnic Institute, New York while studying computer science in 2013.
- They first had the idea of decentralized file storage network at a hackathon held at MIT in 2013.
- Vorick and Champine founded Nebulous Inc. the next year to work on Sia.
- They launched Sia blockchain on 6 June 2015.
- The team has raised $6.4 million dollars from venture capital to date.
- David was born and brought up in Palatine, Illinois.
- He studied B.Sc computer science from Rensselaer Polytechnic Institute, New York in 2014.
- During his education, David also worked as a software developer for IBM.
- David and Luke Champine first had the idea of decentralized file storage network at a hackathon held at MIT in 2013.
- They co-founded Nebulous in 2014 to work on Sia.
- He is the current CEO of Nebulous.
- He is from Westford, Massachusetts.
- He met David Vorick while studying computer science at Rensselaer Polytechnic Institute, New York, in 2014.
- They co-founded Nebulous to work full time on Sia in 2014.
😌 What problems does it solve ?
- Users only pay for what they use, unlike traditional cloud storage providers which provide just a few one-size-fits-all solution with little flexibility.
- Unlike traditional cloud storage providers, Sia does not have to pay for:
- Running large server farms.
- Hiring an army of network architects.
- Buying land for running operations
- Advertisements and marketing.
- Fast: Centralized cloud solutions are slow because the user has to sequentially download the data from a faraway server. Whereas in Sia, storage nodes compete to provide data as fast as possible. The user downloads the data parallelly from nodes to create the complete copy as fast as possible.
- Centralization of the web: There are just a handful of companies that control majority of the internet. This has led to accumulation of power and single points of failure.
Centralization of storage presents a standing target that enables corrupt governments to censor the internet eg China, Venezuela, etc.
- No privacy:
- We cannot be sure that cloud storage providers are not selling our data.
- Whereas in Sia, files are encrypted and split into 30 pieces, each stored with a different node. The nodes cannot see the data they are storing because it is encrypted and incomplete.
- We trust that the storage providers will keep our data safe, but their track record says otherwise.
- Whereas, it is very difficult for a hacker to access data on Sia:
- Data is not stored at a single place, hence many nodes need to be hacked.
- Retrieved data needs to be decrypted.
- Efficient: Everyone has spare idle space in their hard disks, which can be put to use for financial rewards.
- Open source code:
- Sia’s code is open source. Anyone can see how their data is being encrypted, stored, and retrieved.
- Whereas, one cannot see and audit the code of central cloud solutions.
🤖How does it work ?
Following steps are involved in storing and retrieving the data:
- Agreements between users and hosts for storing the data are recorded on Sia blockchain. Terms and conditions of the agreement include:
- Price for storing the data.
- Duration for storing the data.
- How much coin host will stake as collateral to provide security that data will be stored as per contract.
- User encrypts and splits the file into 30 pieces before sending it to different hosts. Any of the 10 pieces are sufficient to recreate the data.
- Hosts store the data for the duration of the contract.
- Contracts typically last for 90 days. At the end of the contract, host is paid if it stored the data successfully. Otherwise, its stake is slashed.
- The user downloads, reconstitutes, and decrypts the data from hosts.
Nodes minning blocks are also rewarded Sia coins for contributing their computing power and electricity cost to the network.
🏛️ Governance model
Sia project’s code base is maintained and developed by Nebulus, a private for-profit company. This exposes the project to risks like:
- Differences among founders
- Government crackdown
- The team does not have to keep their word eg increasing max supply of Sia coins etc.
Nebulus is a for-profit company, it does not have any incentive to decentralize the governance of Sia project in the future.
🤑 How much money does Sia project have for future development ?
- The team raised $6.4 million from venture capital to date.
- The team holds 80% of Siafunds. 3.9% of every transaction on Sia is distributed among Siafund holders.
Sia project has sufficient funds in reserves and an ongoing source of revenue.
- Network effects: More storage providers will attract more storage buyers and vice versa. In case, Sia is able to set the ball rolling, it will enjoy exponential growth and build a strong moat.
- Data growth: More people are coming online and saving an ever-increasing amount of data, increasing demand for online storage solutions.
- Switching cost:
- Users would not want to switch once they have successfully stored their data on Sia.
- Nodes would not want to switch once they have invested time in assembling their hardware and acquiring Sia tokens.
😨 Risks & challenges
- The project will have to scale its blockchain as the users grow.
- Sia can be used for storing illegal files like child porn etc.
- Sia is a centralized protocol being maintained by a single private company. This makes it easy for the government to target the team. SEC charged Sia team for selling Siafunds in 2018. You can read about the complete case here.
10,000 Sia fund tokens were distributed during the launch of Sia network in 2015.
3.9% fee from every storage-related transaction on Sia is distributed among Siafund holders.
- Sia coin does not have a fixed max supply.
- It was not premined.
- The first block of Sia blockchain minted 300,000 Siacoin, the second block 299,999, and so on. The reward for mining Siacoin is reduced by 1 coin every block, till the time rewards reaches 30,000 Siacoin. Hence miners will always have an incentive to keep mining Sia blocks.
- The stake of host is burned in case it does not provide the data during the period of contract. This burn mechanism reduces inflation of Sia coin.
Token’s price increases due to demand pressure.
Demand pressure on Siacoin will come from:
- Users: They will acquire Siacoins to buy storage.
- Hosts: They will acquire and stake Siacoins.
- Speculators: They will buy Siacoins and hope to sell at a higher price in the future.
Supply pressure on a token decreases its price.
Supply pressure on Siacoin will come from:
- Storage nodes: Users pay Siacoin to storage nodes for storing files. These storage nodes will sell a part of their earnings to cover their operational costs.
- Blockchain nodes: They are awarded Siacoins for mining blocks. These nodes will also sell Siacoins to cover their infrastructure costs.
- Initial investor: They earn Siacoin depending on how much Sia fund tokens they hold. Some of them will sell Siacoins to lock in some profits.
Sia is like Filecoin and Storj. Their market cap is:
The market cap of Siacoin is:
Cloud storage is a multi-billion industry, growing at an exponential rate.
Siacoin has tremendous room to grow, even if it can capture a small portion of the market.
🧐 Indicators to watch out for
- Google trends for cloud storage:
- Project’s Twitter account is small but growing:
- Number of active storage contracts is growing:
- Hast rate of the network is increasing, this means more Sia blockchain miners are joining the network:
- Amount of storage available and used is growing:
👋 Final remarks
Investors planning to invest in Sia project should keep following points in mind:
- There is a lot of competition in crypto storage space. Although, there is certainly space for more than 1 winner in decentralized storage space. But, it is very difficult to identify which project will win.
- It is better to invest in Sia funds token rather than Siacoin because:
- Siacoin does not have fixed max supply and too much inflation.
- There are only 10,000 Sia fund tokens.
- Sia fund token holders receive 3.9% of all the Siacoin transactions on the network.