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Decentralized Data Storage Explained

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The $70 billion cloud storage market is about to be profoundly transformed by decentralized storage solutions. Those are empowered by blockchain, which creates a trustless environment and eliminates the need for third-party interference. Sharding technology and sophisticated encryption help keep users’ files safe and their privacy intact.

In the area of cloud storage, decentralization dramatically lowers costs and fosters fair market competition. However, there is still a long way to go before decentralized storage solutions become commonplace.

Data Storages Explained

What Is Centralized Storage?

To grasp the concept of decentralized storage, we must first examine the far more widespread centralized options.

Centralized cloud storage operates as a single entity. Usually, it means that all of the data is being kept in a predetermined number of data centers that are managed by institutional authority. You must delegate your information to a third party to operate the data or just to use the storage. It has numerous flaws and inconveniences.

​​Because of centralization, you cannot guarantee that your data will not be censored, stolen, or disclosed to unauthorized parties. Believe it or not, this happens more frequently than you might think. Users' information is sometimes mismanaged in centralized clouds. In addition, the market for cloud storage is monopolized by large players like AWS and Microsoft Azure, which leads to poor pricing and unfavorable competition in general.

What Is Decentralized Storage?

Decentralized storage provides an alternative to the traditional centralized clouds. Due to its blockchain-based infrastructure, decentralized solutions do not require a single controlling authority or a responsible custodian. Information is encrypted and distributed across a large network of nodes. Each node keeps only a small portion (shard) of the data, so even if one node is corrupted, it cannot access the entire file.

Decentralized solutions have been proven to be significantly more secure than centralized ones. Because of the system's node-storage architecture, your data cannot be leaked or sold to third parties, unlike in traditional centralized storage. Other benefits of decentralized clouds include cost efficiency and fair competition in the storage submarket. There are no monopolies, and 1TB of storage costs roughly $4 per month.


How Does It Work?

Nodes And Clients

When it comes to decentralized storage architecture, there are two key players: nodes and clients. There is no need to explain who the client is because it is simply a person or an application that will interact with storage services. So let's examine the node's operation in more detail, along with the benefits of being one.

A node is primarily a peer who has volunteered to store data in exchange for a monetary reward. Depending on the service provider, an award is granted based on the size of the downloaded data as well as the amount of space provided. But things aren't always so straightforward.

In terms of clients and nodes, it would be good to highlight the key advantages of decentralized data storage over centralized options. As a client, everyone can store their data for a reasonable price, which usually is much lower than centralized services charge. At the same time, everyone who has a fast enough internet connection and enough storage capacity can also become a node and start earning a virtually passive income.

Encryption mechanism

Since decentralized file storages are blockchain-based, the encryption mechanism is automatically provided to every user. Some people, however, may be dissatisfied with the current hash encryption and opt for even more security.

In this scenario, additional encryption and other precautions are put into practice. We won't go into detail on the mathematical intricacies here, but we believe that it is still crucial to describe the main components of additional encryption.

Some platforms utilize XSalsa20 and Poly1305 encryption interfaces. These algorithms encrypt your data and put it in the "secretbox", which serves both as a storage and an authenticator for your information.

Other solutions, such as Arweave, enhance security by utilizing digital signing in addition to the existing public-private key encryption mechanism.

Sharding & Distribution techniques


Let's talk briefly about sharding, which is crucial for the storing process. Sharding's primary goal is to stop the malicious activity and make corrupted nodes unusable.

But how does this work exactly? In short, data is divided into many pieces (shards) and distributed to the nodes using an efficient sharding mechanism.


Distribution is another key step to take when storing the data. In decentralized storage, it's vital to execute distribution in a correct, randomized manner. For example, Storj uses a 20/40 Reed-Solomon setup allowing to spread each file among 40 separate storage spaces, chosen independently from over 100k nodes in operation. The output, on the other hand, is generally performed via the distributed consensus mechanism.


Decentralized Data Storage Providers


Storj is a compatible, secure, and relatively cheap data storage service.


Storj is a robust storage solution for a rather small client. Primarily, it’s oriented towards data storage and direct P2P storage providers.

Pros & Cons


  • Multi-region functionality
  • 13k nodes worldwide
  • Compliance with S3
  • User-friendly
  • Cost-effective (only $4/TB plus 150GB free trial plan)
  • High returns for nodes ( $1.5/TB for provided space, and $20/TB for downloaded data)


  • Not widely adopted (yet)


Without a doubt, Filecoin is one of the most well-known decentralized data storage systems nowadays.


Filecoin is a robust solution for extensive databases and large-scale clients. The network provides plenty of different packages and additional services.

Pros & Cons


  • Competitive app deployment options
  • Extensive network
  • High acceptance of the native coin
  • Relatively cheap pricing


  • Questionable profitability for nodes
  • Not so much of a user-friendly interface


Arweve is decentralized data storage with a noble mission.


Established in 2017, Arweave is a relatively new platform that desires to preserve important knowledge for generations to come.

Pros & Cons


  • High system throughput requirements
  • Permanent storage of data
  • Revolutionary storage technologies


  • Certainly low adoption
  • Scalability issues


In this article, we have explained the key principles of a decentralized data storage architecture, how it differs from centralized solutions, and who are the key players in the decentralized file storage market. Now it's up to you which platform to choose!


  1. Ethereum — decentralized storage
  2. Storj Whitepaper
  3. Filecoin Whitepaper
  4. Arweave Whitepaper

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