Sia launched and has maintained uptime since 2015. The ecosystem continues to add new features like a native interface for consumers (renterd) and hosts (hostd).
Sia is a decentralized cloud storage network that combines a Proof-of-Work blockchain with a contract-based storage model. Storage contracts are used to uphold storage agreements between hosts and renters.
Sia facilitates a global data storage marketplace by connecting storage providers (hosts) with underutilized hard drive capacity to storage consumers (renters).
Sia was conceived at HackMIT in 2013 with the purpose of bringing decentralization to data storage, providing users with sovereign control of their data, and maintaining privacy/censorship resistance for users.
The Sia Foundation funds ecosystem grants aimed at furthering its mission of fostering user-owned data while enriching the Sia ecosystem.
Introduction
The global cloud storage market has experienced effective market penetration when it comes to simplifying digital file storage for users. In 2022, the sector reached a valuation of roughly $90 billion and is projected to reach $472 billion by 2030, with a compounded annual growth rate (CAGR) of 23.4% over the forecasting period.
More than half of the market share is concentrated among the top three providers, with Amazon, Microsoft, and Google accounting for a combined 65%. The resulting centralization of data storage yields monopolized pricing and poses risks to data privacy, security, and integrity.
Decentralized cloud storage networks like Sia have emerged in response to the shortcomings of their centralized counterparts. Sia is one of the longest-running decentralized storage protocols. Since 2015, it has worked to remove single points of failure and provide a more secure and resilient model for storing and accessing data at a cost-effective price.
Background
Sia was conceived at HackMIT in 2013 by David Vorick and Luke Champine with the goal of bringing decentralization to data storage. As a permissionless protocol, the Sia ethos focuses on providing users with sovereign control of their data, privacy (via pseudonymity), and censorship resistance.
Sia originally used a Proof-of-Storage consensus mechanism instead of Proof-of-Work. After discovering issues with Proof-of-Storage, Sia was redesigned with a Proof-of-Work model, largely inspired by Bitcoin, that uses a transaction type for storage contracts. Sia was then launched in 2015 by Nebulous Inc., which was later split into two entities: the Sia Foundation and Skynet Labs.
The Sia Foundation launched after a successful hard fork of the Sia blockchain, which introduced an SC token subsidy to fund the foundation. In April 2021, Nebulous announced its full rebrand to Skynet Labs. It started to reduce its services in August 2022, shutting down its portals in early November 2022 due to a lack of funding. Despite the shutdown of Skynet Labs, Sia continues to operate and implement new developments under the Sia Foundation.
To facilitate much of the new development on Sia, the Sia Foundation funds ecosystem grants spanning from development to research. In Q1 2023, it funded $122,000 in grants, and in Q2, it approved funding for $260,000. The grant committee consists of three Sia Foundation members and three members of the Sia community. Ultimately, the Sia grants aim to continue improving its system of user-owned data while enriching the Sia ecosystem.
Technology
The Sia Network
Sia is a decentralized cloud storage network that combines a Proof-of-Work blockchain with a contract-based storage model. Storage contracts are used to uphold storage agreements between hosts and renters. Renters define the amount of data to be stored, the timeframe for storage, and the price.
As users and storage providers enter into storage contracts, they each deposit the native asset — Siacoin (SC) — into an escrow account. Storage providers cryptographically prove they are hosting the required data. At contract expiry, the storage provider receives the majority of the escrowed funds, with a small portion going to holders of Siafund (SF) tokens. Siafunds are security tokens that accrue SC to the SF holder from finished contracts on Sia.
Sia facilitates a global data storage marketplace by connecting storage providers (hosts) with underutilized hard drive capacity to storage consumers (renters). Siacoin can be used to pay for gas on the Sia blockchain and as the medium of exchange for the storage market. The costs associated with storage contracts are listed below.
Contract Formation — Gas for creating a contract on the Sia blockchain.
Storage Price — SC per TB per month of data stored.
Bandwidth — SC per TB of data uploaded (added) or downloaded (retrieved).
Collateral — Posted by the host, collateral is slashed if the host does not uphold the contract agreement.
Siafund Fees — Fees that accrue to Siafund (SF) tokenholders. They consist of 3.9% of storage, bandwidth, and collateral, all paid by the renter. SF holders can claim fees when contracts are completed.
Files stored on the Sia network are encrypted via ChaCha20 and stored redundantly via Reed–Soloman Erasure Coding. The encryption aspect ensures that uploaded files remain private, and redundancy ensures security by sharding files. Files uploaded to Sia are split into 30 chunks, or shards, and sent to various hosts. Only 10 shards are required to rebuild the file, and their copies are re-duplicated to new hosts whenever one is offline.
Sia Tools
renterd
The renterd interface enables less technical users to access the Sia network as consumers. The halting of storage uploads to Sia from Filebase in September 2022 not only contributed to the Q1’23 decline in active contracts but also demonstrated the need for another access layer on Sia. Since its beta launch, the Sia Foundation has implemented novel features including an autopilot mode and file packing, which give developers the power to build applications using Sia. While autopilot automates the management of storage contracts, file packing essentially compresses files by encoding their content more efficiently. The renterd module can also distribute workloads in parallel across multiple machines, making it horizontally scalable. The Sia Foundation is targeting a full release for renterd in September 2023.
hostd
With the beta version launched in Q2’23, the hostd module offers a user-friendly interface, an API for managing storage resources and revenue, and an embedded web UI that enables providers to remotely manage storage operations. In a comparison with the prior hosting module (siad), hostd proved to be over 20x faster at uploading data to hosts and 1.4x faster at downloading data for renters. The Sia Foundation is targeting a full release for hostd in September 2023.
walletd
The Sia Foundation launched the alpha version of walletd in July 2023. The walletd application allows users to interact with Sia assets like SC and SF tokens on both hot and cold wallets. It also supports multi-signatures and hardware wallet integrations, enabling users to store Sia assets more safely. The Sia Foundation is targeting a full release for walletd in September 2023.
Tokenomics
Siacoin (SC)
Siacoin (SC) is Sia’s native token. It is used to pay gas fees and as a medium of exchange on the Sia network. SC is rewarded to Sia miners for creating new blocks. SC was not launched with pre-mined allocations. It was, instead, launched with a unique inflation schedule where the number of Siacoins minted each block was 300,000 minus the block height. In other words, a block with a block height of 200,000 created 100,000 Siacoins (300,000 - 200,000). After Sia’s block height at 270,000 (July 2020), the block reward was programmed to not decrease any lower, and all blocks would yield a 30,000 SC reward (annual inflation of roughly 1.57 billion SC) thereafter.
Following the implementation of the Sia V1.5.4 hard fork on Feb. 3, 2021, a one-time subsidy of 1.57 billion new SC tokens was minted to the Sia Foundation. In addition to this subsidy, an extra 30,000 SC per block would also be minted to the Sia Foundation to fund its activities. As a result, a total of 60,000 SC was minted per block since February 2021 — 30,000 to miners and 30,000 to the Sia Foundation.
The token models differ greatly between Sia and Storj, its closest competitor. Sia uses a Stake-for-Access (SFA) token model to capture value. In this model, storage providers must lock up SC in order to accept storage deals. The amount locked up is proportional to the amount of data that storage providers can store. This creates a dynamic where storage providers must increase their collateral as they store more data, thus increasing demand for the network’s native asset. SC is also used by renters as payment for gas, storage, and bandwidth.
Siafund (SF)
In 2019, the SEC designated the Siafund (SF) token as a security. The SEC went on to claim that the 2014 offering of sianotes (convertible to Siafunds) was unregistered, and Nebulous settled the claim. Then, in 2018, the Sia team held a legally compliant, registered offering of Siafunds in the wake of multiple SEC comments from 2017. The SEC also reviewed the SC token but did not take any action on Siacoin or the Sia network. The designation of SF was based on its explicit purpose: allowing holders to claim any accrued SC from finished contracts on Sia.
Initially, ~11.6% (1,160 SF) of all SF was sold to 46 investors, with Skynet Labs holding the other 88.4%. A later sale further distributed SF, dropping the Skynet holdings to ~86% and leaving a total of ~1,400 SF for other investors. Although Skynet Labs shut down its operations, it still exists as a legal entity. Hence, most SC claimed from SF holders is claimed by Skynet Labs. SF tokens are not sold on public markets.
State of Sia
Messari has reported on the state of Sia since Q1 2023. Our ongoing coverage has measured the pertinent metrics for the five most recent quarters of Sia’s activity. Read the latest report to stay up-to-date with Sia’s developments on a quarterly basis.
Key Metrics QoQ
What Sia has experienced in its last five quarters is no harder than the challenges it has faced since 2015. Despite the growth in transactions and new contracts in the second half of 2022, the new year started off with a dive from key activity metrics. This fall was a result of the problems with third-party interfaces that created storage contracts for their users.
For example, Filebase was responsible for a majority of storage contracts before it stopped uploading new files to Sia due to technical issues in late September 2022. The shutdown of Skynet Labs and the Skynet network in November 2022 also compounded this problem. Sia’s new tools like renterd and hostd, which aim to be user-friendly portals for accessing Sia, should provide an alternative to the deprecated portals that used to facilitate much of Sia’s activity.
Competitive Analysis
Overview
The four most mature and widely used decentralized storage networks are Filecoin, Arweave, Sia, and Storj. All four networks differ in their underlying technologies and network architecture. These structural differences largely result in different user bases, storage purposes, and token models.
Target Users
Decentralized storage networks provide two primary storage choices based on user needs: hot and cold storage. Hot storage deals with data that is accessed often and requires quick retrieval, usually at a higher cost. Conversely, cold storage is used for infrequently accessed data, ideal for long-term storage. Permanent storage is a special designation for Arweave’s network, where users pay a large upfront cost to store data indefinitely as opposed to regular rent/lease payments.
Sia operates in the hot storage market, primarily targeting developers. It's favored by those in search of a decentralized storage system offering both privacy and quick retrieval. Sia does not compete with Filecoin directly, given that Filecoin users are more concerned with storing large amounts of archival data.
Arweave’s permanent storage is highly accessible, making it a competitor with Sia’s and Storj’s hot storage protocols. However, users that need data to be accessible without permanent storage needs will likely seek solutions that have smaller principal payments. Storj’s network is the most aligned with Sia’s. It is also more user-friendly and targets both developers and enterprise clients. However, at a structural level, the Sia network is more independent and not susceptible to developments on a separate base layer.
Token Model
The token models differ greatly between Sia and Storj, its closest competitor. Sia uses a Stake-for-Access (SFA) token model to capture value. In this model, storage providers must lock up SC in order to accept storage deals. The amount locked up is proportional to the amount of data that storage providers can store. This creates a dynamic where storage providers must increase their collateral as they store more data, thus increasing demand for the network’s native asset. SC is also used by renters as payment for gas, storage, and bandwidth.
Storj’s model is simpler. The STORJ token is used for settlement. Users can pay to use Storj with either a credit card or directly in STORJ. Regardless, storage providers receive STORJ for their services. Contrary to Sia’s market-based pricing, Storj payout rates are set by Storj Labs. While making payments is easier on Storj at the moment, value accrual to the STORJ token is weaker than to SC, which must be staked to use Sia and is used as gas. Additionally, there is a grant project funded by the Sia Foundation to create a network service that would allow users to pay for storage on Sia with a credit card. Doing so would lower the barriers to accessing storage on Sia in the future.
For more details on the decentralized storage landscape and a full explanation of the remaining network metrics in the chart above, see Messari’s Essential Guide to Decentralized Storage Networks.
Final Thoughts
If age is a sign of maturity, then Sia is the seasoned veteran of decentralized storage protocols. With a network uptime since 2015, it has bested market cycles, SEC scrutiny, and the death of founding entities and prominent user interfaces. Sia is the radioactive cockroach in crypto’s nuclear wave of disruption. Many have fallen, and many more will fall — and yet, Sia continues to build. In launching new tools and funding hundreds of thousands of dollars in grants each quarter, Sia is building out its vision for consumers, developers, and the ethos of crypto — sovereign data, owned by its users.
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