Storage demand on Sia remained stable, as active storage contracts rose by 23% QoQ, maintaining the growth momentum in Q1.
Sia’s revenue in SC terms increased by 22% QoQ, but revenue in USD terms declined by 25% QoQ as the SC price dipped 54% QoQ.
In Q2, new contract creations rose by 41% QoQ, contributing to the 37% QoQ increase in total transactions.
The concentration of mining activity in Sia mining pools increased significantly, as F2Pool produced no blocks in Q2, while DxPool retained its position as the top miner.
Sia released incremental upgrades to its hosting and renting modules throughout Q2’24, improving user experience, storage performance, and reliability.
Primer
Sia (SC) is a decentralized cloud storage network that combines a Proof-of-Work blockchain with a contract-based storage model. Storage contracts uphold storage agreements between hosts (storage providers) and renters(storage consumers). 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 deposit the native asset — Siacoin (SC) — into an escrow account. Storage providers must cryptographically prove they are hosting the required data, and if they do not uphold the storage agreement, their collateral is slashed. At contract expiry, the storage provider receives most of the escrowed funds, with a small portion (3.9%) 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 with underutilized hard drive capacity to storage consumers. Siacoin can be used to pay for gas on the Sia blockchain and as the medium of exchange for the storage market. Renters pay a storage fee, upload/download bandwidth prices, and gas to create storage contracts. Files stored on the Sia network are encrypted via ChaCha20 and stored redundantly via Reed–Soloman Erasure Coding. Encryption ensures that uploaded files remain private, and redundancy ensures security by sharding files. Files uploaded to Sia are split into 30 or shards chunks and sent to various hosts. Only ten shards are required to rebuild the file, and their copies are re-duplicated to new hosts whenever one is offline. For a full primer on Sia, refer to our Initiation of Coverage report for a full primer on Sia.
New storage contracts are a measure of the origination of active storage contracts. New contracts require renters to allocate funds (called allowances) in advance. These allowances determine how much SC the renters are willing to pay for storage on Sia. The allowance is derived from an equation that multiplies the price in SC per TB stored by the expected number of TBs and by the expected number of months for storage. For example, if a user wanted to store 3 TB of data for three months at 500 SC per TB, their allowance would be 4,500 SC (500 SC x 3 TB x 3 months). Renters also pay contract formation and upload bandwidth fees when creating new contracts. Hosts must lock up collateral, which can be slashed if they don’t uphold the contract agreement.
Transactions on Sia account for all activity related to storage contracts, peer-to-peer transfers, and trades of the SC token. New contracts lead to various types of onchain transactions, such as contract initiation payments, bandwidth payments, and ongoing storage payments. For this reason, transaction count tends to be influenced by initiating new contracts. In Q2, new contract creations rose by 41% QoQ, contributing to the 37% QoQ increase in total transactions. This growth built on the upward trend observed in Q1, driven partly by UI and performance improvements from the official release of Sia’s renting module.
Active Contracts
When a contract is active, it automatically facilitates the exchange between escrowed SC and storage provided by hosts.
Active storage contracts on Sia increased by 23% QoQ in Q2’24, maintaining the growth momentum in Q1. This increase likely stemmed from either more new contracts being initiated at the end of the quarter or longer-term contracts starting early in the quarter. With a similar impact on network storage activity, incremental updates to Sia's renting module may have also contributed to this growth, given its improvements to user experience.
Storage Utilization
While a storage network's capacity helps highlight its current scale, its utilization rate reveals the demand for the type of storage it optimizes for. Sia operates in the hot storage market, primarily targeting developers. It's favored by those searching for a decentralized storage system offering privacy and fast retrieval.
Storage demand on Sia flows through storage contracts, incentivized by its Stake-for-Access (SFA) token model. For this reason, storage demand is closely linked to active contracts. In Q2, storage usage remained stable, slightly declining by 0.5% QoQ, while the utilization rate declined by 8.6%. Despite a 23% increase in active contracts, the slight decline in storage suggests that users required less storage per contract. Moreover, Sia continues to improve its renting and hosting modules, reflected in Q2’s stable storage use.
Network Revenue
Sia produces revenue for multiple parties: hosts, miners, and Siafund (SF) holders. Its network revenue is the sum of payouts to hosts, Siafund fees, miner fees, and burned collateral. Burned collateral is included in revenue because burning SC makes it more scarce, accruing value to SC holders.
In Q2’24, revenue in SC terms increased by 22% QoQ, peaking in April 2024. However, revenue in USD terms declined by 25% QoQ despite stable storage demand and a 23% QoQ increase in active contracts. USD revenue likely fell due to a 54% QoQ decrease in the SC price, driven by the Q2 crypto market decline. For comparison, BTC, ETH, and SOL market caps also fell by 12%, 6%, and 25% QoQ, respectively. Regardless, Sia’s ongoing improvements to the network’s renting and hosting modules, with incremental upgrades throughout the quarter, helped maintain the network’s storage demand.
Storage Prices
Renters entering a storage contract on Sia pay multiple fees to set up and maintain the contract. Storage fees are based on the amount of data uploaded, the length of the contract, and the price in SC per TB per month.
Storage prices in USD declined by 23% QoQ, dropping from $2 to $1.58 per TB. This reduction may have contributed to increased storage demand in Q2, as evidenced by a 23% QoQ rise in active contracts and a 41% QoQ increase in new storage contracts. Conversely, storage prices in SC rose by 40% QoQ, increasing from 199 SC to 280 SC per TB. The change reflected the growing access to cheaper storage in SC terms due to the decline in the USD value of SC in Q2.
Bandwidth Costs
Storage providers offload the costs of uploading and downloading the renter’s data to the individual renter. Users seeking to store data on Sia initially pay upload fees to hosts, and users seeking to retrieve uploaded data pay download fees to hosts. In both cases, bandwidth is priced per TB.
For the first time in three quarters, upload and download costs in SC rose by 44% and 37%, respectively. This increase aligns with the decline in the USD value of SC, allowing renters to purchase storage more cheaply in Q2 compared to Q1. The lower USD value of SC, combined with a tightening supply of storage, may have incentivized storage providers to raise prices. This adjustment helps sustain revenue in USD terms while limiting the SC supply.
The USD price for upload bandwidth moved in the opposite direction compared to SC's price. While SC's price declined 53% QoQ, the USD prices for upload bandwidth costs jumped to 186% QoQ, the highest level in three consecutive quarters. This surge in upload bandwidth cost in USD did not result in a proportional decrease in upload bandwidth cost in SC terms, which instead increased by 44% QoQ. Meanwhile, download bandwidth cost in USD terms dropped by 37% QoQ, driving a corresponding increase in download bandwidth cost in SC terms.
Block Rewards in USD
Siacoin has an unlimited maximum supply; its current supply is over 57.7 billion SC. Siacoin inflates at 60,000 SC per block mined, with half going to miners and half to the Sia Foundation’s development fund (used for community grant funding and company operations). Because a portion of SC must be locked up in storage contracts, Siacoin's inflation mechanism aims to maintain liquidity.
Total block rewards for Q2 declined 35% QoQ, with miners earning significantly less compared to Q1. F2Pool saw the most substantial drop, producing no blocks and losing 100% of its Q1 share. Luxor trailed a close second with a 60% QoQ decrease in rewards. For the third consecutive quarter, DxPool retained its position as the top miner, although its share of rewards decreased 49% QoQ, falling from $2.3 million to $1.1 million.
Percentage of Blocks Mined by Pool
The percentage of blocks mined by each mining pool shows how dominant certain entities are in block creation on Sia.
F2Pool lost the third spot to SiaMining, ending the quarter with no blocks mined. Again, Luxor followed closely, experiencing a 45% QoQ decrease in blocks mined. Meanwhile, DxPool’s market share as the top miner declined by 26% QoQ, though it remains the leading miner. As other mining pools continue to lose market share, the level of dominance on the network could pose security risks to the Sia blockchain.
Market Cap
Sia's market cap fell from $570 million in Q1’24 to $272 million by Q2’24’s end, marking a 53% decrease QoQ. This sharp decline reflects the broader downturn in the cryptocurrency market during this period. Despite the selloff, demand for Sia’s core product remained stable as active and new storage contracts grew by 23% and 41% QoQ, respectively.
Qualitative Analysis
Software Updates
Throughout Q2’24, Sia modules renterd and hostd saw incremental upgrades that improved the network’s storage performance, usability, and reliability. These upgrades also introduced UI enhancements that better user experience with minimal features such as auto-calculation for renterd and support for IPv6 addresses. Most notably, June 2024 marked the migration of renterd to Sia core and the beta release of walletd, Sia’s wallet application replacing the existing siad module.
Ultimately, Sia’s development focus remains the upcoming V2 hard fork (Utreexo), its first major upgrade since its mainnet launch in 2014. Among other proposed improvements to Sia, this upgrade will replace its traditional UTXO database with a cryptographic accumulator, reducing the initial sync time for nodes. This modification could scale Sia’s data storage and consensus code, enabling full nodes to run on smartphones, embedded devices, or even browsers.
Ecosystem Grants
The Sia Foundation approved six grants that accounted for $147,000 in Q2’24. Since its inception, the grant program has approved a total of ~$1.6 million for projects spanning from development to research. The grants committee meets biweekly and consists of three Sia Foundation employees and three Sia community members. The six approved grants from Q2 are detailed below by order of grant size.
S5 Network 2024 - $96,000
The Sia Foundation approved $96,000 for Redsolver to continue building and expanding S5, a content-addressed storage network on Sia for which a previous grant was awarded in April 2023. This proposal aims to fund performance improvements for S5 by stabilizing its specifications, improving Dart and TypeScript libraries, and making the network’s UI (Vup) more user-friendly with new design and web app integration. Additionally, the grant will support the deployment of archiving tools powered by Sia with extensive support for different sources.
SkyMusic Part 2 - $19,000
The Sia Foundation approved $19,000 for Mózes Dániel to further develop SkyMusic, a music streaming application on the S5/Sia network for which a previous grant was awarded in October 2023. The new funding aims to enhance the web app's functionality, improve the user interface, and integrate S3 storage. Additionally, this funding intends to provide for comprehensive testing, documentation, and the development of a more user-friendly design, aligning with the Foundation’s mission of promoting user-owned data.
S5 ecosystem & Vup chat - $9,600
The Sia Foundation approved $9,600 for Luke McCarthy to enhance the S5 ecosystem and develop Vup Chat, a decentralized, privacy-focused messaging platform on Sia. This grant focuses on improving documentation, workflow, and the user interface for S5 projects, including Vup Chat. It complements previous funding for the S5 project by enabling dedicated efforts on user-facing applications and developer tools.
Sia Indexer - $8,600
The Sia Foundation approved $8,600 for Go-Africa to develop the Sia Indexer, a blockchain explorer designed to provide easy access to data, enhance transparency, and facilitate interaction within the Sia ecosystem. This grant will fund two primary milestones: optimizing data architecture and database redesign, followed by the deployment of the indexer on the Sia Mainnet. The Sia Indexer will enable users to view transaction details, host information, and network activity while supporting both novice users and developers.
SiaLearn – $7,000
The Sia Foundation approved $7,000 for Dapp Mentors Ltd. to launch SiaLearn, a developer educational program to improve access to resources for building on Sia. This grant will fund the creation of long-form training courses, video tutorials, and hands-on projects, starting with a video streaming platform project (VidTV) to teach integration with Sia Renterd infrastructure. The initiative aims to bridge the learning gap, foster community engagement, and promote user-owned data, enhancing the Sia ecosystem.
Sia NFS Gateway (sia-nfs) - $6,400
The Sia Foundation approved $6,400 for Roland Rauch to develop the Sia NFS Gateway. This gateway provides NFS interface access to Sia storage, allowing compatible clients to access files directly without needing a Sia client or renting. This grant supports the launch of a standalone, cross-platform program to enhance enterprise integration and user access to Sia-hosted content. The project will be implemented in Rust, ensuring performance and safety, focusing on metadata caching and stability improvements.
Closing Summary
In Q2’24, Sia demonstrated resilience amidst a challenging market environment. Despite a significant 53% QoQ decline in market cap largely driven by a broader Q2 crypto market downturn, Sia maintained stable storage demand with a 23% increase in active contracts and a 41% rise in new storage contracts. Revenue in SC terms increased by 22% QoQ, although revenue in USD terms declined by 25% due to the 54% drop in SC's value. Additionally, continuous improvements to the network’s renting and hosting modules contributed to stabilize storage demand and enhanced user experience. The concentration of mining activity also saw significant changes: F2Pool produced no blocks, and DxPool retained its top position despite a 48% QoQ decrease in rewards.
Looking ahead, Sia’s development roadmap focuses on enhancing network efficiency, security, and user experience. Its upcoming Utreexo hard fork will reduce the size of the blockchain's data structure and improve validation times, thus making the network more scalable and efficient. These ongoing developments and strategic adjustments position Sia for sustained growth heading into Q3.
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Jennifer Obem is a Research Analyst at Messari. Previously, she worked full-time as a corporate finance professional in the Nigerian fintech industry. She enjoys dissecting concepts relating to Blockchain Interoperability and Web3 Infrastructure.
Jennifer Obem is a Research Analyst at Messari. Previously, she worked full-time as a corporate finance professional in the Nigerian fintech industry. She enjoys dissecting concepts relating to Blockchain Interoperability and Web3 Infrastructure.
