Bitcoin is the world’s most well-known cryptocurrency. But Bitcoin only offers decentralized transactions. Ethereum’s network was the first to provide various decentralized services. One of these services is data storage.
Data storage is one of the necessities of the 21st century, as smart devices become an inseparable part of society. Some cryptocurrencies offer decentralized data storage, changing the approach behind it once and for all. One of the biggest cryptocurrencies to provide such a service is Siacoin.
Siacoin is, in fact, a utility token and the native token of the Sia network. Like every cryptocurrency, Siacoin has had its ups and downs in terms of price. Recently, Sia has been growing at a consistent rate. But its price is not the only pretext for traders to consider before engaging with this coin. It is perhaps its utility that makes it unique and worthwhile. As such, let’s look at the key components of Siacoin so that you have a better understanding of this cryptocurrency’s background.
What Is Siacoin?
Siacoin (SC) is the native token of the Sia network and serves as a utility token. It is one of the first cryptocurrencies built on the Ethereum network that offer decentralized cloud storage.
Sia was created by computer scientists David Vorick and Luke Champine. It was initially announced in 2014, then revised and announced again in 2015. The funding for the Sia project came from Jim Pallotta, a billionaire investor. The name Sia is a reference to the ancient Egyptian god of perception.
But what makes Siacoin unique?
The fact that it is decentralized gives Sia a chance to potentially compete with the likes of Google or Amazon, which provide centralized cloud storage. As such, the main goal of Sia is dethroning these centralized data storage options and putting decentralized ones on the pedestal.
In the same way that decentralized projects are built on top of the Ethereum network, SiaStream and Skynet work on the Sia network. SiaStream is the application that allows streaming media in a decentralized manner. Skynet delivers the pillar content of the network.
As of now, Siacoins do not have a limited supply, so their price might be prone to inflation. The reason for a limitless supply is that Siacoin is a utility token intended to benefit anyone who wants to join the network and use cloud storage. If Siacoin were to be limited, this would also limit storing data on the Sia network by its users. As of May 2021, the Circulating supply is the number of cryptocurrencies or tokens that are publicly available and circulating in the crypto... of Siacoin is 47.5 billion SC.
According to CoinMarketCap, Siacoin debuted at $0.00004 in 2015. The price reached its all-time high in January 2018, at $0.09. In 2021, the price of Siacoin started increasing again.
How Does Siacoin Work?
As suggested, the Sia network allows people to store data in a decentralized manner. In order for users to store files, they need to pay the network by using Siacoins. The fees are relatively low, and are considerably lower than the fees which traditional cloud storages requires.
Additionally, users can store many files at once without causing any trouble to the functionality of the network. Recently, the storage used has been increasing by terabytes.
Used storage over the last 90 days as of April 2021. Source: SiaStats
So how does Sia achieve this?
Sia uses smart contracts to regulate every process in the blockchain. Smart contracts are sets of codes that enable a blockchain to be decentralized. The smart contracts which enable the functionality of the Sia network are known as file contracts. These file contracts usually last 90 days.
After 90 days, the host needs to prove that the data is being stored, which is done by sharing a small percentage of the host’s data. This proof mechanism is known as Proof-of-Storage (PoS). After the host proves the information, which is added to the Sia blockchain, the host is rewarded with Siacoin.
What makes the data storing process of Sia much more efficient than traditional cloud storage is the decomposition of the files. Before a file is shared, the Sia network breaks down and encrypts the file into 30 parts so that uploading it is much easier. This also maintains the stability of the network, and makes sure that the data storing process does not fail.
Storage proofs and the breaking down of the data are made possible by Merkle tree technology. A Merkle tree is also known as a hash tree, whereby the information of each block is linked with that of another in the form of a “tree” to ensure efficiency and security in the blockchain.
But what if the host is offline? Does that mean that the user storing the files cannot recover and download his/her files?
The answer to that is the erasure coding process. Erasure coding enables the Sia network to store the file redundantly. Because of this, any 10 out of 30 segments of the broken-down file are able to recover all the files that a user stores. Judging by this process, even if 20 out of 30 hosts are unavailable and offline, you can still access all your files.
File contracts that last only 90 days are renewed after a certain period. If the host goes offline after 90 days, and does not prove the stored files, all the data is moved to another host to ensure the continuity of storing the files. This process is known as file repair.
Moreover, even if the Sia network cannot find a new host automatically after the 90 days of the file contract, the user is refunded for any unused Siacoin.
Sia uses Proof-of-Work (PoW) as a consensus mechanism. Hence, the Siacoins can be mined by users. The mining process requires the nodes to verify a transaction in order for them to be rewarded with Siacoins by the network. Since the network’s supply is not limited, mining might not become as difficult in the future as it does in cryptocurrencies with a limited supply. It is also worth noting that Sia is open source, meaning that anyone can access the information and suggest modifications.
But Siacoin is not the only token in the Sia network. Another token that plays a vital role in the development of the Sia network is Siafunds. Siafunds (SF) are considered security tokens. Their purpose is to serve as an incentive for more people to join the Sia network and begin to store data in cloud storage.
The owners of such tokens earn a revenue of 3.9% from every transaction conducted in the Sia storing process. This 3.9% comes from fees that users pay, whether they are renter storage fees, bandwidth costs, or simply host collateral. The downside of this feature is that only 10,000 SF are in circulation, which was deployed when the Sia network itself was launched. 8,000 out of these 10,000 available SF are owned by Nebulous, the Sia network team.
Siacoins converted to Siafunds. Source: support.sia.tech
So what do all these processes achieve? There are benefits that come with every one of Sia’s features. Here are the main ones:
- Since all the data is broken down and encrypted individually, it is very secure. The host that stores your data cannot access your files unless they somehow get a hold of your private keys. This provides complete control over your files with no risk of data breaching whatsoever. However, this is not the case with traditional cloud storage. The most relevant example would be the Cambridge Analytica scandal, when Facebook sold their users’ privately stored data to a British political consulting firm, Cambridge Analytica Ltd.
- All the data you store is private, but storing it is also relatively cheap compared to traditional storing options, such as Google, Amazon or Microsoft. To illustrate, it costs $2 a month to store 1TB worth of data in Siacoin. Amazon requires $23 per month for the same service, Google charges $20, and Microsoft $24. The bandwidth costs are also extremely cheap with the Sia network when compared to those traditional options.
Data storing costs of Sia compared to traditional options. Source: CoinCentral
- Last but not least, decentralization increases the security of Sia, while the same cannot be said for centralized, traditional options.
The Sia Blockchain
So where does this information put Sia in relation to Bitcoin?
Interestingly enough, the Sia blockchain and the Bitcoin blockchain are very similar. In terms of their transaction processes, they have the same functions. In terms of consensus mechanisms, they both use Proof-of-Work (PoW). Both blockchains are very secure and decentralized. Even though the supply of Siacoins is not limited, and the supply of Bitcoins is limited to 21 million BTC, the mining process is still similar for both of these blockchains.
However, there are some distinct features of the Sia blockchain that make it unique. Besides the obvious fact that the Sia network offers data storage and Bitcoin’s does not, they also differ in terms of the algorithms they use.
Bitcoin uses Secure Hash Algorithm (SHA-256). This algorithm generates a 256-bit hash, one of the strongest hash functions that exist so far.
Sia, on the other hand, uses the Blake2b algorithm, which is based on BLAKE2. It generates a 64-bit hash, and its priority is to increase the security of hash functions.
How Is Siacoin Used?
Now that we’ve covered what’s needed to understand the main idea of Siacoin and the network it resides in, let’s look at the main platforms that Siacoin can be used for besides transactions.
Filebase is one of the biggest storage platforms for which Siacoins can be used. It stores data in a secure, private and decentralized way. Filebase is the first platform to simultaneously support Sia, Storj and Skynet as underlying storage layers. Filebase ensures a 3x redundancy for each segment of the files, making the files easily accessible to users even if hosts are offline.
While Siacoins are necessary for storing files in the network, Filebase does not explicitly ask you to purchase and use cryptocurrency.
Skynet is also a decentralized storage platform. Every file uploaded to Skynet has a unique ID, which is known as a Skylink.
Skylink serves as the file information’s hash, and it can be used any time to access or retrieve files in a Skynet Portal. All this is done in a decentralized manner, even though specific vantage points connect the user with the files.
Nextcloud is another external storage application developed on the Sia network. It also offers redundancy of file segments, as well as a secure data storage service. Sia is constantly updating Nextcloud, and it is currently trying to make the Sia Nextcloud one of the best platforms to offer a user-host interface.
The Bottom Line
Ultimately, Siacoin is one of the most underrated cryptocurrencies in terms of utility. Its price may not experience rocketing highs due to its large, unlimited supply, but it has revolutionized how data is stored online.
Exploiting decentralized storage offered by the Sia network could reduce the need for centralized storage options such as Google, Amazon or Microsoft. This is because it is much more expensive to use these centralized options. Additionally, they do not offer the security and privacy that the Sia network provides.
One thing is for sure: decentralized cloud storage may become one of the most critical features of decentralization in the near future.
So, with the new found knowledge in crypto, why not sign up to Bybit?