Storage Markets and the rise of the Interplanetary file system (IPFS)

Data storage has evolved from the state of being hyper-local (on computers, disks, storage server, etc.) to the cloud. However, each of these storage mechanisms have a few points of failure (e.g., data being accidentally deleted, removed or disk failure), Similarly on the cloud issues of data privacy, who has access, etc. pervade. The interplanetary file system (IPFS) is a protocol that attempts to solve this problem. It supports all kinds of data storage and enables people to store and delete data from the network. The white paper for this protocol currently in a version can be obtained here.

IPFS System

The IPFS system, while decentralizing storage (i.e., providing similar functionality) as cloud storage nevertheless is responsible for several web-3 applications such as in social networking (, balance3 (accounting software), etc. a full list of IPFS adopters given here. That being said, IPFS which is currently still at its infancy needs incentives to keep the network running and to prevent users from deleting/taking storage offline. While deep incentive protocols such as Filecoin are being developed , it is important to note that while secure data storage – while technically feasible in terms of cryptography and access control, needs network behaviors to alter i.e., service providers who are incentivized should also be penalized if they take services offline or disconnect from the network willingly. However, there could be many more conditions like power failures, network failures, etc. all of which are not decentralized.

Challenges abound for such a storage Market

  • Will supply and demand be ever balanced in this new ecosystem?
  • More challenging is the fact to determine how much of an incentive will keep these networks for storage active and running. What will happen if a storage service provider has recouped his operating costs with a huge profit margin, and decides to stop this business?
  • How will data be migrated especially when there are large single providers who provide for most of the storage?
  • What will happen to networks when large investors with the financial capability to invest in storage and provide services onboard onto these networks?

How will such networks be incentivized to remain neutral and decentralized?

Most important of all – for IPFS and decentralized storage to become a reality, this four things need to happen-

  1. Cost of the service should be significantly lower (atleast by 90%) for a switch to happen from cloud based services.
  2. Reliability of service – i.e., such a service needs to at least be as reliable as today’s cloud service and
  3. Security of data should be significantly proven safe against all types of attacks.
  4. Speed – the speed of access, retrieval, replication and backup should be proven to compete with existing cloud based services.

Off these four things , significant development has been made with respect to security – by means of cryptographic hashing of data and provision of access through keys managed only by the owner. The other three services are market driven and will take time to develop.

On the overall, IPFS is a promising alternative to existing centralized storage systems and can solve a lot of today’s monopolistic market problems. However, it remains to be seen if markets adopt it at a pace that makes it financially viable for the retail consumer.