Every new technology faces barriers to entry, and each blockchain application has its own unique set of challenges. Protocol Labs is grappling with these challenges as we prepare to launch Filecoin, a blockchain-based system to democratize file storage.

Harnessing Blockchain to Solve the Problem of Data Storage

Bitcoin aimed to solve a major problem in finance: centralized trust in currency. It offers a decentralized monetary system, showcasing alternatives to traditional organization models. But blockchains, the record-keeping technology behind Bitcoin and other cryptocurrencies and tokens, face their own challenges.

The DCS triangle, above, describes top tradeoffs that decentralized systems must consider: Decentralization, Consensus, and Scalability. The DCS theorem states that a decentralized system cannot have all three properties simultaneously. This leads to technical barriers to a decentralized system that can maintain consensus as well as the scalability often needed for blockchain adoption.

Protocol Labs is grappling with these challenges as we prepare to launch Filecoin, a blockchain-based system to democratize file storage, in the coming months. Filecoin is a cryptocurrency-powered storage network (opens new window) that lets anyone contribute unused storage space to store the world’s information. Its mission is to create a decentralized, efficient, and robust foundation for humanity’s information.

Let’s unpack what we mean by a robust foundation using the DCS triangle.

Decentralization of Storage

Filecoin aims to solve a pressing problem: what to do with all of the data (opens new window) humanity is generating. By the end of this year, there will be 44 zettabytes (ZB) (opens new window) of data in the world -- that’s more than 130 million (opens new window) times the amount of data housed in the Library of Congress. By 2025, it’s estimated that we’ll create 463 exabytes (opens new window) of data per day worldwide, the equivalent of more than 200 million DVDs (opens new window). The question is: Where will we store all of this information?

Storage capabilities are finite, bound by centralized data storage centers and hard drive capacity. Building new centers and more sophisticated storage space is expensive and energy-intensive. Meanwhile, roughly half (opens new window) of the world's storage capacity sits unused in data centers, and even in personal computing devices like our phones and laptops.

As discussed on this blog in 2017, a few massive corporations own nearly all of the global cloud data storage market. This consolidation is concerning for a number of reasons:

• users must trust these large corporations to protect their data from exposure,
• the cost of switching cloud providers is especially high,
• and providers are incentivized to lock in their customers and extract a premium.

The current market for cloud storage is not nearly as competitive or efficient as it could be, and end-users suffer because of it.

There’s also a significant amount of ‘latent’ (available) storage throughout the world that sits unused. This storage is owned by all kinds of entities: from large corporations to small businesses, from individuals with huge hard-drive racks to smaller drives in our home computers. But due to the aforementioned barriers to entry it would be difficult for any one particular company or individual to monetize their extra space and start a cloud data service.

In 2015, Protocol Labs launched IPFS, a technology that decentralizes the web by addressing information based on what it is, not where it is. Addressing using a cryptographic hash of the content makes the data unalterable, can identify duplicates across the network, and enables any host to store and provide the data. This makes decentralization more efficient.

Filecoin shares many common components with IPFS including content addressing. Developers can integrate with these modular components to build in encryption and redundancy. In the future, Filecoin will also support user-defined smart contracts enabling its storage to be programmable along with easier integrations with other networks and tools.

Consensus Across Many Actors

Every new technology faces barriers to entry, and each blockchain application has its own unique set of challenges. Some face hardware or timing requirement challenges; others are challenged by energy consumption. For example, Bitcoin’s proof-of-work consensus requires miners to compete with one another to solve a computationally expensive math problem in order to verify payments. Solving these problems requires lots of electricity. In fact, each Bitcoin transaction requires an estimated 80,000 times more energy (opens new window) than a credit card transaction!

Trent McConaghy’s blog post (opens new window) on The DCS Triangle describes IPFS as a decentralized network with strong decentralization and planetary scalability but not consistency across nodes. Many blockchain networks use IPFS for decentralized storage and content integrity while complementing it with a consistent view about the state of things: ordering transactions, signatures, payments, registries, markets and much more.

Filecoin incentivizes consensus about the state of what has been uniquely stored in the world, including a market for this, in a way that anyone can verify. Consensus in Filecoin is achieved through an operation yielding positive social externality (data storage). At its core are two Proofs-of-Storage that provide a more useful alternative to Bitcoin’s Proof-of-Work:

• Proof-of-Replication: proof that a unique encoding of data exists in physical storage in the world
• Proof-of-Spacetime: proof that a given encoding of data existed in physical storage continuously over a period of time in the world

With these proofs, the Filecoin protocol creates a trustless (i.e., more trustworthy in a mathematical sense) market for storage resources, amassing them into a self-healing, robust storage network on which anyone in the world can rely and join. Clients can select replication parameters to protect against different threat models and developers can build additional tools to make this experience as seamless as cloud services are today.

Filecoin is an ambitious project. Until now, storage power-based consensus and its consistency and security have been at the core of our protocol research. In our research to produce the best Filecoin protocol possible, this has been the priority. We’re working to make sure that consistency and security in our proofs construction and a consensus protocol are at the forefront of our work before mainnet launch in the decentralized web space.

Scalability of the Protocol

In December, we laid out hardware requirements (opens new window) for block mining and storage mining on the testnet, which are likely larger than that old PC you have lying around and commodity hard drives. This is because protocol security and solid proofs constructions have been paramount. But longer-term, we expect to make optimization improvements to the protocol and the growth of ecosystem tools and services that facilitate a wider spectrum of miner and other market participants to join later on. This will make work cheaper for participants while also reaching for scalability via economies of scale afforded by specialized markets and the wider range of functionality they provide to the network.

Any part of our protocol where a new market may arise opens up opportunities for community participants to leverage what they can do best: block mining, storage mining, retrieval mining, repair mining, as well as potentially offloading computation and other services.

With a strong foundation for trustless coordination in its protocol, Filecoin participants can achieve consensus around decentralization of storage and use these evolving specialized markets to achieve future scalability.

The Filecoin team is working to solve the problem of building a decentralized storage solution that can operate at the scale and speed needed to satisfy many data storage and retrieval use cases while the protocol maintains consensus across diverse actors.

Learn more about the technical barriers to blockchain adoption and how Protocol Labs is approaching these challenges in this video (opens new window) featuring Filecoin Co-Lead Pooja Shah from CES 2020 and in this ZeroKnowledge podcast (opens new window) with Juan Benet.