The Pros and Cons of Decentralized Data Storage

With most enterprises favoring centralized cloud storage providers (CSP) for storing data, hyper scalar CSPs are in high demand. However, they have been accused of monopolizing the market and pigeonholing customers into rigid storage plans. Additionally, they are susceptible to cyberattacks that can cripple systems and cause disastrous financial loss

“As we saw in the Equifax and Experian breaches and the recent TransUnion problem with a criminal gaining access to the data, these centralized data stores are treasure troves for criminals and attract attacks accordingly,” says Uri Arad, co-founder and VP of product & research at Identiq. “That, in turn, is disastrous for consumer privacy and makes effective cybersecurity and fraud protection far more difficult. 

“They’re not just disasters waiting to happen; they’re disasters in progress.”

Given the inherent flaws present in centralized solutions, maybe it is time to explore alternative data storage options. Decentralized data storage, which is highly secure and promises more flexibility to the end user, is an option worth considering.  

Also read: Data Loss Prevention (DLP) Best Practices & Strategies

Why Decentralized Data Storage?

Decentralized options, sometimes referred to as providerless, are practical, effective, and safer. According to Arad, an obvious next step for data storage is to combine decentralized options with privacy-enhancing technologies in order to pool knowledge without sharing data. It also allows companies to leverage and weigh the reliability of information from multiple sources.

Moreover, decentralized approaches will allow companies to better align themselves with data protection regulations, the requirements of which will only expand as data breaches and the demand to protect personal data grow.

How Decentralized Storage Works

Decentralized storage works on a reasonably democratic concept where data storage is not concentrated in the hands of a few tech giants. Instead, it is a peer-to-peer cloud storage solution with ordinary users or miners managing the system. Users rent out free disk space on their drives and are incentivized with tokens in return for their contribution.

Decentralized storage works by sharding data, or splitting it into small pieces; encrypting it; and then distributing it over an extensive system of nodes spread across the globe. Each file is encrypted with a private key, and only users with the same set of encryption keys can access the data, making it highly secure. To access a particular data in a decentralized storage platform, threat actors have to launch a concurrent attack on data situated on multiple storage nodes worldwide, making it almost impossible for them to hack into the system.   

The Benefits of Decentralized Storage 

Lower costs

A decentralized storage model doesn’t require significant investment in data centers, making it less expensive than centralized storage solutions. Further, there is a robust market of users willing to rent their unused disk space, which lowers the costs even more. 

Load balancing

“Load balancing is an essential principle in blockchain-based decentralized storage systems,” said Shiv Gupta, CEO of Incrementors Inbound Marketing. “Hosts can cache frequently used data locally to avoid having to connect to the server regularly. 

“It lightens the server’s load while also reducing network traffic. In addition, the server can allocate and optimize data to eliminate bottlenecks in the central system resources.”

Greater security

In decentralized storage, files are broken down and spread across several nodes. This ensures that even if one node is hacked the rest are not affected. No single point of failure, trustless architecture, and granular access controls are additional features that enhance security.

High reliability

Decentralized clouds have less downtime because data is distributed across unrelated nodes. So, even if a particular server goes down, you can retrieve your data from other nodes.   

Also read: Top Blockchain as a Service (BaaS) Providers for 2021

The Drawbacks of Decentralized Storage 

While the concept of decentralized storage is promising, it has certain drawbacks that cannot be overlooked. 

For instance, “decentralized storage systems are only as robust as the miners working their blockchain,” said Allan Buxton, director of forensics at Secure Data Recovery. “As long as their blockchain has some value and the companies make node services profitable, it is likely that there will be enough nodes to store their client’s base data.” 

However, due to the competitive nature of blockchain and the differing cryptocurrencies that attract minors, Buxton said that “using decentralized storage as a primary backup could prove extremely volatile to commercial interests.”

Compared to a centralized storage system provider, which places the responsibility of data integrity and privacy with one provider, a decentralized system places this responsibility with many contractors who all have varying equipment and connections, Buxton explained. While the data may be “protected by an encryption algorithm and segmented for redundancy,” it is important to weigh the benefits and risks of using a decentralized system for primary data storage.

“From the data owner’s perspective, a potential con would be the mere counterintuitivity of this concept (using a decentralized system for data storage),” said Adam Garcia, founder of The Stock Dork

While data isn’t stored on a cloud server by a company with nefarious intent, the peer-to-peer nature of a decentralized approach might seem unappealing to non-technological individuals. Whether data is encrypted, shredded, or secured, it still rests with one or many unaffiliated contractors, which can be worrisome to some company leaders, Garcia noted.

Leading Decentralized Storage Platforms

Several decentralized cloud storage providers have emerged on the scene, given the interest in this space. A few options are:


Storj is a decentralized storage system where users rent redundant drive space and earn tokens. Before uploading a file to the network, Storj encrypts files using AES-256-GCM symmetric encryption and then breaks them down into 80 pieces, all spread across diverse geographies and ISPs. Doing so ensures that no unauthorized user gets access to your data. Retrieving a file, however, requires only 29 pieces. 

The V3 Storj network that was launched recently differs significantly from other decentralized platforms and even the earlier V2 version. Some key differentiators include using erasure codes and avoiding blockchain for storing data. 


Sia is an open-source cloud storage company that utilizes file sharding to store data. It works on the proof-of-storage (PoS) mechanism where verifiers issue challenges to renters to prove that they are indeed storing the data. Sia miners can monetize their extra unused storage space and earn rewards in the form of siacoin (SC)—the native utility token of the Sia platform. 

In contrast to Storj, the supply of siacoins is not fixed and can be minted indefinitely. Siafunds are the other component of Sia’s unique two-coin system that incentivizes the investors of the Sia network. Siafunds are rare, with only 10,000 Siafunds in circulation currently. 


Created by Protocol Labs, Filecoin is an open-source, peer-to-peer network that allows users to rent unused space from those who do not require it. It consists of two groups—miners, who are encouraged to rent as much storage space as possible, and retrieval miners, who are tasked with retrieving data when they receive a ‘get’ request. 

Miners are paid in FIL, Filecoin’s native token, which is used to rent hard disk space. Filecoin also comes equipped with cryptographic PoS and proof-of-spacetime mechanisms that enable clients to check at any point in time if a storage provider is actually storing the data they have committed to store.   

Decentralized Storage—A Natural Corollary to Web3 

Though decentralized file storage doesn’t get enough air time, it is going to have a tremendous impact in the coming years, according to Carlos Cano, creative lead at D-CORE

“This is because without decentralized file storage, many nascent industries, such as NFTs, will be worthless,” said Cano. “Few people realize it, but most NFTs are basically over-glorified links to images stored in Google Drive and other repositories. Now, the question is: Will those files be there two months from now? Three years? 20 years?

“My guess is that we’ll start hearing about cases of NFTs suddenly rendered valueless and people realizing how important decentralized storage is when using applications on-chain. Certainly, Web3 cannot take the next step in its evolution without its core components moving away from centralized and custodial providers.”

No doubt, decentralized storage offers a rich alternative to centralized data storage, yet there is time before it becomes fully mainstream. According to Gupta, “it is still in its infancy, and businesses will not immediately dump all their data into a decentralized network. It will be a slow trickle at first, and then the dam will burst all at once. After all, the advantages are too good to pass up.”

Read next: Best NAS Software for Enterprise Storage 2022

Susnigdha Tripathy
Susnigdha Tripathy
Susnigdha Tripathy is a full-time writer and editor who presently lives in Singapore. She has over ten years of experience writing, editing, and delivering exceptional content for her clients. She currently writes for Virtasant, a cloud technology company, and Krista Software, a provider of intelligent automation solutions. Her work also gets published on several high-ranking tech websites.

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