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Sia is a blockchain-based, cloud platform that aims to provide a solution for decentralized storage. Peers on Sia’s network can rent hard drive space from one another, for storage purposes instead of renting it from a centralized provider. Not only does this decentralized approach make Sia more secure, but it drastically reduces the overall cost as well. Simply put, if you have unused space on your hard drive, then you will be able to rent it in Sia and earn money from it, in the form of Siacoins (SC).

What is Siacoin?

History of Sia: Siacoin and Siafunds

The two tokens – Siacoin and Siafund

Sia uses a dual token system – Siacoin and Siafunds. Siacoin is the main utility token. The following is the current snapshot of Siacoins:

There is no limit to the total supply of Siacoins and they all must be mined. The reward for the first block mined was 300,000 Siacoins, which will decrease with time till it reaches 30,000 SC per block.

The second token in the ecosystem is Siafunds (SF). There are 10,000 SF in existence and they have all been premined. Those coins have been distributed as such:

Sia’s parent company, Nebulous Inc., holds 8835 of these Siafunds.

The remaining Siafunds were sold in a crowdfund which helped finance Sia’s early development. During their crowdfunding campaign, Sia raised money by selling “Sianotes” on NXT’s platform, which was later exchanged for Siafunds. After the crowdfunding, Sia raised a further $1.65 million through venture capitalist funding and grants. Noted VCs who have invested are – Procyon Ventures, Fenbushi Capital, angel investor Xiaolai Li, and James Pallota’s investment company, Raptor Group.

The main goal of Siafunds is to provide a way to finance Sia’s development, without having to depend on external donations or a premine.

When a storage contract is officially complete between a renter and a host in Sia, the transaction gets finalized. The Sia nodes will now calculate how much of the money in the contract belongs to the host and how much of it belongs to the renter. 3.9% of the total money in the contract will be divided over all the 10,000 Siafunds in the blockchain.

Eg. if a contract has 500 SC from the renter and 500 SC from the host, then 3.9% of the total (39 SC) will be allocated to all the Siafunds. So in this case, for 1 SF held, 0.0039 SC will be rewarded.

Siacoin History

The creative forces behind Sia are David Vorick and Luke Champine of Nebulous Inc, a VC-funded startup in Boston. The seeds of the original idea of Sia were planted at HackMIT 2013. The idea was simple – what would happen if you could liberate the unused storage spaces in hard drives around the world, and unite it into a global decentralized cloud storage platform? The concept received a lot of positive feedback and Vorick and Champine opted to pursue the project full time.

Before we look into how such a platform actually works, let’s look into the problems of traditional and centralized cloud storage.

The problems of centralized cloud storage

Let’s get the obvious out of the way first. Companies like Dropbox, Apple, and Google have revolutionized company operations thanks to their cloud storage service. Not only has third-party cloud storage met the ever-increasing demand for more storage, but they have managed to save businesses thousands of dollars in IT investments. Unfortunately, despite their obvious utilities, they do suffer from a lot of issues.

#1 Giving over control of data

The biggest problem of third-party cloud storage services is that the company hands over their data to a third-party for storing services. Since the data is outside the company’s control, the data privacy settings are beyond their control as well. Since users usually back up their data in real-time, they may accidentally give up control of data that they didn’t mean to share in the first place.

#2 Hacking risks

Since all the data is stored inside a third-party, centralized server, they are susceptible to hack attacks. This not just some random assumption, third-party servers have been repeatedly hacked to obtain sensitive and private information. Let’s look at two of the most infamous cases of data hacks.

In September 2017, more than 145 million Americans had their personal data, including social security and driver license numbers, stolen because of a hack. The target was the Equifax credit reporting company. The sheer scale of Americans affected was staggering. Many of the people affected had not even signed up with the credit-monitoring service.

Apple’s iCloud was hacked on August 21, 2014, which has been infamously termed “The Fappening.” During the hack, several celebrities, mostly women, had their private pictures hacked. Most of those pictures contained nudity and were posted on 4Chan, Imgur, and Reddit. Investigators found out later that access to the photos was gained via spear-phishing attacks.

While it will be wrong to accuse centralization of these attacks, the fact of the matter is that these attacks only happened because all the data was stored in one central location. This one location invariable became a single point of failure (SPOF). When the SPOF is breached, it creates a ripple-like effect that compromises the entire system.

#3 Data Mismanagement

Facebook’s Cambridge Analytica debacle is the best example of a third-party mismanaging their client’s data. Aleksandr Kogan, a data scientist at Cambridge University, developed an app called “This is Your Digital Life” and then provided it to Cambridge Analytica. They, in turn, used it to survey Facebook users for academic research purposes. However, Facebook’s design allowed the app to not only collect the personal information of the users but all their connections as well. Because of this, Cambridge Analytica was able to get their hands on the personal data of a staggering 87 million Facebook users, of which 70.6 million were from the United States.

According to Facebook, the information stolen included one’s “public profile, page likes, birthday, and the current city.” Some of the users even gave them permission to access their News Feed, timeline, and messages. The data they ultimately obtained was so detailed that they were able to:

Create psychographic profiles of the subjects of the data.

The profiles created were detailed enough to suggest what kind of advertisement would be most useful to persuade a particular person in a specific location for some political event.

Politicians paid Cambridge Analytica handsomely to use the information from the data breach to influence various political events.

In another infamous case, media analytics company “Deep Roots Analytics,” used the Amazon cloud server to store information about as much as 61% of the US population without password protection for almost two weeks. This information included names, email and home addresses, telephone numbers, voter ID, etc.

#4 Bring Your Own Device

Another genuine problem with cloud storage is the BYOD issue aka Bring Your Own Device. Many companies have now encouraged employees to get their own devices to work. The reason why they are allowing this is that:

Employees prefer to use a device that they are more used to.

The employee laptop specs are usually better than the ones given by the company.

It saves the employees lots of money that they would have had to spend to buy IT equipment.

As you may have already guessed, BYOD has significant security risks. The employers can lose or misuse their devices which will once again compromise the client’s privacy. Also, if a data breach does occur, then it is quite difficult to track down all the employee devices and discover the point of failure.

Sia Blockchain

Sia aims to bring in decentralization into the cloud storage space by leveraging the blockchain technology. Sia’s vision is to create a storage server that will not be run by a centralized authority and, as a result, won’t have a single point of failure. Along with the decentralization of control, Sia also plans on creating a platform where it will be impossible misuse the data inside the cloud.

Before we go any more in-depth, let’s look into what the blockchain is.

What is a Blockchain?

Image Credit: Lisk

A blockchain is, in the simplest of terms, a time-stamped series of an immutable record of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain). The following are the three main properties of the blockchain:



Immutability: Immutability means non-tamperable. Any data that you put inside the blockchain cannot be tampered with. This happens because of the implementation of cryptographic hash functions

Transparency: Any data that you put inside the blockchain will be visible to everyone who is part of its network.

Decentralization: The idea of decentralization is at the very core of blockchain technology . What it means is that any data that is stored inside the blockchain is not owned by one centralized entity but shared by everyone who is part of that blockchain’s network. The blockchain is hosted by a peer-to-peer network where each node has the same power and importance as the other. These nodes keep a copy of the blockchain, which is continuously updated. This ensures that all the nodes are in control of the data inside the blockchain, making it decentralized.

How the Sia Blockchain leverages decentralization

#1 Security

The Sia platform will break apart the users’ files and distribute them across multiple nodes on their network. Since the data is encrypted and accessible only by the private key in the user’s possession, a random node will note be able to access any of it. Still, if the node somehow manages to figure out the private key, they will have access to only a portion of the file, which won’t be useful.

As has been stated before, the distribution of the files among multiple nodes will also reduce vulnerability since there will no longer be a single point of failure.

#2 Faster Processing

Another problem with having a centralized server or a centralized source of information is that the geographical location of a client greatly affects its processing speed. When you, as a user, want to send a query to the server, your information packets will ricochet and transmit through these various ISPs before it reaches the server, and vice-versa.

Image Credit: YouTube

As you can imagine, the information packet that you are sending won’t really be taking the most optimal of routes. Not only is this extremely time-consuming, but if one of the ISPs are out of service, for whatever reason, it could lead to a misplacement of your data packet as well.

However, if you have a decentralized system is geographically spread throughout the world, then content delivery and query clarification will be much faster.

Image Credit: Wikipedia

#3 Cheaper Alternative

Another issue that plagues centrlaized storage system is the costs. These facilities need high-grade maintenance and full-time staff, which tends to spike the price. In a decentralized system, none of that is needed since the nodes take care of themselves. This, alone, makes them a cheaper alternative.

How does the Sia P2P storage work?

There are two main components in Sia’s ecosystem – the renters and the hosts. The renters can pay hosts in Siacoin to lease storage capacities. They are also free to determine the storage fees directly from the hosts.

Since the hosts play such a vital role in the network, they have the freedom to:

Promote their storage resources and the quality of service that they provide.

Have the right to refuse rent storage to a particular client if they feel that the data is too sensitive, ethnically unacceptable, or illegal.

The renters, for their part, have the right to:

Protect the flies by splitting them up and having them copied between various hosts. This will help ensure the safety of the file.

Pay the hosts more than the asked fees to ensure preferential treatment, such as faster upload speeds and granting storage requests.

Alright, so now let’s look into how the storage procedure actually works, by understanding File contracts.

What are File Contracts?

At the core of Sia’s functionality, lies File Contracts, which are Sia’s version of smart contracts. These contracts allow renters and hosts to engage directly with each other, within the confines of some pre-determined and well-defined set of rules. All smart contracts work using the IF-THEN logic, meaning, that a statement can only be executed, if the statement prior to it was executed to its completion.

Formation of File Contracts

The renter establishes an allowance, which is a pre-paid amount of Siacoins which will finance storage and bandwidth demands during the duration of the contract. The default length of the contract is 13 weeks.

The allowance will then get locked up within the wallet and the client software will promptly pick up 50 optimal hosts for the renter according to their scoring.

The host locks up some Siacoins in collateral as a gesture of good faith. The size of the collateral is set up by the host manually. Higher collateral ensures a higher scoring during the host’s selection process.

The file contract is signed by the renter and 50 hosts and is submitted to the blockchain.

As explained earlier, 3.9% of the total money locked up in the contract is paid as fees to the holders of Siafunds.

Uploading and Downloading Files

As long as funds remain in the allowance, renters can upload and download their files as many times as they want. The current contracts will not be affected if the host decides to change their pricing mid-operation. Regarding data transfer:

Done by direct connection between the renter and the hosts.

Data is encrypted by the Twofish algorithm and stored with the redundancy algorithm Reed-Solomon among the hosts.

Proof of Storage

To protect the renters from malicious hosts, Sia uses proof of storage. To receive their payment, the host must present a number of proofs to the network, within certain pre-determined time frames. If the host fails to provide this proof within a given time frame, the proper payment is sent to a missed proof address until proof is submitted. The hosts must keep sending the proofs to demonstrate that:

They are online.

They are properly preserving all the data.

The host receives a penalty if they are negligent and the contract may get terminated entirely if they miss too many timeframes. On the other hand, if the host successfully provides proof of storage, then the contract awards the payment to a valid proof address.

Termination of File Contracts

The file contract may get terminated due to multiple reasons:

The renter failed to upload their file: In this case, the renter gets their allowance back but pays the fees for both allowance and collateral. The host gets back the full collateral.

The files were uploaded and the host achieved the required target uptime: The renter will receive the unused part of his allowance and pays the fees corresponding to both the allowance and collateral. The host will receive payment for their services, their full collateral back and won’t need to pay any fees.

Renter uploaded the files but the host didn’t achieve the target uptime: The host will lose the collateral and won’t receive any payments for their services. They will also need to pay the fees corresponding to their collateral.

Renter fails to auto-renew: If the renter has enabled auto-renewal of the contracts, it will be renewed some time before it expires. However, the renter needs to online in advance to renew the contracts.

Siacoin Mining

Siacoin uses the proof-of-work consensus mechanism, meaning they have miners using ASICs to mine the coins. In mid-2017, co-founder and lead developer David Vorick announced that the company behind Sia, Nebulous, will launch subsidiary called Obelisk to manufacture ASICs specifically for Sia. Community members pre-ordered the miners and contributed millions of dollars to fund the effort.

However, around the same time, ASIC manufacturing giants Bitmain and Innosilicon had also begun to develop Sia ASICs. This did not sit well with the Sia community with many demanding a hard fork to prevent mining monopolization by Bitmain. While many opposed the hard fork, the Sia core developers ultimately decided to go ahead with the hard fork.

The hard fork was planned for October 31, 2018, with the intention of bricking Innosilicon and Bitmain miners. Only Obelisk equipment will be allowed to run on the protocol, granting them ASIC monopoly. As per Vorick, the main reasons behind the hard fork were:

The pessimism in the community against Bitmain

Dominance of Innosilicon, which controlled 37.5% of Sia’s mining hash rate.

While many in the community were happy with the result, there were some dissenting voices, especially those who had heavily invested in Innosilicon. They decided to continue using the old Sia chain, calling it SiaClassic. Regarding this, Vorick said:

“[SiaClassic] has very low community support. They say they believe in the vision though, and that they wish to have a collaborative relationship with the main chain. If SiaClassic does get support, then we are happy to engage them collaboratively. But so far we’ve seen little evidence of actual support outside of SiaClassic employees.”

The SiaClassic Foundation told CoinDesk:

“We greatly respect Siacoin’s founding principles, and the people who have supported them since the very beginning. We are focused on the future. We are excited about the team we’ve built, and we look forward to working with the SiaClassic community to take this project to the next level.”

Overall, Vorick feels that the fork was a success, estimating that 87% of the network’s computing power is accounted for by community members, “The hashrate is much much more decentralized than before the fork.”

Siacoin: Conclusion

Sia solves a very real problem that was in urgent need of a decentralized solution. Now, with all the drama of the hard fork behind them, the Sia team can focus completely on innovating and fine-tuning their product. The project is built on solid tokenomics and principles and has a bright future ahead of it.