Bitcoin may finally be coming into its own as a cryptocurrency, despite the implosions of several online exchanges and the IRS regarding the digital cash system as property, not currency. But the real value of bitcoin may reside with other applications for its underlying algorithms.

A startup named Storj.io has hatched one such idea: use the blockchain, or the ledger of bitcoin transactions distributed across computers that interact with bitcoin's network, as a way to denote where files are stored in participating servers on the network. The files themselves are public-key encrypted before being inserted into the network.

According to a whitepaper created by the Storj.io team that explains the technology (which is being released as an open source project), Storj.io was created to satisfy the need for "a cloud storage model that is not based on trust between client and host. All potentially private data, including filename, date, and other metadata, must be encrypted before any transfer takes place from a client's computer to the cloud. There will be no centralized point of attack using political or legal attack vectors."

The costs of operating the system are also intended to be competitive with, or superior to, conventional cloud hosting. The authors use an example of running a Dropbox account at $99 per year versus using a Digital Ocean VPS for $5 per month with 1TB of transfer per month standard. Granted, the cost paid for a polished professional service like Dropbox includes many other items that would probably not be included in Storj.io's BitCumulus software, such as auditing and reporting, permissions management that integrates with a credentialing authority, and so on.

What'll really raise some eyebrows is how Storj.io brings the digital cash aspect of bitcoin back into the picture in a novel and unexpected way. Those who participate in providing storage and CPU power to the network are rewarded with cryptocurrency, a la bitcoin's "mining" metaphor. However, Storj.io is minting its own cryptocurrency in lieu of bitcoin or one of its newly popularized cousins, a move that might dampen its uptake.

At least one analogous technology already exists: MaidSafe, another decentralized data store platform with its own attendant cryptocurrency, Safecoin. The Storj.io paper references MaidSafe as a point of comparison, but it says "[a]chieving the security, scalability, and cost efficiency of a truly decentralized storage system will require software of immense technical complexity. We must design the nodes and network in an extremely secure manner as we can trust neither the lines of communication nor the nodes themselves."

Right now, the software isn't even available in an alpha implementation, although Storj.io is taking signups for access to an early-invitation preview. Many other pieces of the puzzle are also a long way off, including the "proof of resource" component upon which Storj.io's cryptocurrency system relies. Clearly, it'll be a while before the concept is developed enough to even be testable as a viable alternative to conventional cloud storage -- but its existence is a sign of how bitcoin is starting to inspire projects outside its usual métier.

Update: Storj.io developer Shawn Wilkinson contacted us with a few corrections for this article: "We are releasing our own cryptocurrency with Storj, but only as a fast-to-release prototype to gather data about the network's behaviors. Eventually we will switch to a sidechain [a blockchain that runs in parallel with an existing cryptocurrency such as bitcoin and allows its use], when that technology is ready.

"Also, we and Maidsafe are partners, not competitors, and we're planning to integrate their product with ours as soon as is feasible. Finally, we do have alpha software available on Github, although most people won't be able to run it themselves just yet -- we do want to polish it a bit first."

This story, "Bitcoin finally pays off -- in secure cloud storage," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.