While scaling solutions such as Sharding and Plasma are expected to raze down the scalability concerns of the distributed ledger technology (DLT), storage taxes are fast becoming the next best solution for scaling the Ethereum blockchain.

Put simply, storage taxes involves creating smaller parts from a larger one, a characteristic it shares with sharding.

In sharding, smaller partitions called shards are created in the ledger. This means that with the help of sharding, participants in the consensus protocol need not execute the entire code themselves – instead, they can execute a part of the code in a block and mitigate the stress borne by the underlying network.

However, for storage taxes, participants in the consensus protocol need not store the piece of data themselves. Participants only need to agree to the integrity of the data being stored. Once the consensus is achieved, the data is stored off the chain.

Storage taxes offer enough tools and incentives for users to save the data off the grid and prove its authenticity whenever required. The motivating factor for users in this scenario is the option to pay for storage that they force on consensus protocol participants to store the data.

With storage taxes there is the reduced memory requirement for nodes – much like the minimal CPU and bandwidth requirement for nodes in case of sharding.

Features Of Storage Taxes

The technology offers features that address some of the most critical challenges the DLT is facing today. One of the features offered is the sleep/awaken function.

Sometimes contracts may get deleted due to storage rent. The sleep/awaken function helps in keeping track of the dormant contracts, saving them from getting lost forever.

However, the sleep/awaken function is not without challenges of its own. The prime obstacles with sleep/awaken is that to get a contract up from its “sleep” or awakening it mandates a proof that the contract was not awakened from the last time it was put to sleep.

To mitigate the expense involved, the “Awaken Bloom” technique has been conceptualized.

The Awaken Boom technique entails that at regular intervals (maybe every block or a fixed number of blocks) a bloom filter of the non-dormant or “awoken” blocks will be published, in addition to the head of a Merkle tree of the live blocks being published.

Nevertheless, there are fears that the process of creating a new account will eventually become cost-intensive. It is estimated that creating a new account will be costlier than awakening an existing account.

The Ethereum blockchain mechanism requires that before an account can be interacted with under any capacity, it must prove that it has never existed in the entire blockchain’s history.

To circumvent this problem, a new type of private key/public key account can be created.

This type of account can make use of the combination of the private key and the block hash of the most recent block published. Once the account address is determined, before the address is truncated, the recent block hash can be hashed with the public key. This will ensure that when you later interact with the newly created address for the very first time, the required proof will only need to go back to the block specified.

Although the concept of Storage Taxes looks promising, there is still a lot of work left to be done to bring it to the forefront of the things in the DLT world.