Welcome to the third part of the series designed to help you learn everything about Sia. For those who missed the first two articles, you can find them right here:

#1: Welcome to the Sia network

#2: Organizing your Sia-UI wallets and seeds securely

Today we will take a deeper look at the cryptocurrencies, or better said, the tokens and securities that are circulating through the ecosystem of Sia. They make sure that everything works, both technically and from an incentive perspective. We will look at the reasons they exist, their usage, and where to obtain or earn them. There are two currencies that the Sia network supports and that can be sent or received in the wallet. Most users are aware only of one, Siacoin, as the other, Siafund, is visible in the UI only if you have some.

Siacoin (SC)

The first and most common mistake I see all the time is people calling the currency SIA, the same name as the network. It seems to make sense to them if they only hold it, but is very confusing to anyone actually using it. The network is called Sia and the currency enabling us to use it is Siacoin with SC as the ticker symbol commonly used on exchanges.

Siacoin is a cryptocurrency that was never pre-mined and is only entering circulation as a result of mining. For more info on mining and coin distribution, I recommend you read the first two parts linked above.

How they get made

Those who earn the new coins by mining do it as a paid service. They buy and use expensive hardware with a single purpose — mining crypto. It’s a very targeted device because it cannot be used for anything else. But it provides an important security layer to the network by powering the transactions that take place. They earn Siacoin (SC) as their mining reward and then distribute it with profit to the broader community, usually via exchanges. For those who know Bitcoin, this is the same process, but with its own network and Proof of Work algorithm. The only difference is that while Bitcoin has a limit of coins that can be mined, Siacoin doesn't. Practically though, it has a kind of limit as we exactly know how many coins will be created in our lifetime and it is very slight inflation compared to the total number of coins in circulation. But technically there is a lower limit to the mining reward, which is 30,000 SC per block (it started at 300,000 with the first, genesis block) and we will hit it in a few months.

Supply and demand

There is always going to be some block reward to ensure that there are new coins entering circulation. Remember, this is not just a currency like Bitcoin, this is a data storage network. If it becomes successful, it can happen that a majority of the coins will be locked in storage contracts. The existence of the block reward then guarantees that the network can continue performing smoothly and users always have the option of either buying it on exchange, using some middleman (storage services built on top of Sia and providing fiat payment gates), or mining it themselves. This helps to keep everything working and self-balancing.

Another self-balancing technique that the network uses is coin destruction. Some coins are burned by host announcements and lost in collateral from bad-actor hosts. These two things also help with Siacoin inflation .

But miners are just where it begins. You probably know that when it comes to decentralized storage, your paper currency is quite useless. Not even the funds on your bank account can help you as there is no payment gateway. Some other projects have them and those gateways are the points of failure, because if they go down, you cannot access your files.

The importance of Sia having its own currency

And that's where Siacoins come into play. It is a cryptocurrency specifically designed for this kind of service. Its blockchain supports storage contracts so you can form these with the selected hosts directly. Once the contract is formed, all payments between you and the other side are instant through the payment channel and in the near future there will even be pre-payments possible.

Thanks to this you only pay for what you really use. I believe this is beginning of the internet where you have the option to pay tiny micro-transactions only for content you see instead of blanket subscription fees.

It goes further

Then there are hosts who also use SC. Hosts are the providers of the storage you use when you upload data to Sia. Not only is it the currency in which they get paid for providing the hosting service, but they also need to provide some as good faith collateral to begin with. Hosting is a serious job and needs dedication to fulfill your part of the promise, or else you lose your collateral.

And finally, beyond those that hold SC for investment reasons, are the holders of Siafunds.

Siafund (SF)

Siafund is a supplementary token of the Sia network with only 10,000 SF that will ever be in existence. Unlike Siacoins, which can be divided up, a single SF cannot be split. They are only transferred or held in whole units.

You can hold it in the same wallet, but will never see it mentioned (at least in Sia-UI) unless you have one. These tokens are securities, and you can read more about the landmark 2019 SEC settlement that declared them so. They are used for revenue sharing on the Sia network; a 3.9% fee from every storage-related transaction on Sia is distributed to the holders of Siafunds. The Sia core team currently holds approximately 85% of all Siafunds while the rest were distributed to the community in a total of three offerings over the last five years. This distribution trend is expected to continue.

What the developers say about Siafunds:

We created Siafunds in order to sustainably fund the development of the Sia network. Siafunds incentivize and enable us — and investors — to maintain and improve the Sia network by capturing a share of revenue as the network grows. As more users pay for storage, Siafund revenues increase, and more resources can be devoted toward Sia development.

This is quite a unique business model in the world of crypto and the only one I've seen so far that gives the developers the right incentives. Instead of giving them millions or billions of pre-mined coins and never seeing any useful development on the network, Sia developers and their investors (and by this I mean those backing the development, not your average speculator on an exchange) do not hold many SC — less than 0.1% of the supply, in fact. It forces them to be fully committed to follow their goal of getting decentralized storage ready for the post-cloud world. They will see any of the invested money and time back only if they succeed.

Sia already has a working product. It has for a long time, but version 1.4.0 in April 2019 changed the game by making Sia production ready, and the network is reaching new peaks every month now as you can check out here.

The site, SiaStats, has many interesting numbers including those related to Siafunds and their profitability. If you think about the state and potential of Sia for a while, you will come up with even better questions related to the increasing monthly growth of rented storage amount and no running costs. Quite interesting, right? It is truly an interesting asset to hold.

Where to buy Siacoin (SC)?

If you plan to give Sia a try, especially with SiaStream, Skynet, Cloudly, and other apps around the corner, you will need some SC to begin. And because the majority of users cannot participate in mining (at least not efficiently), you need to buy Siacoins from others who have them.

To do so you need to use an exchange. You can find preferred exchanges here, or the full list here. If you do not have one, most of these (if not all of them) require KYC (Know Your Customer) so you need to provide them with your ID.

Some exchanges will let you trade Siacoins for your local fiat currency. As Siacoin is mostly traded for Bitcoin (BTC), you will first need to get some BTC, so it is handy if you select an exchange from the above list that supports both SC/BTC pair and also allows you to buy BTC with your money. Let’s assume that by now you have an account on some exchange with SC/BTC pair and you have some BTC.

If you access the trading books, all of the exchanges have different interfaces but the panels are very similar. You usualy see two columns, one with buy orders and a second with sell orders. Buy orders essentially say “I’d like to buy x numbers of Siacoins for y price” and sell orders mean “I’d like to sell a number of Siacoins for b price”. These are offers from other users (or bots providing liquidity and getting profit from the margin) that you can accept (fill) instantly or you can place own buy order and wait until a counterparty to accept it appears.

Lets say you are not a pro trader and want just some SC quickly, you can enter the amount you want and press Market Buy (or just Buy in some cases).

Exchanges have a wallet too. It’s where your coins go after buying them. You can click Withdraw and specify your Siacoin wallet address (one that you created in previous article in this series). And that is it. Last thing to mention is that exchanges usually batch transactions and so there are delays, but usually not longer than 15 minutes. You should usually see the SC in Sia-UI in 15 to 30 minutes.

Troubleshooting

If you cannot see the SC and you got a transaction ID from the exchange, try to search it in a Sia blockchain explorer. If you didn’t find it, contact the exchange as they failed to broadcast the transaction to the network, but subtracted the SC amount in their internal database, so they owe you a refund. If you can see it, the coins are already yours and the problem is in your blockchain data.

You might be an existing Sia user who didn’t update before the fork on November 1, 2018 and even if you tried to update since then, you are already synced with the legacy (mostly abandoned) network past the point of automatic resolution and cannot see any Sia transactions past that date. The solution is to manually perform a clean installation of the Sia software. It works like a charm so no worries… once you get 100% re-synced, you will see your SC in your wallet.

Where to buy Siafunds (SF)?

There are only two ways. Well, actually three if we count Nebulous and their TSO (Tokenized Securities Offering), but it is unknown when there will be a next one. So far there were two events like this in five years.

The first (and recommended) way is to buy them on Bisq, which is a peer to peer, decentralized exchange. However, be prepared that Siafunds are highly illiquid assets and there may be no offers during some times. It is usually best to visit the Sia Discord server, join the #siafunds channel, and ask there. Once you find a seller, you can safely proceed with the trade on Bisq where the seller creates the offer and you accept it.

Second way is to do the trade using some escrow service. You can ask in various Sia communities, but be careful as there can be impersonators and so you should always be the one who begins any discussion (so you can be sure you talk with the person you want and not some scammer who made an account with an ID that looks the same).

Nebulous recommends that you research the applicable securities laws in your country before buying or selling Siafunds.

If you are based in the United States, you may be required to be an accredited investor to buy or sell Siafunds. Nebulous recommends consulting with an attorney.

Siafunds can be held in Sia-UI as well so just get them sent to the same wallet address you use for SC. Once you get the SF, you will see both currencies in the wallet’s balance.

Until next time…

You should have quite a good idea about how the network works, how to securely manage your wallet and seed, and where to get some coins. Next time we will look into how to make your life better as a renter and take a look at some rather cool examples!

So see you then and feel free to contact me on Discord (Danger#1924) if you have a question I forgot to answer in this article.