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Crypto 101: An Introduction to Storj

Crypto 101: An Introduction to Storj

It takes a particularly brave entrepreneur to take on the cloud storage space.

Dropbox’s first earnings report as a publicly traded company reads like a victory lap. A staggering 11.9 million users pay for the ability to easily store their data in the cloud, pushing annual revenue to $339.2 million.

A 12-hour drive away from Dropbox’s headquarters in San Francisco, Seattle-based Amazon managed to increase operating cash flow to $21.8 billion – a yoy increase of 22%.

Back in sunny California, Google’s parent company Alphabet reported revenue of $31.16 billion, and is seemingly growing faster than it was a year ago.

The financial muscle of Dropbox, Amazon’s AWS service, and Google Drive could hardly be more impressive. These are technology juggernauts that have vast sums of capital at their disposal and surely present an insurmountable level of competition for an outsider in the cloud storage industry.

It’s even more impressive that a number of small, blockchain-powered disruptors have entered the field with the aim of turning the industry on its head. Filecoin, Storj (STORJ) and Sia are the most promising among them, and today we will focus on what makes Storj an interesting alternative to the mainstream providers listed above.

What is Storj?

Founded in 2014 by Shawn Wilkinson and John Quinn, Storj is a peer-to-peer, blockchain-powered cloud storage network which allows members to share and transfer data in a trustless way.

Storj has been very successful with this approach, raising over $35 million in equity and ICO funding. This has allowed the Atlanta-based startup to grow their customer base to several thousand network members and their team to over 40 employees.


As the whitepaper makes clear, the benefits of a decentralized and peer-to-peer approach are manifold. Most importantly, the removal of central controls significantly reduces the number potential vulnerabilities hackers could exploit.

To get a feeling for the severity of this issue, you only need to turn to the litany of poorly configured AWS buckets that have come to light in 2018. As mentioned previously, AWS is Amazon’s cloud storage solution primarily targeted towards enterprises. In order to use this service, the customer (usually a business) creates a “bucket” to which assets, such as images, personal information and so on, can be uploaded. These buckets are private by default but human error can easily set them to “unsecured”, meaning that anyone who can find the link can access them.

As Engaget reports, the domain registrar Godaddy kept a significant amount of sensitive information stored inside such an unsecured AWS bucket. This means that information which could easily be used to attack the company was accessible to malicious actors.

A more drastic version of the same mistake has been reported by ieee, with the publication claiming that millions of U.S. voter records were exposed on Robocent’s poorly configured AWS bucket.

These are two grains of sand in a desert of cloud storage issues, which make one thing clear: unencrypted information stored by a central authority is vulnerable to hackers and other malicious actors.

Luckily, blockchain technology is now being used to eradicate these attack vectors. More specifically, Storj allows “renters” to upload files which are then encrypted and fragmented across the network.

Using this approach, malicious actors gaining access to servers in the network would not be able to retrieve and misuse the information encrypted therein. Instead, when the renter wishes to retrieve it, the file is recompiled and decrypted on the spot using Storj proprietary technology stack.

Understanding file sharding

The key to Storj’s success is known as file sharding. This is the process by which a file is disassembled and scattered throughout the network. Only the owner of the file knows where all the individual pieces are kept, safeguarding the users’ privacy.

To fully ensure that only the owner of the file can locate all the pieces, Storj uses distributed hash tables. These require a private key to open and – once opened – show the location of the shards within the network. It is practically impossible for anyone without the private key to guess the locations of the shards.

Crucially, Storj has managed to take this approach to another level by introducing parity shards. These essentially allow files to be stored on the network multiply times, meaning that if a computer shuts down, or leaves the network, your shard remains available.

Exactly how many times a file is stored on the network is determined by the level of redundancy a user chooses before uploading the file.

Despite increased redundancy and parity shards, users are encouraged to recompile files and re-upload them to ensure their long-term availability. It is not unimaginable for example, that shards from multiple copies go offline given enough time.

Understanding the Storj marketplace

Importantly, Storj does not provide the storage space itself, but instead provides a marketplace where “renters” can pay for storage provided by “farmers”. As prices are determined dynamically on the network it is touch to predict how much farmers will earn from offering their disk space.

Additionally, the amount a farmer is paid depends on whether his disk space is actually used. To get a rough idea of pricing, we can approximate that farmers earn $2-6 per TB of used space per month. For providing upload bandwidth on the other hand farmers can expect to get the equivalent of $0.02-0.05 per GB per month.

Interestingly, farmers are typically paid at the end of each month, meaning there is a slight delay between renting out storage space and earning the rewards. Farmers can check the status of their payout here.

As is to be expected, payouts occur using Storj’s proprietary STORJ token, although the whitepaper specifies that the network is payment agnostic. This has the compelling implication that other, more mainstream cryptos like bitcoin and ethereum could be used to pay for file transfer and storage.

Finally, farmers should be aware that Storj does not seemingly provide protection from illicit use of storage space. This results in a grey area, where illegal material could potentially be stored on your disk with murky judicial consequences.

Understanding contracts and negotiations

Now that we have a basic understanding of Storj, we can get stuck into the meat and potatoes. As mentioned above, pricing is dynamically determined and consequently requires a certain level of negotiation between the “renter” and the “farmer”.

In detail, the contract typically comprises all information required for each node to form a relationship, perform audits, process payments as well as storing and transferring the data.

Both parties sign the contract and keep a copy so that the terms of the contract can be verified at any point.

To actually negotiate the terms of the contract, the farmer sends an OFFER message to the prospective renter. This message contains the fully articulated contract, and can elicit one of the following responses:

  1. Termination of the contract negotiations
  2. A new counter-offer
  3. Acceptance of the contract

Once the contract is cosigned by both parties, the renter must establish a similar relationship with a number of other farmers. Once a sufficient number of relationships have been established the renter has permission to upload his file to the network.

Understanding the Storj Bridge

Another fascinating concept is described in the whitepaper as the “Bridge”. This innovative feature allows developers to access the Storj network via an API call.

This is an important achievement because it allows the ecosystem to flourish without necessary understanding the intricacies of audit procedures, cryptocurrencies or the network as a whole. More impressively the Bridge acts as a trusted third party, which takes on responsibility for contract negotiations, auditing, payments and file sharing.

In short, the Bridge is helping to reduce the amount of technical knowledge required to become active on the Storj network.

Understanding Storj’s strategy

Storj’s strategy is focused primarily on the enterprise market. Promising partnerships have already been announced in industries as diverse as healthcare and super computers.

More specifically, in December 2017 Storj announced a partnership with, which will focus on securing medical records on the blockchain. Excitingly, this project could help dissolve the myriad data silos which contain vital medical information and thus vastly improve medical care. This can be seen as a further step towards revolutionizing the healthcare industry.

In terms of regional expansion, Storj has managed to strike a partnership with Genaro – the first Turing-complete decentralized storage network based in Asia. Considering how important the Asian market is to the crypto-ecosystem, it is easy to see why Storj would seek a way of entering the market organically.

Finally, Storj has entered into a collaboration with SOMN (Supercomputer Organized by Network Mining), with the aim of increasing STORJ usage. By providing SOMN users with the ability to store and share files, Storj stands to significantly increase the usage of its token, with positive ramifications for its market cap.


According to reports from Reuters the cloud storage industry is on pace to be worth $92.4 billion by 2022. Multinational corporations like Google, Amazon, Microsoft and Dropbox are vying for every customer, driving down prices in the process.

In such an ecosystem, it’s hard to believe in the underdog. Storj currently has a market cap just north of $45 million, which means it has a fraction of the resources available to the big fish listed above.

Perhaps more importantly, Storj is lagging behind even other blockchain solutions. Filecoin and Sia have managed to strike bigger partnerships and raised significantly more funds. More disheartening still, little tangible progress is visible since the ICO raised $30 million in June 2017.

As of August 31st 2018, the Storj homepage simply links to a waiting list. Considering how rapidly the competition is scaling, Storj needs to move fast to make sure it doesn’t fall too far behind.


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