What Is Siacoin (SC)?
Siacoin is a decentralized cloud storage solution based on blockchain and cryptographic technology. Through Siacoin, anyone can store data on the blockchain without compromising their identity and data privacy.
Siacoin was created by developers David Vorick and Luke Champine back in 2013 to be the backbone storage layer of the internet and as a solution to the centralization and privacy issues presented by leading cloud services Amazon and Google today. If you’re wondering what Siacoin is doing differently from centralized cloud storage options – the answer lies in trustless buyer and seller transactions. Anyone can be a storage provider (host) and a storage user (renter) on the blockchain without intermediaries, vendors, or third-party involvement.
Sia’s decentralized open-source protocol uses data sharding techniques and redundancy for instant data retrieval that improves data obfuscation and retrievability.
What Is Siacoin - Key Points
- A wholly decentralized and encrypted blockchain-based storage system
- Open-source proprietary software that splits data into multiple segments and distributes it globally.
- No data access for third-party intermediaries or even the Sia network
- Storage contracts between storage buyers and sellers in a peer-to-peer format
- Highly affordable data storage solution
- SC utility token that can be used on the Sia marketplace for transactions.
How Siacoin (SC) Works?
You now have a basic understanding of what Siacoin is delivering to its users. Let’s take a look behind the scenes to understand the nuances of how Siacoin works.
Anyone with extra storage on their computer can become a storage host on the Sia network. Renters pay for this storage in a contractual system.
Siacoin functions through a storage contract system between renters and hosts instead of from a centralized storage provider.
File Sharding
Before upload, the Siacoin network automatically shards files into 30 (or more) segments and sends them to different storage providers across the globe. These data chunks are sent redundantly to multiple storage hosts. Since each file is split into various segments, transfer speeds are accelerated through simultaneous sharing to file destinations.
Files aren’t just split into equal segments. Siacoin uses a data sharding technology called the Reed-Solomon erasure coding. Reed-Solomon codes were created by Irving Reed and Gustave Solomon and are most well-known for their usage in Blu-Ray discs and ATSC satellite communications. This erasure coding adds network redundancy so that there is no single point of failure. Even if 20 of 30 segments are irretrievable, the original file can still be restored with 10 out of 30 segments to the renter.
File Encryption
All files on the Siacoin network are entirely encrypted. Before a file leaves the renter’s computer, it is encrypted with Siacoin’s default Threefish algorithm. This encryption algorithm is a symmetric-key block cipher and a part of the Skein hash function.
In comparison, leading commercial cloud storage data providers sometimes offer file encryption, but it isn’t always the default storage option. Furthermore, keys to the encrypted data often lie with the storage service instead of giving it to the user, giving them complete access to your data and increasing the chances of data malpractice or theft.
The Siacoin network and storage hosts (storage providers) cannot access any stored data. The only person who can access the data is to who the data belongs, the renter.
File Contracts
A file contract is a mutually consensual agreement formed between the host and renter before the file transfer takes place. It is a smart contract that contains information about the storage duration, pricing, payout parameters, and challenge frequency. A challenge frequency details how often the host must fulfill storage proofs to the network to prove they are legitimately storing the data.
The file contract also contains a maximum limit of missed proofs. It is the maximum number of times a host can miss completing a storage proof – if the limit is exceeded, then the contract is invalidated, and the host is penalized.
The File Contract acts as a cryptographic SLA (Service-Level-Agreement) and is trustless in nature. Hosts and renters do not need to negotiate terms, and the network secures the contract. If the host fulfills storage proofs, they receive payouts in $SC through the course of the storage duration (depending on the challenge frequency) as well as after the contract period.
Suppose the host fails to send the minimum number of storage proofs stipulated in the contract. In that case, funds are sent to an unspendable address called a ‘missed proof address’ to penalize and disincentivize bad host behavior.
At the end of the payouts to the valid proof address or missed proof address, the contract is terminated, and files are returned to the renter.
Storage Proofs
Proof of Storage is when a host proves that they are storing the renter’s data on their storage system. Storage proofs on the Sia network are built using Merkle Tree, a cryptographic technology that validates if a segment of data is legitimately part of a larger data group.
The Storage proof is broadcasted to the network for transparency, enabling anyone to validate it. Proofs are also stored permanently on the blockchain. As of the time of writing, there are 971207 storage proofs on the Siacoin blockchain.
Each storage proof contains an encrypted segment of the original file as well as a list of file-specific Merkle Tree hashes. Irrespective of the original file size, the storage proof size remains small and doesn’t take up too much space on the blockchain.
$SC as Siacoin Currency
Renters, and users wishing to utilize storage through Siacoin, pre-pay for the storage they require in $SC. Hosts also receive payouts in $SC – making it the main currency on the Siacoin network. Payments are made to hosts during each challenge window, which is the time frame during which a single storage proof must be completed. These are called micropayments, and they reduce blockchain bloat and provide minimal latency.
Frequent payouts also incentivize hosts to store file segments for the entire duration. The remaining amount after the micropayments is sent to the host’s valid proof address along with the successful termination of the contract.
Micropayments and final contract payments are fulfilled through a payment channel system. This system is based on Bitcoin’s Lightning Network payment channel technology.
Contract Renewal
Storage contracts on the Siacoin network are time-bound. Usually, the contracts are set to a period of 90 days. Contract renewal takes place upon the expiring of a file contract if the renter chooses to continue using Siacoin storage. Renter software automatically enables renters to renew their contracts close to the expiration date.
Since the renter pre-pays for storage before the storage duration is complete, failing to renew or cancel the contract will cause the network to send unused $SC back to the renter's address.
Siacoin Token Utility | Where Is Used
Siacoins, or $SC, is the currency that powers the entire Sia network. So, what is Siacoin used?
- Renters pay for the storage space stipulated in their file contract in Siacoins before the storage duration. If a renter wants to upload their files and use Sia storage, they will need to pay for this service in the Siacoin currency.
- Storage hosts are rewarded for renting out their excess storage space in Siacoins, $SC. It is the main incentivization for storage hosts, as anyone can earn passively on their unused storage data.
- If you own Siafunds, you hold a share of potential network growth that is later actualized into $SC. Siafunds are a secondary token on the Sia network and fund the development of the Sia network. 3.9% of completed storage transactions go to Siafund holders and can be encashed for Siacoins. 85% of Siafunds are currently with the Sia network core team.
- $SC can be transacted and transferred to others through wallet addresses. You can also obtain Siacoins by mining them or purchasing them on an exchange like OKX.
Siacoin History | Who Founded
Siacoin was created by developers David Vorick and Luke Champine in 2013. Vorick and Champine studied Computer Science at Rensselaer Polytechnic Institute in New York. The early idea for Siacoin, a decentralized file storage network, was pitched by Vorik at a hackathon at MIT in September 2013. Champine, who also attended the hackathon, reached out to Vorik via email and began building together. They named the project after Sia, the Egyptian god of intelligence and wisdom.
The following year in May, Vorick and Champine founded Nebulous Inc – the parent company of Siacoin. After receiving $750,000 in funding for Nebulous Inc, David Vorick and Luke Champine released a public beta version of Siacoin in March 2015. By the end of 2015, Nebulous Inc launched the final version of the Siacoin storage network.
In 2021, Nebulous split into Skynet Labs and the Sia Foundation. David Vorick leads Skynet Labs, while Luke Champine heads the Sia Foundation. Today, Sia has some core developers working toward building a decentralized cloud storage future.
The Sia Foundation was launched in early 2021 and is a non-profit organization that manages Sia. It is headed by a board of directors with Luke Champine as the president and Eddie Wang as the chairman.
Siacoin Tokenomics
Anyone with extra storage space on their computer can earn Siacoin from renters who utilize that space. Siacoin is a PoW (Proof of Work) token used to execute smart contracts on the network. While successful completion of storage contracts sends payouts to storage hosts, Siacoin is used even before the contract can take place. Storage hosts need Siacoins for collateral on the network, while renters need Siacoins to purchase storage space from the host.
Siafunds are a secondary cryptocurrency on the Sia network and act as a tokenized security to pay out holders 3.9% of Siacoin for every contract conclusion.
Siacoin is a mineable Proof of Work token and uses the BLAKE 2b hashing algorithm. The target block time is 10 minutes.
There are around 50 billion Siacoins in circulation as of July 2022, which is also the token's total supply. Miners create new blocks on the Sia blockchain and are rewarded with $SC for each newly created block. Siacoin has an unlimited supply, as Siacoin aims to fulfill the increasing demand for storage and network growth. Siacoin hopes to be the storage layer of the internet and foresees an infinite demand for Siacoins.
However, rewards for mining Sia blocks are diminishing. Sia implemented a standard block reward for when the block height reaches 270,000 – and all subsequent blocks have a reward of 30,000 Siacoins. It means that a constant 1.57 billion Siacoins will continue to be created yearly.
Sia v1.5.4 introduced the Sia Foundation in a hard fork. The Sia Foundation is funded through a block subsidy. This subsidy equals 30,000 Siacoins per block and is paid every 4,380 blocks. This initial subsidy was intended to help kick start the non-profit Foundation, but it also affects the supply structure and creates a spike in the inflation schedule of 6.34%. It is expected to be evened out in the following years through token burns.
With the proof of burn algorithm, the inflation rates are expected to fall below 3% in 2025. Siacoin also expects the inflation rate to compensate for lost coins.
How Is Siacoin Mined?
Siacoin can only be created through mining with the Proof of Work algorithm. Miners contribute computing power to the blockchain and are rewarded in Siacoin for their contribution.
Proof of Work algorithms are high on security and decentralization but are notorious for being resource-intensive and high on energy consumption.
David Vorick, co-developer of Siacoin, argued that Proof of Work is the best chance at safeguarding attacks by making it expensive for attackers.
Siacoin miners used GPU (Graphics processing unit) mining almost exclusively in 2018, but most miners now use ASIC systems. The Sia network also underwent a hard fork to reset the PoW. This hard fork mainly targeted Bitmain and Innosilicon hardware for more egalitarian mining economics. Obelisk ASICs were not affected by the fork and continue to be used. The ASIC mining monopoly indicates GPU mining is no longer profitable for Siacoin miners.
Siacoin Investors and Partners
After Siacoin’s parent company Nebulous Inc was founded by David Vorick and Luke Champine, it received $750,000 in a seed fund round held in September 2014. The investors included Procyon Ventures (an early-stage venture capital fund for AI, computation biotech, and blockchain) and angel investor Xiaolai Li dubbed ‘China's richest Bitcoin billionaire’.
Nebulous Inc also raised around $500,000 from a Siafunds sale in May 2014, which took place in a modified dutch auction format. INBlockchain also issued a $400,000 grant in July 2017, making the total investment $1.7 million up until now.
Siacoin continued to receive funding through its development post-2017 and has received a total of $6.4 million from Fenbushi Capital, First Star Venture, Raptor Group, INBlockchain, and other investors. Siacoin did not hold any ICOs and has received funding from investment firms and angel investors.
Siacoin went on to close a $3.5 million pre–Series A round led by Bain Capital Ventures in 2019. Salil Deshpande, a managing partner at Bain Capital, said that Nebulous was the only investable startup that provided a live solution to centralized storage. He also mentioned that it lacked the technical issues faced by competitors in the decentralized storage space.
Nebulous Inc. holds less than 1% of the total Siacoin supply.
Siacoin Competitors
Siacoin has multi-fold advantages when compared to centralized cloud storage providers like Amazon S3 and Google. Apart from offering encryption as a default, data sharding, and zero-knowledge cryptographic storage proofs; Siacoin happens to be much, much cheaper as well. If you choose to store 1 TB of data on the Sia network, the cost would range between $1-2 per month.
By contrast, it would cost you around $23 on Amazon S3.
But Siacoin is not the only decentralized cloud storage provider based on a blockchain. The top file storage competitors in the market are Filecoin and STORJ.
Siacoin vs. Filecoin
Similar to Siacoin, Filecoin is a decentralized cloud storage provider. Siacoin is two years older than Filecoin and went live in 2015 compared to the Filecoin 2017 launch. Both protocols utilize unused hard disc storage space as a cloud storage solution and operate on peer-to-peer contracts and agreements.
Filecoin is built as an incentive layer on the IPFS (Inter-Planetary File System) which facilitates storage deals. Like Siacoin, Filecoin implements a Proof of storage mechanism to determine whether storage providers are legitimately storing a specific file.
While Siacoin uses a zero-knowledge proof based on Merkle Tree data structures, Filecoin uses two proofs, 'proof of replication’ and ‘proof of spacetime’. Proof-of-Replication validates that the file is a unique data set, while Proof-of-Spacetime proves the time duration of storage by providing multiple sequential proof-of-replications.
Filecoin also raised significantly more in funding through its ICO and pre-seeds. The Filecoin ICO was the largest one to date, raising $257 million (Tezos raised $232 million as a close second). To date, Siacoin has received less than $10 million in funding. It may explain why Filecoin has more robust marketing and is the more popular cryptocurrency.
Siacoin vs. STORJ
STORJ is a fast and secure cloud storage solution that is decentralized and built on the Ethereum blockchain. The STORJ peer-to-peer framework slightly resembles Siacoin – farmers lend their extra storage space to renters who pay for it.
Both Siacoin and STORJ use data sharding – but Siacoin has greater redundancy and file retrievable by sending files to multiple nodes. Siacoin also happens to be marginally more affordable than STORJ. 1TB of monthly storage data comes to $4 for renters, while Siacoin offers this at $1-2.
Siacoin SWOT Analysis
What Is Siacoin’s Biggest Strength?
Siacoin sets itself apart from other decentralized storage solutions with its Proof of Storage cryptographic tech, peer-to-peer contracts, and affordability. Siacoin is often called ‘the Airbnb of hard drives’ as it creates a global market for unused hard disc storage space as an alternative to traditional cloud computing. Siacoin is also the oldest decentralized storage option in the crypto sphere, having been live and running for 7 years.
What Is Siacoin’s Biggest Weakness?
While Siacoin provides an attractive solution to data privacy issues associated with centralized cloud storage – it has obstacles on the ease-of-use front. Amazon S3, Google, and other cloud services are designed to have an easy user interface, and storage back-ups typically run in the background with little effort from the user.
Renters on Siacoin must zip their files and manually upload them individually. They also have to create starting allowances and wait up to two hours for sufficient storage contracts to appear. Successful upload with 3x redundancy can be a lengthy procedure as well. Renters are also responsible for safeguarding their data through erasure codes and backing up their renter metadata.
Siacoin is best designed for archival storage – accessing your data once encrypted and uploaded is challenging. It is also next to impossible to share files that have been uploaded to the Sia network without having to retrieve them individually.
While this process guarantees a greater level of data security, the high-barrier entry can be challenging for beginner-level users and possibly hinder Siacoin’s mass-scale adoption.
What Opportunities Does Siacoin Offer?
Siacoin stands out for providing data privacy, data redundancy, and affordability – but has promising opportunities on the data sharing front. David Vorick, ex-CEO of Nebulous Labs is currently building Skynet Labs, a decentralized storage and app hosting platform. Skynet Lab portals in the Sia network can bring better integrations to Siacoin, offering data sharing and streaming opportunities to Sia’s current data archive model.
What Threats Does Siacoin Face?
Siacoin faces potential centralization threats. Obelisk Tech is an ASIC mining hardware manufacturer owned by David Vorick, ex-co-founder of Nebulous Inc. It makes the Sia network potentially vulnerable since the same company created the proof-of-work algorithm as well as the ASIC mining hardware. Only allowing a specific set of ASIC miners can potentially lead to the centralization of Siacoin mining.
Siacoin Roadmap - What Is Next for Siacoin?
Siacoin does not have a publicly available roadmap but follows a fluid and flexible course-correcting model. Sia’s core team is active on their Discord, and plans are often discussed with the community. Siacoin frequently publishes complex fork updates on the Sia and Skynet Medium blogs.
Siacoin is currently working on:
- Easy File sharing (both inside and outside the Sia Network)
- Support for smaller files. Currently, the minimum space is 40MB. Files less than 40MB take up 40MB of space irrespective of size.
- Support for files larger than 10TB.
- File Recovery through wallet seed
Where Can I Buy Siacoin?
If you’re not mining blocks to earn Siacoin as a reward, the only other way to obtain them is through buying it from a secure exchange like OKX. On OKX, you can instantly buy $SC with your chosen fiat currency. OKX supports over 99+ fiat currencies for $SC, and you can use your supported payment method of choice, like credit cards/debit cards or bank transfers.
How To Store Siacoin?
Once you buy Siacoin ($SC) on OKX, you can store it securely in your OKX wallet for instant access whenever you choose to buy, sell, or transfer.
You can also use Sia’s wallet interface Sia.UI, on Windows, Linux, or MacOS. Advanced technical users can also use Sia Daemon with command line interfaces. Another option is using the Ledger hardware wallet for cold storage.
How To Stake Siacoin?
OKX Earn offers passive income opportunities for holders of $SC. Visit OKX Earn after signing in to your OKX account to access low-risk savings options with flexible lock-in periods.
FAQs
What Are Siacoin’s Trading Fees?
OKX offers competitively low trading fees. Depending on your spot trading volume, you can expect to pay between 0.1%-0.025% for your $SC transaction. OKX also lists $SC in its Quick Convert market. Here you can convert over 106 cryptocurrencies, including USDT, BTC, ETH, for $SC holdings with zero fees or slippage.
What Is SC’s Circulating Supply? How Many SC Are Left?
$SC has a circulating supply of 51,533,362,992 at the time of writing. It is also equal to the total supply. Siacoin does not have a maximum token supply and will continue producing new $SC with a constant miner reward to fulfill an infinite storage demand. However, this growth is tied to a continuous block reward of 30,000 SC.
Will Siacoin Burn Coins?
Siacoin will implement a proof-of-burn mechanism as a layer of network security. It will allow storage hosts to prove their legitimacy by burning a percentage of their revenue generated on the network. Sia also claims that the in-built inflation accounts for lost coins, unrefunded collateral, and proof-of-burn mechanic.
What Is the Difference Between Siacoin and Skynet?
Siacoin and Skynet have the same core team behind them and are part of one ecosystem. Sia is the base Layer 1 of cloud storage, while Skynet is a censorship-resistant publishing platform built on Siacoin as a Layer 2 protocol.
Is Data Secure on Siacoin?
Siacoin is one of the most secure options for storing your data online. Sia is a fully decentralized cloud storage that runs on the blockchain through smart contracts with in-built encryption and erasure coding. Furthermore, storage hosts are incentivized to provide enterprise-level service for your data.
