There's a lot of hype around blockchain storage and its underlying distributed ledger technology. That makes sense, what with IDC forecasting worldwide spending on the technology hitting $12.4 billion in 2022, with a five-year compound annual growth rate of 76% from 2018 to 2022.
However, the reality is it's early days for blockchain and its use in data storage. There are still many details for companies to understand and work out.
Blockchain is based on peer-to-peer, distributed network technology used to validate transactions. It breaks up data and distributes it across thousands of nodes. The technology enables participants to see all the transactions as they happen.
There's a lot to recommend with blockchain when it comes to tracking the movement and storage of data, but there are still a lot of questions surrounding its use for storage. How will enterprises be adequately compensated for being part of a blockchain environment? What strategies are best to minimize risks to participants? What new data security threats will emerge as blockchain storage gains a foothold? How does blockchain compare to other distributed data storage options?
Below, we answer five key questions about blockchain's use for data storage and highlight others that have yet to be answered.
How does blockchain storage function?
Blockchain is based on distributed ledger technology (DLT), which serves as a decentralized database of information about transactions between multiple parties. The transactions populate the DLT chronologically. They're stored in the ledger as a series of blocks, where each block refers to the preceding one, forming an interconnected chain.
Blockchain technology distributes the ledger across multiple nodes. Each node maintains a complete copy of the data, and all the participants in the blockchain can see and verify the ledger so no central authority or verification service is needed.
A blockchain-based storage system prepares data for storage by creating data shards or segments, encrypting the shards, generating a unique hash for each shard and creating redundant copies of each shard. The replicated shards are then distributed across the decentralized nodes in the blockchain infrastructure. The transactions are recorded in the blockchain ledger, and the system validates and synchronizes the transactions across the nodes in the blockchain.
How do you become a blockchain provider?
An organization with available storage can participate as a provider -- or farmer -- in a blockchain storage network, leasing nodes to a blockchain service. When signing up with a blockchain service, such as Storj or Sia, potential farmers must provide information on how much available storage and bandwidth they have, as well as the average downtime of their systems.
Sharing excess storage with a blockchain-based service is a new concept, and understanding its full effect on an organization's storage resources is still unclear. How participating enterprises minimize the risks involved with opening their systems to third-party data and how much compensation they need to take on this risk are among the details service providers and participants are still working out.
What are the advantages of leasing storage to a blockchain service?
There are a number of advantages to leasing storage from a blockchain-based storage network. Distributed storage through a blockchain service is cheaper than on-premises or traditional cloud-based storage. Enterprises using blockchain for storage don't have to buy and maintain equipment or software. They also may not need to have as many management resources devoted to storage infrastructure as they would with traditional storage.
Blockchain data storage offers more transparency than a traditional cloud service. With data distributed across multiple nodes, blockchain technology is able to provide higher levels of availability and fault tolerance. Blockchain also offers performance advantages because users can access data closer to where it's stored.
Blockchain storage is also thought to be more secure than centralized storage because the data is spread out across many data points. Distributed storage is less likely to be universally hit by invasive malware. In addition, the redundancy built into these systems protects against data loss from all sorts of events.
What are the potential drawbacks of blockchain storage?
For blockchain to work effectively for storage, users must have sufficient visibility into the storage environment and must be sure the multiple peers it's made up of are physically and logically diversified enough to guarantee high availability and reliability. For instance, if all the peers in a network happen to reside in the same region, the system could be vulnerable in the event of a major outage in that region.
Operational strain on the network when companies retrieve and consolidate data from different nodes could also be a potential blockchain problem once the technology is in more widespread use. Data security is another area where issues could arise as attackers look for and find new ways to compromise and exploit the technology.
What synergies exist between cloud and blockchain?
Industry experts expect cloud-based infrastructures to be the basis for the majority of blockchain deployments. The two technologies are built on the same concepts and provide similar benefits.
Public cloud providers operate large distributed computing environments, which are key requirements for a blockchain network. They also offer advantages, such as scalability and on-demand compute access, which are blockchain advantages, as well. Moving a blockchain deployment into the public cloud can provide more efficiency and flexibility compared with a corporate environment.