Key takeaways
- Storage tokens are digital assets proving data ownership on decentralized storage networks, allowing users to access, sell or transfer their data rights.
- Users can earn storage tokens by providing storage space to the network, participating in governance or sharing files with others.
- Unlike traditional cloud storage, decentralized storage solutions offer better security and privacy by spreading data across many computers.
- Decentralized storage networks use blockchain technology to organize and encrypt data across multiple nodes while improving security and reducing data loss.
Many people have some degree of unused storage space in their computers, servers or even standalone hard drives lying around. But what if converting that extra storage space into a profitable venture were possible?
That’s where storage tokens and decentralized storage solutions come into play.
The emergence of storage tokens can be connected to the blockchain industry’s increasing need for dependable, censorship-resistant, storage solutions. As blockchain technologies gain more momentum, so does the demand for decentralized alternatives to cloud storage solutions.
What are storage tokens?
Storage tokens are digital assets that prove you own a piece of data stored on a decentralized storage network.
Just like a receipt proves ownership of a particular product, a storage token proves you own the right to access and use the data stored in decentralized storage platforms. This also means you can get your data whenever you want and sell or transfer your ownership to the next person.
Like other cryptocurrencies, storage tokens can be bought and sold through various cryptocurrency exchanges, but their value is based on the demand for storage space.
How to get storage tokens
There are several ways to acquire storage tokens on decentralized storage platforms. One way is to provide storage space to the network. You can do this by running a node on your computer or server.
To get started, you have to download the platform’s application, register and link your storage device, such as a hard drive, to the network. Once set up, the platform starts using your storage space, and you are paid storage tokens for storing data for other people.
Another way to earn tokens is to participate in the platform’s governance process, which may include voting for or contributing to its future development.
Did you know? Some storage tokens, such as Filecoin (FIL) and SiaCoin (SC), can be used across different decentralized platforms, meaning the tokens you earn on one network might be accepted on another for similar storage services.
What is decentralized storage, and how does it work?
Decentralized storage spreads data across many computers or servers instead of relying on one central server. This approach makes the system more private, securer and less vulnerable to failures or censorship.
But there are some downsides, too. If a large number of computers on the network go offline or aren’t responding, it could be difficult to access the data. Plus, as you need to communicate with several computers, retrieving data can sometimes take longer.
Blockchain plays a key role in how decentralized storage works. It encrypts data in decentralized storage by grouping it into cryptographically connected blocks, making every piece of data safe and unbreakable. This makes it nearly impossible for unauthorized users to access or alter the data.
Decentralized storage vs. traditional cloud solutions
Businesses and individuals often rely on centralized services to store large amounts of data. The data on traditional cloud storage platforms, such as OneDrive or Dropbox, is stored on single or multiple servers maintained by a central authority. And while these platforms offer convenience, they come with significant risks.
Millions of people can lose their data if these organizations suffer technical issues or cyberattacks. Moreover, users’ privacy may be violated by centralized storage providers using or selling their personal information without the required authorization.
Decentralized storage platforms powered by blockchain technology can offer solutions to these problems.
By spreading data over several nodes in a network, data loss can be reduced and security increased. Users are in control of their information, and no one from a centralized authority has the power to sell or edit it.
Some decentralized storage systems also allow users to earn crypto by contributing their unused storage space, making it a cost-effective and secure alternative.
Although centralized storage has advantages, decentralized storage is gaining popularity among people who want more security, privacy and financial rewards.
Did you know? Decentralized storage platforms can reduce the environmental impact of traditional cloud solutions by offering up existing, unused storage space on individual devices.
Key use cases of storage tokens
Storage tokens can be used in many industries, which is why they have attracted attention for the past years. Here are some of the most common use cases to choose the best storage tokens for you:
- File storage: File storage tokens, such as Filecoin, enable users to securely and effectively store files without relying on centralized service providers. This ensures data integrity and facilitates retrieval and handling of information.
- Data monetization: Storage tokens, such as Ocean Protocol (OCEAN) and Arweave (AR), can make data sharing securer and more transparent. In the meantime, they allow people and companies to monetize their data while still being in charge of it.
- Decentralized applications (DApps): Storage tokens, such as Holo (HOT), can help DApp developers provide reliable services, as they offer a secure infrastructure to store application data.
- Supply chain management: Storage tokens, such as OriginTrail (TRAC), can also improve supply chain transparency as they can help safely store information about the product’s origin.
- GameFi: Storage tokens, such as Chiliz (CHZ), can allow players to safely store virtual in-game items and exchange them with other players.
In short, storage tokens have the potential to reshape the way we store and exchange data while offering more efficient solutions across various industries.
How to invest in storage tokens
Investing in decentralized storage tokens, such as Filecoin, may initially sound challenging.
In reality, earning passive income while contributing to a growing network of storage tokens can present a lucrative opportunity.
Step 1: Understand the market
When choosing the right storage tokens for passive income, consider factors such as the network’s activity, potential for price growth and overall simplicity of use.
The appeal of decentralized storage goes beyond earning tokens; it allows users to effectively monetize their excess storage space. Every storage token has distinct features and uses its proprietary underlying technology. Get acquainted with the use cases, ecosystem and issues each token seeks to resolve.
When researching storage projects, consider the following factors:
- Team and development: Research the development team of the project, its recent developments and its roadmap.
- Community and ecosystem: Look at the level of community interaction with the project. Engaging communities usually suggests a healthier project and a higher propensity to succeed.
- Partnerships and integrations: Evaluate the partnerships created by the project. Relationships with well-established firms can help increase credibility and expand the market niche.
Step 2: Choose an investment strategy
Decide on an investment strategy that aligns with your financial objectives and risk tolerance:
- Long-term holding: Become a long-term holder of storage tokens and claim gains from the potential increase in token prices caused by the application’s usage.
- Active trading: If you have experience and are comfortable with market fluctuations, consider actively trading tokens to take advantage of short-term price movements.
- Yield farming and staking: Some platforms may offer yield farming or staking opportunities, where you can lock your tokens for a period to earn additional rewards.
Step 3: Participating in the ecosystem
Engaging with the storage token ecosystem can provide additional earning opportunities.
Become a host or a node
One way to earn money with decentralized storage is to become a host or a node of a decentralized file storage platform.
A host typically provides extra storage space to the network and can set their own rates for storage. At the same time, a node validates transactions and contributes to the overall functioning of the network.
Depending on the decentralized data storage network, becoming a host may require some technical knowledge and becoming a mining node sometimes requires specific types of hardware.
Participate in governance
Tokenholders can participate in voting and other decision-making processes in certain projects. By voting, participants can potentially impact the storage network’s development, augmenting its stability and value.
Did you know? Some decentralized storage platforms allow you to receive tokens for sharing files with other users in addition to paying you for storage space. This way, you can earn more tokens as more people access your shared files.
Should you start using decentralized storage and earn storage tokens?
With the increasing popularity of blockchain technology, customers worldwide may effectively rent extra storage. Decentralized storage, protected by encryption in a peer-to-peer network, can significantly increase the amount of data that can be stored globally while giving regular people an opportunity to make money off of their unused hard drive space.
However, it’s essential to carefully consider the risks and rewards before deciding to participate. Decentralized storage can be complex to set up and manage.
Additionally, the value of storage tokens may fluctuate, and the earning potential can vary depending on factors like network demand and available storage space.
Yet joining a storage network might be a good way to make extra money if you have additional storage space and feel comfortable with the technical aspects of decentralized storage.
The decision of whether to use decentralized storage depends on your individual goals, risk tolerance and technical expertise.