What is Siacoin? Your ultimate guide
Sia is a decentralised solution to data storage. But can it overcome major trust hurdles?
What if Dropbox was a blockchain? That is the concept of Sia, as it aims to rival key data storage players including Amazon and Google.
Sia is data storage blockchain that uses a peer-to-peer system, instead of a centralised website like Dropbox. It is a matchmaker, connecting renters with hosts. By paying with the Siacoin cryptocurrency, users who would rather rent than invest in hardware can store their files.
The blockchain has faced many hurdles, including absent hosts and users storing illegal data. But how does Siacoin work? Keep reading to have everything you need to know about Siacoin explained.
The Sia blockchain
The roots of Sia date back to 2013, where David Vorick discussed the idea over email with his college friend Luke Champine, who joined the project later that year. They named the project Sia in 2014 after the Egyptian god of perception. Just before graduating, the two created the parent company Nebulous that rebranded to Skynet in 2021.
Skynet handles Sia, which is a decentralised storage platform where renters pay hosts to store their data. By using the peer-to-peer element of blockchain, it gives hosts a monetary incentive to store other peoples data, while it provides renters an alternative to centralised organisations. According to its white paper, the goal of Sia is to become the “backbone storage layer of the internet” and compete with existing storage solutions.
The Sia blockchain uses a proof-of-work consensus to ensure that the data is secured. This system puts miners against each other to compete for the next new block. Vorick argued in a blog post that the proof-of-work system is the best way to keep the network secure as it fends off attackers due to the massive energy and hardware costs.
Sia’s storage process
Sia’s process of renting and storing data is unique. It first takes the file and splits it into 30 pieces before it is uploaded, ensuring that the data can be recovered if something goes wrong. Files can be restored through any 10 out of the 30 segments.
The file is also encrypted before it is uploaded adding a layer of data security. This is different to centralised cloud storage providers like Amazon, who do not usually encrypt user data. This makes it more secure than these traditional methods however it is potentially more important for Sia due to security and fraud concerns with blockchain technology.
A file contract is then formed between the host and the renter by using a smart contract, an automatic computer algorithm that does not require a third party. These contracts agree on aspects of the relationship between the renters and the hosts, including pricing and when their data is available for download.
Renters prepay for the storage with the contracts normally lasting 90 days. If the host goes offline after the contract ends, Sia will move the data to a different host in a process called file repair. At the end of the contract, hosts must submit proof of storage, which will appear on the blockchain and must be completed within a certain timeframe for the host to be paid.
What is Siacoin?
Siacoin (SC) is a utility coin built specifically to be used in the Sia blockchain. Renters use Siacoin to buy storage capacity from the hosts. Meanwhile, hosts deposit Siacoin into each smart contract to be used as collateral. If the host fails to submit storage proof or goes offline, they could risk losing the deposit.
Renters and hosts send Siacoin (SC) micropayments using a channel protocol similar to Bitcoin’s Lightning Network. This allows the main blockchain to be more efficient and scalable as the payments take place off-chain.
There is no supply limit for Siacoin as it is designed to be used countless times. On its support website, it said: “Humans produce so much data that it is effectively a limitless amount – and when Sia is the industry-standard storage layer of the Internet, the network will need lots of Siacoins to fulfil all those contracts.”
Siacoins can be mined using its proof-of-work consensus system. The reward for mining a block will stay at a rate of 30,000 SC. Currently there is a circulating supply of 49bn and is sitting around the $0.20.
Hard fork in 2021
This year Sia completed a hard fork that created the Sia Foundation, a non-profit entity that takes funding from a 30 KS per block fee. This is gradually freeing Sia from the parent company Skynet Labs, which handles the operations.
A hard fork refers to a radical change to the protocol of a blockchain network. In the case of Sia, the hard fork changed its consensus rules to prevent specialized hardware from mining on the network. Obelisk, a subsidiary of Sia’s parent company, manufactures hardware that was created to be one of the only ways to collect crypto rewards from the blockchain. However, other hardware products were able to collect the rewards as well. This hard fork was successful in changing the algorithm to disable non-Obelisk miners.
The other purpose of the hard fork was to separate Sia from Skynet. Skynet is a content delivery system layer that is built on the Sia blockchain. The purpose of the second layer is to provide a peer-to-peer alternative to the internet, where applications can be built and will not go offline unless every user disappears.
The big caveat of using Sia is that the renter is depending on the host to access their files. Opposed to Dropbox where you can access your files any time, Sia only lets you access the files when the host is connected to the blockchain.
Sia has attempted to avoid unreliable hosts through monetary disincentive. By going offline for too many hours or losing the renter’s data, a host can lose the invested collateral. This even occurs if the outage or data loss is accidental, like poor internet or a hard drive failure, due to the automatic nature of the Sia smart contract.
There’s also a risk for hosts. Most renters encrypt their data which is then split into pieces meaning that hosts only have a small encrypted piece of a file. This gives them plausible deniability if they are hosting illegal content. However, it is possible for renters to store data on Sia unencrypted. It warns on its website: “In any case, you may be subject to takedown requests, search warrants, or other adverse actions from law enforcement or your Internet service provider as a host if it is determined that illegal content is being stored on or retrieved from your host.”
Siacoin price history
Siacoin (SC) launched in 2015 around the $0.00004 mark and for the first 18 months the utility token did not pass $0.0001. The coin saw a spike in the summer of 2017 as it reached $0.019 on 19 June. Siacoin went on to reach its all-time high of $0.11 on 6 January 2018.
Although the coin dropped to below $0.005 for the next two years, this year it has been on a bullish trend. The Siacoin cryptocurrency climbed from $0.003 on 1 January to a peak of $0.05 on 17 April. In the following months, it fell to $0.01, but as of 22 November, it is currently sitting around the $0.021 mark.
There is no limit to the amount of Siacoins that can be mined. Currently there is a circulating supply of 49 billion and the price is sitting around the $0.20 mark.
Users pay the hosts that are storing their data with Siacoin. This peer-to-peer matchmaking means that Sia can remain decentralised as no organisation is storing the data.
Currently, there are 31 exchanges that Siacoin can be bought on, according to an Airtable made by the developers. These exchanges include Binance, Bittrex, and Kraken. However, Sia only recommends seven out of the 31 exchanges. Remember, you should always do your own research before investing and never invest more than you can afford to lose.