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Learn > Web3 101

What is the difference between centralized and decentralized storage?

Muhammad Ahmed
Muhammad Ahmed
28 May 2023 · 6 min

Embracing change: transitioning from the centralized to decentralized cloud

Over the years, the manner in which we store our data has evolved. It’s important to adapt and keep up with these changes. Doing so not only allows us to benefit but also prevents us from falling behind.

Originally, companies stored their digital data on-premise, a method that demanded significant investment not only in infrastructure and staff but also in ongoing maintenance. However, with the advent of centralized cloud storage (CCS) services came a simpler, cost-effective alternative, allowing businesses to outsource their storage and easily scale up or down.

As of today, many businesses and individuals completely rely on these centralized cloud storage services. The majority of IT decision makers believe 95% of workflows will be in the cloud in 5 years. However, what began as a cost-effective solution has now become a long-term financial burden and major security risk.

We’re now at the dawn of something new, something better – decentralized cloud storage (DCS). Utilizing blockchain technology to disperse data across a network of nodes instead of a single central location, DCS increases data security and privacy, reduces risk of data loss, and empowers users with full ownership and control of their data.

Out with the old

The long-term financial implications of centralized cloud storage

When it comes to the centralized cloud storage market, there is currently an oligopoly – Amazon, Microsoft Azure and Google – exploiting their market power. Even though the cost of data storage has decreased on average by a rate of 30.5% annually in the past 50 years, the prices of these services have remained flat for the past 7 years.

Additionally, there are hidden fees and high egress costs. Thanks to the exponential growth of data, businesses are now forced to spend up to one third of their IT budgets on just storing and managing their data.

If you think this pricing model for data storage is unsustainable, you’re not alone. Nearly two thirds of a thousand IT professionals surveyed in the UK believe that the current pricing model stifles innovation.

Given the unpredictable nature of monthly subscriptions, it’s virtually impossible to determine the total cost of ownership (TCO) for sustainable storage and maintenance of your data. This needs to change.

Info icon Total Cost of Ownership – TCO

TCO refers to the overall cost of a product or service through its life cycle. It's a financial estimate designed to help consumers and enterprise managers determine direct and indirect costs related to a product or system. It includes not only the initial cost or purchase price of a particular item, but also the full cost over its lifetime, which may encompass maintenance, operational expenses, support, decommissioning, and other related costs. This concept is particularly important in IT decision-making, as it allows companies to assess the comprehensive financial impact of implementing new technologies or systems, beyond simply the upfront acquisition costs.

Navigating T&Cs: hidden pitfalls of cloud storage agreements

Most reputable cloud storage providers have policies that clearly state they do not claim ownership of the user’s data. However, once you agree to their terms and conditions, you often grant them a license to use, host and reproduce the data as necessary to store your data.

After your data has been uploaded to a CCS provider, you no longer truly own it. This means those providing the service have the ability to view and control your data.

Data security risks in centralized systems

CCS providers store information in a single location or a few locations, which are managed in a single database by a single entity. This means they have a single-point-of-failure. If something were to happen to the infrastructure hosting your data, it can be lost forever.

Due to their centralized nature, they are also prone to data breaches and service outages. The Big 3 – Amazon, Azure and Google – have all suffered from many data breaches. Since CCS providers retain control over encryption keys, they have the ability to decrypt data stored on their servers. This arrangement, while convenient, comes with an inherent risk: if their system is compromised, your data can fall into the hands of the attackers.

A study on ransomware indicates that in every enterprise environment there are identities that, if compromised, could grant an attacker access to 90% of the data buckets within an AWS account. This alarming insight is based on the breach of just one identity. Typically, ransomware attackers move laterally in order to compromise multiple identities which gives them an even more substantial level of access. What's more, ransomware is a problem on the rise – in a recent 2022 study by IBM it was found that ransomware attacks had increased by 41% on the previous year.

Censorship threats in centralized services

As if the possibility of your data being breached or losing it isn’t enough, you can also be censored.

When politics enter the equation, the range of users that CCS providers can service may become limited. Governments may exert pressure on CCS providers to suppress or remove content they consider inappropriate. A notable instance of this occurred in summer 2021 when the Chinese government banned the pro-democracy paper, Apple Daily. The move effectively censored the journalists but just before being taken offline, employees successfully uploaded all content to Arweave, a decentralized cloud storage service.

Censorship can also come in the form of politically biased moderation. Businesses that are thinking of using centralized storage providers should carefully assess suspension and non-renewal risks. There is often a fine and blurred line between moderation and censorship.

Moderation is using a sledgehammer when you need a scalpel, and there will be all sorts of collateral damage to legitimate businesses.

Corynne McSherry, Electronic Frontier Foundation

As businesses grapple with these challenges of the centralized cloud, its decentralized counterpart is quickly gaining ground.

In with the new

Embracing cost-effective decentralized cloud storage solutions

Decentralized cloud storage (DCS) providers often offer far more competitive prices in comparison to their centralized counterparts. The payment models can be divided into two types: contract-based vs permanent storage solutions.

The cost of storage on contract-based DCS providers such as Filecoin, Sia and Storj is estimated to be $0.002, $0.0094, $.0.048, per GB per year respectively. This does not include ingress or egress charges albeit they charge a tiny fraction of what CCS providers do. Overall, the cost incurred with DCS providers is just a fraction of what their centralized counterparts typically charge.

The cost of storage on CCS providers such as Amazon, Azure and Google is estimated to be $0.276, $0.25, $0.24, per GB per year respectively. These estimates do not include other hidden fees, ingress and egress costs which are known to compound as your storage needs grow.

Cumulative cost of 1 GB over 200 years

Permanence and immutability with Arweave and Akord

Arweave is revolutionizing the DCS landscape by offering a truly permanent storage solution. 

Thanks to its unique architecture, any data stored on Arweave is designed to to be stored for at least the next 200 years. As your data is uploaded to Arweave, it gets a timestamp on the blockchain, providing immutability and integrity.

Info icon Blockchain timestamp

A blockchain timestamp is a unique cryptographic record that marks the exact time and date when a certain event, like a transaction or data entry, was added to the blockchain. It's crucial because it provides an immutable, verifiable chronology of events that enhances transparency and trust in the system. This immutable timestamping feature is foundational to many blockchain applications, such as secure financial transactions in cryptocurrencies like Bitcoin, where it's critical to prevent double-spending, and in supply chain management, where it allows for authentic tracking of goods. The security and immutability of a blockchain timestamp ensure the integrity and reliability of the stored data, leading to more robust and trustworthy decentralized systems.

Services like Akord that are built on Arweave, allow you to pay for your storage upfront and eradicate the concerns of hidden costs such as ingress or egress fees. This transparency allows you to calculate the total cost of ownership from the onset. You no longer have to worry about compounding storage costs and the risk of losing your data if you are unable to pay monthly subscriptions. If you stop paying an Akord subscription, your data will always be accessible on-chain or through Akord Explorer. You will only lose access to the paid features of our digital vault software. 

The benefit of data ownership 

Have you ever thought about who actually owns your data in the cloud? With CCS, those providing you the service have the ability to view your data, edit it or delete it. They own your data and you’re effectively renting access to it.

With DCS providers, your valuable data is under your control. As you own the keys to that data, only those you wish to see your data will be able to access it. Once your data is uploaded to Akord, it is both immutable and permanent – no third party can tamper with, censor or remove that data.

Enhanced data security in decentralized storage systems

DCS is far more secure and reliable in comparison to CCS due to its nature. In decentralized storage, the data is stored across various nodes and is governed by blockchain technology. This means that even if one node experiences a breach, the data is still secure and intact in other nodes. Any potential attacker would have to simultaneously compromise a substantial number of nodes to gather the complete data, making the task prohibitively difficult. This dispersion of data substantially mitigates the risk of a single point of failure.

In addition, decentralized cloud storage leverages advanced cryptographic technologies to protect the data. In many cases, the data stored on a decentralized cloud is broken into pieces, encrypted, and then spread across the network. Therefore, even if a piece of data is intercepted, it would be virtually impossible for unauthorized individuals to decrypt and make sense of it. Each piece is also replicated and stored in multiple locations for redundancy, ensuring that even if some nodes were compromised or went offline, the data's integrity would remain unaffected.

Thanks to zero-knowledge proofs and end-to-end encryption, not even the DCS providers hosting your data have the ability to access your data. You truly own the data as only your private keys can be used to decrypt and access it. As such the risk of internal threats, data misuse, and unauthorized access are nullified.

Censorship resistance: a key advantage 

No central authority has the power to exclude you from participating in DCS networks. Moreover, if you use Akord your data is immutable thanks to the permanence of Arweave, making any information uploaded inherently uncensorable. Concerns about moderation or suspension risk due to the content of your work cease to exist with DCS.

A case in point that illustrates the power of censorship resistance through DCS is the story of Apple Daily. This popular tabloid, known for its sensationalist writing style, had been a staple in Hong Kong for 26 years. However, in 2021, amidst a broader crackdown on press freedom, the Chinese government forced Apple Daily to cease operations.

Despite this, thanks to DCS, all was not lost. Over 4,000 articles from Apple Daily found a new, permanent home on Arweave. While the physical publication might have been silenced, its legacy and contributions to journalism were preserved, demonstrating the resilience and potential of decentralized cloud storage.

Conclusion: the future of data storage lies in decentralization

This evolution from on-premise storage to centralized cloud storage, and now to decentralized systems, signifies a critical paradigm shift in how we secure and manage data. Decentralized systems offer a more cost-effective, safer and user-centric approach to data storage compared to their centralized counterparts.

Companies such as Filecoin, Sia, Storj and Arweave are leading the way, offering decentralized cloud storage solutions that embody data ownership, privacy, security and censorship resistance. 

With these platforms, you can confidently store your data, knowing it's safeguarded by advanced cryptographic measures, distributed across various nodes, and is solely under your control. By using Arweave and Akord you can further ensure data permanence with a one-time fee.

It's not just about storing data anymore; it's about owning, securing and controlling it in a truly decentralized manner. It's clear that decentralized storage isn't just a passing trend, but the next big leap in data storage technology.

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