Web3 data economy: A new era of cloud storage?

Over a decade has passed since former Google CEO Eric Schmidt made the following estimation: “Every two days, we now create as much information as we did from the dawn of civilisation up until 2003.”

Fast forward to today, current estimates project that 463 exabytes of data will be created each day globally by 2025. With numbers growing exponentially each year, it’s clearer than ever that the advent of cloud storage ushered in a new era of accessibility and convenience for millions of businesses as rapid digitalisation takes place at a breakneck speed

Supporting this demand are cloud platforms such Microsoft Azure and Amazon Web Services, which have satisfied the endless appetite for data storage for decades. Yet, in spite of all the advancements made in recent years, it’s worth asking ourselves if existing cloud-based solutions are truly serving the needs of businesses today. For one, the majority of these services are centralised by design, making them far more susceptible to cyberattacks. In 2022 alone, 45% of data breaches occurred in the cloud, amounting to US$9.26 million worth of data lost, according to IBM’s Cost of a Data Breach Report 2023.

Accelerated by the shift in a dynamic where internet users are now re-evaluating their relationships with Web2 platforms, the internet is set to undergo great change in the next few years. From the read-write era of Web2 to the read-write-own era of Web3, are today’s cloud storage solutions fit to support the next phase of the internet’s evolution?

The centralisation conundrum

Before the cloud was the norm, what were things like before? For one, companies needed to store everything themselves — be it on their own hard drives or on-site servers. As companies grew in size and sophistication, compounded by the growing normalisation of digital for everyday consumers, the amount of data and software these businesses relied on equally grew. The larger the organisation, the more data they had, and as such, the more storage they needed and the more specialised labour was required to manage it. Clearly, handling all these storage requirements themselves simply wasn’t scalable in the long term.

The same conundrum applies today for individuals. Think of all the data we generate each day. Imagine if you had to store all of that on physical hard drives of your own. It’s no surprise that we’ve become so reliant on platforms such as iCloud, Google Drive, or Dropbox.

But the ease and convenience of the cloud can come at a cost, and in recent years, this has only become more apparent amid a rapidly crowding landscape of cloud storage service providers. Over a decade ago, cloud storage Nirvanix had to shutter its business, leaving customers with less than two weeks to retrieve their data and move it to another platform, or risk losing access to their files forever. As mere users rather than owners of these platforms, it’s easy to forget the underlying terms of engagement with cloud providers. By storing one’s data on a centralised platform, users are ultimately limited by their risk and governance practices.

On the other hand, the promise of cost efficiency that centralised cloud storage providers once offered has simply fallen short over time due to a surplus in supply of service providers. Bound by complex multi-year contracts, extensive lock-in periods, and hidden fees, some businesses have found themselves unable to sever ties with some providers due to predatory pricing and contract structures.

The internet, in flux

The Cambridge Analytica scandal undoubtedly changed the way we think about data. How should it be handled? Who has the right to use it? For what purposes? And for users, especially, does it make sense to share it? Over the years, consumers have grown far more conscious about the implications of sharing their data and in turn, its inherent value to companies. A survey by software company Segment.io found that 69% of customers only appreciate personalised products and services if generated as a result of data that they explicitly shared with a business.

The Web2 era has shown that today’s data economy has largely functioned like a barter system where each transaction is not only opaque and slow but is often done at the expense of the user. It’s time for this dynamic to change.

This is precisely what the era of Web3 promises: a new internet that takes power out of the hands of big tech and puts it back in the hands of users who can control how their data is used, by whom, when, whether it can be monetised, and who should benefit from that.

Data storage fit for the next stage of the data economy

Handling user data has never been a simple task but it’s certainly only become more complicated over time. It’s time for a new solution fit for the next stage of the data economy — one that takes a decentralised approach. 

Decentralised data storage applies a similar underlying governance structure to that of a blockchain. Unlike existing centralised cloud solutions, data is stored on multiple clouds and servers. This ensures that even if the portion of data stored on one node gets corrupted, the hacker will not be able to access the entirety of the file. Coupled with the fact that it is governed by a full peer-to-peer system, the multi-stakeholder approval process for all transactions removes the obligation to comply with the risk of the completely different governance structure of the original host platform. As a peer-to-peer system, participating users are instead incentivised with rewards to support the operations of the network by renting out space on their local devices. 

This approach leverages an existing marketplace of unused storage and bandwidth on user devices, allowing for greater scalability and thus a far more cost-efficient system. In addition, it also distributes risk by ensuring that even if one node is rendered vulnerable, the rest aren’t affected, preserving the integrity of the network as a whole. This applies from both a security and reliability perspective. This trustless architecture and the absence of a single point of failure is one of the core security enhancements that decentralised data storage can offer. 

Be it enhanced scalability and cost-efficiency or distributed risks, the characteristics of a decentralised approach have made it a strong contender against present solutions. However, it’s far from a perfect one. Trusting in a trustless system, especially for enterprises handling large amounts of sensitive data and the counterparty risks that entails, is a challenge that will be difficult to overcome. The inherent uncertainty of a fundamentally new way of doing things may very well perpetuate the preference to rely on tried-and-tested centralised partners, no matter the costs.

Up in the clouds: Data storage in a Web3 world

The internet is already transforming to become a platform that is owned and written by its users; and it’s logical that as the space evolves to better empower users to take control of their digital destinies, the underlying infrastructure should adapt in turn. Believing in such a future, venture capital firms like Sequoia Capital and Andreessen Horowitz and major cloud players like Microsoft have all invested in decentralised storage protocols, proving that decentralisation has a place in the future of cloud storage.

Simultaneously, outside of decentralised data storage protocols, traditional blockchain networks are preparing themselves for opportunities in the Web3 data economy by building their own decentralised data storage solutions to bring greater utility and ownership to their users’ data. To better scale their offerings, these are often developed in collaboration with blockchain infrastructure providers to ensure that networks are equipped to accommodate increasing storage demands and transaction activity.

After having emerged in the industry just a decade ago, decentralised cloud solutions are quickly gaining popularity due to enhanced security, cost efficiency, and scalability. This is critical as enterprises need solutions that can support the ever-growing swaths of data being generated each day. As more and more businesses begin to recognise the benefits of Web3 and transition their business models in line with the next phase of the internet, demand for decentralised storage solutions will grow. As this becomes the norm, we may very well see a future where users can confidently say that they are truly in control of their personal data.

- Advertisement -