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Key Takeaways

  • Decentralized file storage systems provide increased security by distributing data across multiple nodes, reducing the risk of data loss or tampering due to a single point of failure;
  • By removing reliance on a central server, decentralized file storage solutions offer greater accessibility to data. Users can access files from any node in the network, leading to improved availability and reliability;
  • Decentralized storage puts users in control of their data, allowing them to retain ownership and manage access permissions without intermediaries.
Beyond the Cloud: Navigating the Era of Decentralized File Storage

Keeping our files safe is perhaps one of the more important aspects nowadays. After all, our data defines us, and it’s imperative to ensure its security. Centralized services are all well and good, but with the improving conditions online, there’s a new player in town - decentralized file storage.

It allows people to store their files away from the prying eyes of any particular entity while giving you full control over your files and data. If you believe you might benefit from this service, I'll present a brief breakdown of how decentralization can further storage technology and how you, as a user, can reap the rewards of this innovation without being lost in the process.

However, if you’re seeking a step-by-step guide on how to create a decentralized file storage economy, this might be a hit-and-miss for you, as I’ll mainly focus on the idea of decentralized storage, not its technical intricacies.

By the way, speaking of secure storage in the Web3 space, don't forget to keep your crypto assets in security-focused wallets like Ledger Nano X.

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What is Decentralized File Storage?

Decentralized file storage is, as the name suggests, a way to store your files using decentralized technology. Most of us probably use some form of file storage, maybe even without thinking too hard about it.

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Decentralized storage’s roots come from the same place as centralized storage services, like Dropbox or Google Drive. Basically, you place your file into the care of the service provider and trust them to keep it until you need it again.

However, whereas centralized services are under the supervision of one company or entity, their decentralized alternatives distribute the administration of your files among several participants. That way, no other person who doesn’t have direct authority is able to obtain your files. This is achieved through a two-way approach.

Firstly, decentralized file storage partially relies on blockchain technology (or protocols that are inspired by it). By its very nature, blockchain is based on distribution, and applications built on this technology give users more control over their data. Secondly, there’s more security because you’re the only one with full access to your files despite not hosting them yourself.

The decentralization of file storage replaces the concept of keeping the file in a singular location and instead divides it into smaller parts, which are then distributed among the other participating nodes. Such a divide of a file is called sharding.

To keep it simple, let’s say you place a file into a decentralized data storage. This file is then divided into pieces, each one given to multiple participants of the same service, and the shards are then further encrypted. This means no single person has access to the file except you.

Decentralized file storage: lock and three keys.

It lessens the chance of someone tampering with your file because they don’t have the means to. It also safeguards your information since, with immutable decentralized file storage, not even the people who are keeping your file shards can gain anything from them.

When you want to gain access to your file, you will use your access code and assemble the file out of the scattered shards that were housed all over the network. The process is smooth and fairly simple, much like recovering the file from a centralized storage.

Such division is beneficial both because the provider of the service doesn’t have to supply a giant server to host the files and because the users themselves can rely on the security of the storage method as no one can alter a file that's not whole.

Users who provide nodes do so with the incentive of obtaining either digital assets or other financial incentives, which increases the robustness of the decentralized file storage protocol[1].

The idea of decentralized storage is becoming increasingly appealing nowadays. The access to files on a decentralized network is restricted, therefore, no entity, despite its authority, is able to see it, which brings back the idea of true privacy.

Pros and Cons of Decentralized File Storage

Now that you know what is decentralized file storage, and more or less how it works, let's go over its pros and cons.


Better Security

Decentralized file storage further boosts the ever-desired requirement to keep user files safe. In the best-case scenario, with centralized services, you can expect airtight security, but if someone hacks that system and gains access to your files, there’s little you can do.

However, with decentralized storage applications, the nodes that hold your file don’t have the complete version, so even if one of them is compromised, the hacker won’t be able to do much with only one piece of the puzzle.

So, while with a centralized service, one hack could result in your information being stolen, with a decentralized service, you have the inherent layer of security that doesn’t depend on the provider but is an actual feature of the service itself.

A decentralized file storage protocol enables people to retain their file’s integrity without compromising on its preservation or personal privacy.

Data Retention

Decentralized applications not only keep your files safe, but also ensure no information will be tampered with. As mentioned before, the fragmentation of the file makes it impossible to alter the data on it.

Decentralized file storage: security.

But naturally, you might wonder what would happen if one of the nodes holding a piece of your file is compromised. Well, fear not, since most services not only divide your file but also create a copy of the shards and send them out to several nodes. So, if one of them is tampered with, you will still be able to retrieve your file with no trouble.

This gives the immutable decentralized file storage an upper hand over traditional storage services where, if there’s an error and your file is accidentally displaced or deleted from the server, it’s lost forever with little hope of recovering it.

Privacy and Control

Decentralized storage gives you back control over your information. For comparison, let’s take a look at centralized storage - once you place a file there, the provider essentially has control over it.

Of course, there are ToS and various agreements, but you no longer have direct input once you release your file, so any part of the file’s data (or the file itself) can be used for purposes outside of your purview.

Decentralized file storage: illustration of cost effectiveness.

Alternatively, decentralization of the storage services keeps the control in your hands the entire time. It can be argued that the divided file is out of your reach, much like with the centralized services, but the shards don’t hold any information that’s available to the holder, so your data is safe, and only you know its content.

Cost-Effective Approach

Generally speaking, the price for centralized storage services is largely impacted by the cost of their servers. After all, to properly operate the business, a provider needs to charge people for taking up space.

This issue is partially solved by a decentralized file storage protocol since the hosting of the file is shared among several people, which doesn’t require the upkeep of big servers. Of course, the user base that provides the nodes is compensated for their effort, but the overall cost of running decentralized data storage is significantly lower than the mainstream alternative.



Whereas centralized storage is more widespread, its decentralized counterpart requires the usage of additional services to gain access. This can create a barrier for new users who haven't yet dipped their toes into the world of decentralization and Web3 as a whole (luckily, you can easily do that via BitDegree Missions).

Many decentralized applications also rely on some form of digital assets, which are less commonly used than traditional currency. This could potentially present a steep learning curve to newcomers, further alienating them from decentralized applications.

Decentralized file storage: cryptocurrencies.

That said, the decentralized file storage blockchain technology is based on peers, meaning its accessibility is directly impacted by the number of people participating. The more people engage in these services, the easier it is to get into it. And with the growing number of crypto and blockchain enthusiasts, there's no lack of willing participants.


Centralized service providers, like Google Drive, are established brands and therefore offer some ostensible security when it comes to accountability.

While that is mostly true for decentralized versions as well, with decentralized storage providers, it’s a blind pick. Users don’t really know who holds their files, and while it’s perfectly safe, the idea of some unknown stranger having a fraction of your data on their own device can be disconcerting to certain users.

There’s also a chance that the service won't have enough people available for the hosting.

Lack of Interoperability

Centralized storage works in much the same way, regardless of which provider you use. The idea of servers and cloud hosting is not unique to each service. Thus, if you've used one, you'll essentially know how to use another, which means you can intuitively switch between different providers.

Decentralized file storage: Google Drive.

It gets a bit more complicated with decentralized data storage, though, as different applications have different authentication and encryption methods. Because of this, the user will need to get used to a whole set of rules if they want to use several services at once.

On top of that, there’s the aforementioned digital asset issue, as you’ll need to keep reserves of several different coins in, most likely, several different places to smoothly use more than one service at a time.

New Technology

Decentralized file storage is a promising technology, with plenty to offer to users. However, it’s undeniable that it’s very new, and so errors and mishaps cannot be avoided.

The overall scope of the application of these systems is growing every day, but while remarkable, decentralized storage systems reportedly are not without their own emerging threats[2].

Additionally, it’s not a settled service like its centralized counterpart. Because of this, users can find themselves involved in projects that might not last or might have to navigate the shifting rules.

Centralized VS Decentralized Storage

I have partially touched upon some of the differences between centralized and decentralized file storage. However, it would be beneficial to take a closer look at the topic.

As I've previously discussed, centralized storage comes from one provider who supplies dedicated servers to house your files. On the other hand, decentralized storage relies on cooperation between people to keep the file divided and inaccessible to anyone aside from its owner.

This difference is essential both for the user experience and the files themselves. With decentralized service, your file is like a puzzle piece, and only you can put it together again. This gives you full control, even if the file itself is kept out of your direct reach.

Centralized services, however, store all files they receive in one spot. This makes them susceptible to various pitfalls – information can be hacked or leaked, hardware can break down, or the network might be overrun with errors.

Decentralized file storage: dissapointment.

On top of the aforementioned security, in some cases, a decentralized file storage blockchain system can be used to validate and check storage-related transactions across the network, so it’s possible to track down the shard locations, how much the transactions cost and similar relevant data.

This adds a layer of transparency that blockchain is known for. But keep in mind that decentralized storage and blockchain are not interchangeable and, more often than not, operate separately, albeit they share some similarities that link them together.

Though, there are several well-known decentralized file storage blockchains (or, more specifically, blockchain-based networks), including Filecoin, Sia, Arweave and BitTorrent.

But let's jump back on the comparison train. I should mention that one of the major distinctions between the two is the way the service is provided. Centralized service mostly utilizes URLs, which literally denote the location of the file, not the file itself.

Naturally, one can theorize that this can present the problem if the file is altered, but the location stays the same. This might, potentially, send two different sets of data to different users while under the coverage of the same URL.

Decentralized file storage: URL.

Decentralized file storage relies on identifying the file itself, giving it a unique ID, and the file can then be requested by users through that identification. This eliminates the probability that the file can be replaced because any other file uploaded to the system will get its own ID, and it won’t be merged or otherwise tampered with.

Lastly, there is the issue of expenses. As I stated above, centralized storage services have a lot of costs attached to them because they need to keep the servers running, ensure the hardware is up to date, and ensure security is not slacking. This requires plenty of funds, so the overall cost for the user per GB of data can become quite high.

On the other hand, decentralization distributes the need for space across the network, so no one party needs to bear the full brunt of it. The expenses of the individual nodes are compensated via digital assets. While their prices might fluctuate, the decentralized data storage expenses still won’t reach that of centralized solutions.

Reportedly, the highest price per TB/month on decentralized file storage is still cheaper than the cheapest option for the same service on centralized storage.

IPFS Connection to Decentralized File Storage

IPFS, short for InterPlanetary File System, is a decentralized protocol meant for sharing and storing files and data. The protocol successfully implements data-driven sharing in its services and, thus, provides a safe environment for data transactions.

It's also the protocol that is used as a backbone for many decentralized storage services. So, if you ever wondered how to create a decentralized file storage economy, IPFS is likely an element you might start with.

IPFS is inspired by blockchain operational principles. File sharing on IPFS works through nodes that communicate with each other, much like on the blockchain. The information that travels between nodes is encrypted and given a unique modifier.

The protocol is built on P2P (peer-to-peer) technology and offers a broader scope of usage than just transferring files. You can host websites on it too, and the aspect of security remains the same - unlike with one server, should one node fail, the website will still be loaded through other participating nodes.

Decentralized file storage: IPFS.

Moreover, when sharing data through IPFS, copies are created (a staple of decentralized storage). Let’s say you request a download of some file, which causes the system to send you a copy of it. If someone else requests the same file, their copy will be sent from any participating node that has that same file. So, the more people download it, the more available copies there will be.

However, while blockchain and IPFS are both decentralized, there are inherent differences. Blockchain is a distributed ledger technology that stores data in blocks that are linked together in a chain. It is primarily used for maintaining a secure and transparent record of digital assets and transactions.

IPFS, on the other hand, is a decentralized protocol for storing and sharing hypermedia content over a peer-to-peer network. It allows users to address and retrieve content based on its content rather than its location, making it a more efficient and resilient way to access and distribute data on the internet.

Decentralized Storage Providers

By now, you should have a pretty good understanding of what decentralized file storage is. Hence, let's take a look at some well-known decentralized storage providers.

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Crust Network

First up on the list is Crust Network, a decentralized cloud storage provider. You can use Crust to hold NFTs, store personal files, or host websites. All three offer the same concept of decentralization, but, in this article, I will focus more on file storage.

Crust Network offers a method to store your files, which is a mid-way between decentralized and centralized storage. Crust users have access to the platform’s built-in storage. There are two different options to upload your file: free and premium.

Free is available to all users who signed up for the storage service. It allows them to upload files into a public pool, and, as the name suggests, these files will be visible to everyone. This means that, in terms of security, this sort of storage is basically what you would expect from centralized storage providers.

However, where Crust stands out from the likes of Dropbox or Google Drive is the premium option. Users can dedicate a nominal fee to gain access to safe and secure storage, which will be encrypted with a locally-held key.

Decentralized file storage: Crust Network.

The file will be placed in your personal vault, accessible only to you. Additionally, the uploads use the aforementioned IPFS system as a foundation, which provides customized encryption and grants easy access to files from your IPFS account.

The premium services can only be obtained using the network's native CRU token. You can obtain the asset by exchanging ETH for it. Should you need to obtain any form of crypto for your storage needs, you can easily do so on well-established exchanges like Binance or Bybit.

The network also offers Cloud service, which supports data storage and retrieval, while also placing particular attention on providing support for dApps and Web3 creators.

You can find a full Crust Network review here.


Speaking of cloud services, next down the list is ownCloud, decentralized file storage in the making (so it's not a fully decentralized file storage solution). The service is making steps towards decentralization, but in the meantime, it acts as a stepping stone for those who are interested in more secure systems than what’s supplied by most centralized providers.

ownCloud is leaning towards enterprise and teams instead of individual users, and perhaps one of the more prominent features that bring this service close to decentralized storage is encryption.

Decentralized file storage: ownCloud.

Users can work on and edit files on the go using the cloud, and their data is preserved through end-to-end encryption. Once a file is uploaded into the system, a public key is used to encrypt it, and decryption is done via private keys. After the encryption option is enabled, it’s automatically applied to all future files you might upload.

Additionally, the service gives users complete control over their files, from editing to safety, and prioritizes data privacy, which is a step forward from regular cloud storage.

So, while ownCloud decentralized file storage might not be, well, fully decentralized, it offers plenty of features that could bridge the gap between centralized services and decentralization. It's especially a noteworthy option for those who don't want to fully rely on decentralized file storage, but still seek the benefits that come with it.

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Lastly, let's talk about Filecoin, the staple in the immutable decentralized file storage field. It’s a P2P network that enables reliable file storage and is built on the same protocol as IPFS; in fact, the two systems work in tandem. The service can be used in a variety of applications, ranging from metaverse storage to archiving data from Web2.

For operations, Filecoin utilizes its own blockchain, which essentially is a database distributed among different nodes. But Filecoin’s blockchain is unique; it is made up of tipsets, which are a set of blocks with the same height and parent tipset.

To access Filecoin services, users need to use the native token FIL - both to upload the data for safekeeping and as a reward for providing storage (acting as a node).

Decentralized file storage: Filecoin.

Storage services are initiated when a contract is made between the two parties; it lays out the specifics of the agreement, such as the size of the file, the price, and how long the file should be kept. The file must be uploaded to a local Filecoin node, which produces an identifier for the data.

Filecoin provides encryption, but unlike the traditional decentralized storage systems, the file is not always divided into pieces. The division ultimately depends on the side of the content and how much space a node has allocated for the storage service.

The system requires the nodes to provide proof they are supplying the space for the file’s storage, so users can be assured their files are not simply tossed aside. The service also offers Proof-of-Replication that verifies there is an agreed-upon number of copies on your file.


To sum it all up, when it comes to online storage, you mainly have two choices: centralized and decentralized file storage. The latter offers an additional layer of security because your data is both kept private and distributed throughout the network in pieces.

Such division ensures there can be no information tampering since no one apart from you can even open the file. All other parties involved simply store a piece of your file for a nominal fee, bypassing the need for giant servers or even the constant upkeep of hack-proof technology. This ultimately keeps the decentralized service cheaper than its centralized alternative.

As a cherry on top, despite being quite a new field, decentralized storage already has quite a selection when it comes to providers. You can pick from popular solutions like Filecoin or the more familiar storage services that echo the decentralized ones with innovative cloud systems (like ownCloud decentralized file storage).

Just note that decentralized storage providers often rely on their native coins to keep the operations running. Luckily for you, there's no issue with stocking up on digital assets on popular exchanges like Binance or Bybit.

The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.

Scientific References

1. H. Kopp, D. Mödinger, F. Hauck, et al.: 'Design of a Privacy-Preserving Decentralized File Storage with Financial Incentives';

2. F. Casino, E. Politou, E. Alepis, et al.: 'Immutability and Decentralized Storage: An Analysis of Emerging Threats'.

About Article's Experts & Analysts

By Aaron S.


Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era. W...
Aaron S. , Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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What is decentralized file storage?

Decentralized file storage is a method of keeping your files and data outside of your own device or system. This type of storage is built on P2P transactions, as your file essentially is housed with individual nodes. The data is assigned a unique ID and divided into pieces, which are then distributed across the network. Decentralized storage provides a unique way to safely store your data, as even if one piece is compromised, you won't lose your entire file. Often, to use the services, you will have to utilize the provider's native digital asset, such as FIL on Filecoin. You can usually acquire these assets on popular crypto exchanges like Binance or Bybit.

Is IPFS a decentralized storage?

InterPlanetary File System is a decentralized data-sharing protocol. It supports both the storage and allocation of user data. However, it is not a storage provider by itself; instead, IPFS can be integrated into decentralized storage providers (like Crust Network). While both IPFS and decentralized storage share some similarities, such as nodes, IPFS should be considered more like a building block of decentralized file storage providers.

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Which cryptocurrency exchange is best for beginners?

Reading through various best crypto exchange reviews online, you're bound to notice that one of the things that most of these exchanges have in common is that they are very simple to use. While some are more straightforward and beginner-friendly than others, you shouldn't encounter any difficulties with either of the top-rated exchanges. That said, many users believe that KuCoin is one of the simpler exchanges on the current market.

What is the difference between a crypto exchange and a brokerage?

In layman's terms, a cryptocurrency exchange is a place where you meet and exchange cryptocurrencies with another person. The exchange platform (i.e. Binance) acts as a middleman - it connects you (your offer or request) with that other person (the seller or the buyer). With a brokerage, however, there is no “other person” - you come and exchange your crypto coins or fiat money with the platform in question, without the interference of any third party. When considering cryptocurrency exchange rankings, though, both of these types of businesses (exchanges and brokerages) are usually just thrown under the umbrella term - exchange. This is done for the sake of simplicity.

Are all the top cryptocurrency exchanges based in the United States?

No, definitely not! While some of the top cryptocurrency exchanges are, indeed, based in the United States (i.e. KuCoin or Kraken), there are other very well-known industry leaders that are located all over the world. For example, Binance is based in Tokyo, Japan, while Bittrex is located in Liechtenstein. While there are many reasons for why an exchange would prefer to be based in one location over another, most of them boil down to business intricacies, and usually have no effect on the user of the platform.



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