What is Siacoin (SC) and how does it work? Everything you need to know

What is Siacoin?

Siacoin operates as a peer-to-peer decentralized blockchain-based cloud storage platform, enabling users to rent and utilize storage space and excess bandwidth from fellow participants on the network. With no central authority, the system is democratized through a P2P system and decentralization.

This model ensures that Siacoin cloud storage is more secure than conventional cloud storage services and offers cost-effectiveness, featuring significantly lower prices for renting storage compared to centralized providers. Users with surplus storage space can lease it out on the Siacoin marketplace and receive rewards in the form of Siacoin tokens, which are paid by consumers utilizing the rented bandwidth and storage space.

Despite the widespread popularity of traditional cloud service providers like Apple and Google, the cost of renting storage space remains a significant drawback. However, the Siacoin network seeks to attract more users who value the secure environment and low-cost storage offered by Sia. Moreover, Siacoin endeavors to empower users by enabling them to regain control over their data. Within the Siacoin network, data users are also data owners, as the system operates without third parties or central authorities. By addressing common issues in the cloud storage sector such as high rental costs, security risks, lack of data control, and mismanagement, the Siacoin system aims to offer a compelling alternative.

How does Siacoin work?

The Siacoin network operates on a peer-to-peer system, enabling participants to serve as hosts and renters within a decentralized ecosystem. There is no central authority controlling the data or managing ownership of stored information. Users on the Sia network have complete control over their data and storage space, with renters compensating hosts in Siacoin (SC) for their services.

Nodes support the network, while the Siacoin system breaks users' data into smaller fragments and distributes them across these nodes. Each piece of information is private and can only be accessed using private keys that validate ownership. Even if a node were to access the data, it would only obtain a portion of it, rendering the information useless.

The distribution across nodes decreases vulnerability and enhances security. Each piece of information is fragmented and split into 30 parts. Thanks to the decentralized nature of the network, Siacoin offers real-time responses without relying on a central server.

The Siacoin network revolves around hosts and renters. Hosts receive payment from renters for providing cloud storage services. Hosts can advertise their storage capacities and services and may choose not to rent storage to certain consumers. The core functionality of Siacoin lies in File Contracts, which are akin to smart contracts with predetermined rules, facilitating automated communication between hosts and renters.

Siacoin operates on the Proof-of-Work (PoW) protocol, allowing for SC coins to be mined. There are no limitations on the maximum supply of Siacoin (SC).

Who founded Siacoin? What is the history of Siacoin?

The concept of Siacoin cloud storage was introduced during a hackathon at MIT by David Vorick and Luke Champine. Vorick and Champine established Nebulous Inc., the parent company of Siacoin, in 2014, and launched the beta network for Siacoin in 2015. The project received $750,000 in funding from various sources to support Nebulous Inc. and Siacoin. By the conclusion of 2015, Vorick and Champine had introduced the final version of the Siacoin storage network. Since the release of the final blockchain, Vorick and Champine have secured over $6.4 million for the company from investors such as Fenbushi Capital, Raptor Group, INBlockchain, and First Star Ventures.

Initially a duo, Vorick and Champine have expanded their team with numerous developers as the Siacoin network progresses and evolves.

What sets Siacoin apart from others?

Siacoin stands out due to its original utility and efficient functionalities. Its primary goal is to decentralize the cloud storage sector, addressing issues such as high rental fees, data mismanagement, security vulnerabilities, slow server responsiveness, and lack of data ownership inherent in traditional cloud service providers.

By leveraging a decentralized environment and a peer-to-peer system, Siacoin enables users to interact via File Contracts, allowing them to set prices for contracts and rental agreements. With ambitions to become a leading decentralized cloud storage network, Siacoin prioritizes data security and protection, ensuring ownership is verified through possession of private keys.

What attributes contribute to Siacoin's value?

Siacoin's value stems from its technical capabilities and utility. SC coins serve as the native currency within the system, exclusively used for transactions when creating contracts between hosts and renters. This utility, along with adoption and technical capabilities, contributes to Siacoin's value.

For the system to operate peer-to-peer, renters must pay hosts for their services using Siacoin, necessitating the purchase of SC. Hosts, in turn, may sell their SC coins to profit from their services, although they also have the option to retain and hold SC. Siacoin's value is further enhanced by its P2P system, coupled with its attractive services and technology.

What is the circulating supply of Siacoin (SC) coins?

As of May 2021, approximately 47.8 billion SC coins are in circulation out of an unlimited maximum supply. Siacoin does not have a finite supply, allowing for the continuous mining of new SC coins. Miners generate new blocks, validate transactions through Proof-of-Work, and receive SC rewards for each new block.

Siacoin is designed to meet the perpetual demand for P2P cloud storage services, hence the absence of a supply limit.

Other technical data

As of May 2021, the Sia platform has been downloaded 1.2 million times. The network comprises 554 storage providers with a total storage capacity of 3.3PB (petabytes), of which 754TB is currently in use. The cost of Sia's storage is, on average, 90% lower than that of incumbent cloud storage providers.

How does the Siacoin network ensure security?

The security of the Siacoin network is ensured through data fragmentation and the implementation of the Proof-of-Work (PoW) consensus mechanism. Transactions are permanently recorded in blocks, which are generated by miners rewarded for safeguarding the network and verifying transactions on the ledger.

Uploaded data is protected through fragmentation, where it is divided into fragments and distributed across nodes within the network. Even if one node is compromised, only a fragment of information is exposed, rendering it useless to malicious actors. Accessing the data requires proof of ownership, achievable only through the corresponding private keys. This decentralized and fragmented approach guarantees the security of users' data.

How can Siacoin be utilized?

Siacoin serves as the primary currency within the Sia storage network and is the sole form of payment accepted for storage services on the blockchain. It is integral to the peer-to-peer system and also serves as a reward for miners. Additionally, Siacoin can be traded on the market, allowing users to profit from fluctuations in its buying and selling prices.

To utilize Siacoin for storage services on the blockchain, renters must first acquire SC, which is then used to create a File Contract—a type of smart contract—specifying the terms and conditions of the storage rental, including pricing and other details. Hosts receive payment in SC and can also profit by selling SC when market conditions are favorable.

What factors should be considered when selecting a Siacoin wallet?

Siacoin, being the native currency of the Siacoin blockchain, requires dedicated wallets for safe storage of SC coins. Among the commonly used options, the Sia Android Wallet serves as a popular mobile wallet, while the Sia-UI desktop wallet stands as the official wallet recommended by the SC team. Alternatively, SC coins can be stored in any wallet that supports them, with the choice typically influenced by the user's holdings and intended use.

For enhanced security, hardware wallets such as Ledger or Trezor provide offline storage and backup, albeit at a higher cost and complexity, making them more suitable for experienced users with significant SC holdings.

Software wallets, available for smartphones or computers, offer a simpler and often free option. Custodial wallets manage and back up private keys on behalf of the user, while non-custodial wallets store private keys securely on the user's device. Although more convenient for transactions, software wallets are less secure than hardware alternatives and are better suited for inexperienced users with smaller SC holdings.

Online wallets or exchanges, known as hot wallets, provide web-based access but are generally less secure than other options. Users must trust the platform to manage their Siacoin, making them suitable for users holding smaller amounts or engaging in frequent trading. It's crucial to choose a service with robust security measures and a solid reputation.

For a secure storage solution with both storage and trading capabilities, Kriptomat offers enterprise-grade security and user-friendly functionality. Storing Siacoin with Kriptomat facilitates quick buying, selling, or exchanging SC for other cryptocurrencies.

Siacoin mining

Siacoin operates as a mineable cryptocurrency, relying on miners to support its decentralized storage network. With an unlimited supply, Siacoin accommodates continuous demand and ensures the smooth operation of its peer-to-peer storage system. Unlike Proof-of-Stake blockchains, which rely on users staking crypto, Siacoin utilizes the Proof-of-Work protocol, rewarding miners with SC coins for their role in block generation and transaction verification.

In conclusion, Siacoin stands as one of the leading peer-to-peer cloud storage platforms, featuring a marketplace for cloud services. Despite facing competition from similar blockchain networks, Siacoin remains a prominent service network in its niche. It offers cost-effective storage rental and operates within a secure and decentralized P2P marketplace. As long as the network operates and the marketplace thrives, the value of SC has the potential to appreciate alongside the blockchain's expansion.