What is Decentralized Cloud Storage and How does it Work?

Arcana Network
6 min readDec 7, 2023

Decentralized cloud storage is like storing your digital stuff (like photos, documents, and videos) not in one big warehouse (like a traditional cloud storage service), but spreading it out over many different computers all over the world.

Imagine it like this: Instead of keeping all your important papers in one big safe, you make lots of copies and put them in safes in different places. Even if one safe gets lost or broken, you can still get your papers from the other safes.

This way, no single company controls all your data, and it’s harder for hackers to get to it because it’s not all in one place. Plus, if one computer holding your data goes offline, you can still get it from another computer that has a copy.

Key Factors

Persistence Mechanism:

Importance of Incentives: A reliable persistence mechanism or incentive structure is crucial to ensure safe and secure data storage in a decentralized network. Different providers have unique mechanisms for this.

Examples: Ethereum uses blockchain-based persistence, but this isn’t always efficient for large data. Other providers like Filecoin and Storj use contract-based persistence, where data storage agreements are enforced through contracts to maintain data on a certain number of nodes for a specified period.

Data Retention Enforcement:

Ensuring Data Availability: This involves mechanisms to guarantee that data is actually retained on the network. Cryptographic challenges are often used to verify if nodes still possess the data.

Proof-of-Access: For instance, Arweave’s Proof-of-Access requires nodes to pass challenges proving they hold the data, both recent and from the past. Failure to pass these challenges can result in penalties.


Assessing the Level of Decentralization: There’s no universal standard for measuring how decentralized a storage provider is. However, it’s wise to choose services that demonstrate a degree of decentralization, possibly through some form of Know Your Customer (KYC) process.

Consensus Mechanism:

Agreement Among Nodes: Consensus is the process by which nodes in a decentralized network agree on the state of the distributed ledger. Each provider may have its own consensus mechanism.

Common Types: The most prevalent consensus mechanisms are Proof-of-Stake (PoS) and Proof-of-Work (PoW), which form the basis for many other types of consensus processes in decentralized networks.

How does decentralized storage systems work?

Decentralized storage systems work by spreading your data across many different computers, known as nodes, which are all part of a peer-to-peer (P2P) network. This is different from centralized storage, where your data is kept in a few big servers in one place.

Think of it like this: Instead of keeping all your digital files in a single storage facility, decentralized storage scatters them across numerous computers around the world. When you use services like Napster or BitTorrent, you’re using a similar kind of P2P network.

When you want to download a file from a decentralized storage system, the system gathers different pieces of your file from various computers until you have the whole file. The good part is, even though your file is on many computers, no one else can see or change it because it’s encrypted (like putting it in a secret code).

Unlike centralized storage, which keeps your data in a big server close to you, decentralized storage uses a wide network of computers, no matter where they are. This often means you can get your data faster because it’s coming from computers nearby, not just from a far-away server.

Decentralized storage is often built on blockchain technology, which adds transparency and security. It uses special cryptographic methods to make sure your data is stored safely and reliably, without needing to trust a central provider to look after it.

Advantages of decentralized networks

Cheaper to Use:

Decentralized storage spreads your data across many computers (called nodes) all over the world, not just in a few big data centers. This makes it less expensive than traditional storage methods.

Fair Prices:

In decentralized storage, lots of different nodes compete to store your data. This competition helps keep prices fair and avoids any single company charging too much.

Less Chance of Losing Files:

Your data is copied and stored on many different nodes. So, even if one part of the network has a problem, like a power outage, you won’t lose your data.

Safe and Private:

Two things make decentralized storage super secure: first, all your data is encrypted (like putting it in a secret code); second, it’s split up and stored on many nodes, so no single node can see or change your entire file.

Quick Access:

Unlike centralized systems that can get clogged up (like traffic jams in data transfer), decentralized storage keeps multiple copies of your data in different places. This means you can access your data quickly and smoothly.

Better Privacy for Your Data:

Since your data is encrypted and scattered across many nodes, it’s really hard for anyone to sneak a peek at your files without the special key to decrypt them.

Community Support:

Decentralized storage is often supported by a community of users who help each other out. This means more people are working together to make the system better, more transparent, and more user-friendly.

Picking a Decentralized Network Provider

How Data Stays Safe:

Consider how the provider ensures your data is stored securely. Each provider may have its own method, like Ethereum’s blockchain-based system. Some, like Filecoin and Storj, use contracts to guarantee your data stays put.

Making Sure Data Stays Around:

You’ll want to know that your data doesn’t just disappear. Some providers use things like cryptographic challenges to check if the computers (nodes) still have your data. If they don’t, there are penalties.

How Decentralized Is It?

It’s a good idea to check how spread out and decentralized the provider is. You can do this by looking for something like “Know Your Customer” (KYC) practices that show how much they emphasize decentralization.

Agreeing with Everyone:

Think about how all the nodes in the network agree with the data. There are different methods, but the most common ones are Proof-of-Stake (PoS) and Proof-of-Work (PoW), which lots of others are based on.

Top Decentralized Cloud Storage Projects

IPFS + Filecoin:

How it Works: IPFS (InterPlanetary File System) doesn’t look for data based on where it’s stored, unlike the regular internet. Instead, it finds data based on what it is. Filecoin is built on IPFS and incentivizes users with FileCoins (FIL) when they store content on their hard drives.

How Filecoin Works: Users pay to store their files on storage providers’ systems, which can be individuals or organizations. These providers must prove they’ve stored files correctly over time, earning Filecoin cryptocurrency as an incentive.

Note: IPFS and Filecoin can be used independently. IPFS focuses on efficient data sharing, while Filecoin ensures secure long-term data storage.


Concept: Sia, started in 2013, creates a marketplace for decentralized storage using underutilized hard drive capacity worldwide.

Technology: It uses a proof-of-work (PoW) consensus mechanism and a proof-of-storage algorithm to protect and validate storage commitments.

File Contracts: File contracts define storage terms, ensuring transparency and accountability. Data is distributed across multiple providers, enhancing security and privacy.


Technology: Storj operates on the Ethereum network and employs a technology similar to file sharing, like torrents.

How it Works: Data is divided into smaller pieces and stored on a network of computers called nodes. Users can opt for a for-profit service, similar to centralized storage solutions, offering convenience without dealing with decentralized storage intricacies.

These projects offer secure and private data storage, with data distributed across a network of nodes. Users maintain control over their data, which is encrypted and fragmented for added security. Each project offers its unique approach to decentralized storage, catering to a variety of user preferences.


Arcana Network is a game-changer in the world of decentralized storage, particularly for DApps (Decentralized Applications) built on Ethereum and compatible chains like Binance and Polygon.

But Arcana offers more than just storage. To fully embrace the privacy and data ownership advantages of decentralized storage, you need a suite of services. This is where Arcana’s Privacy Stack comes into play.

Arcana’s Privacy Stack includes:

  • Decentralized Storage: This storage is end-to-end encrypted, ensuring your data remains private and secure.
  • Non-Custodial Key Management Services (KMS): Arcana provides a way to manage keys without relying on a centralized entity.
  • Decentralized Identity and Access Management: Users can create accounts with email or social authentication, generate keys, and securely share data by setting access policies.

The beauty of Arcana lies in its ability to handle user access, data security, and key management without the need for a centralized server or provider. This makes it an excellent choice for NFT marketplaces, gaming platforms, data marketplaces, social networks, and more.

If you’re a developer keen to explore how Arcana can benefit your projects, don’t hesitate to get in touch with us at hello@arcana.network.



Arcana Network

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