Friday, August 24, 2018

Triumph Of Greed Over Arithmetic

I discussed FileCoin's ICO in The Four Most Expensive Words in the English Language and worked out that:
Filecoin needs to generate $25.7M/yr over and above what it pays the providers. But it can't charge the customers more than S3, or $0.276/GB/yr. If it didn't pay the providers anything it would need to be storing over 93PB right away to generate a 10% return. That's a lot of storage to expect providers to donate to the system.
On my bike ride this morning I thought of another way of looking at FileCoin's optimistic economics.

FileCoin won't be able, as S3 does, to claim 11 nines of durability and triple redundancy across data centers. So the real competition is S3's Reduced Redundancy Storage, which currently costs $23K/PB/month. Assuming that Amazon continues its historic 15%/year Kryder rate, storing a Petabyte in RRS for a decade is $1.48M. So, if you believe cryptocurrency "prices", FileCoin's "investors" pre-paid $257M for data storage at some undefined time in the future. They could instead have, starting now, stored 174PB in S3's RRS for 10 years. So FileCoin needs to store at least 174PB for 10 years before breaking even.

It gets worse. S3 is by no means the low-cost provider in the storage market. If we assume that the competition is Backblaze's B2 service at $0.06/GB/yr and that their Kryder rate is zero, FileCoin would need to store 428PB for 10 years before breaking even. Nearly half an Exabyte for a decade!

1 comment:

DidgetMaster said...

This brings me back to my original comment that ANY kind of new distributed storage system cannot compete with the likes of Amazon S3 on pure storage costs alone. It must offer something really compelling where people want their data in that system because that makes it much more valuable to them. If your data behaves the same on system A as it does on system B then the only difference is cost.

It is like the difference between storing your structured data in a flat file vs in a high powered RDBMS. It might be the same set of bits and bytes, but you can do so much more with it.

A distributed data system has to offer some really compelling reasons to switch to it (besides just that it is distributed) in order to compete. This is what I am working on. Anything else is futile as David pointed out.