DeFi And Decentralized Data Storage Are About To Collide

The internet we use today is highly centralized by big data companies such as Google, Microsoft, Amazon, and Facebook. These data companies have made...
DeFi And Decentralized Data Storage Are About To Collide
Image credit: 200degrees / Pixabay via Valuewalk

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
6 min read
This story originally appeared on ValueWalk

The internet we use today is highly centralized by big data companies such as Google, Microsoft, Amazon, and Facebook. These data companies have made big bucks carving up traditional systems into compartmentalized, cloud-based offerings. They have so much control over the data that if any one of these providers has an outage, it’s chaotic at the very least.

Q2 2021 hedge fund letters, conferences and more

In order to push back against this increasing centralization, developers and platforms need to establish a new system that is easy to set up and compose. Given DeFi success, Decentralized Storage could serve as the cornerstone for a more distributed web.

Decentralized data storage is driving a fundamental shift in the efficiency and economics of large-scale storage systems. By eliminating the centralized control, decentralized data storage allows users to store and share data without relying on third-party storage providers. Decentralization of the data storage sector allows us to mitigate the risk of data failures and outages while increasing security, performance, and privacy.

The Market For Data

Studies suggest that the amount of digital data the world generates doubles every year. Having said that, the vast majority of the storage devices are operating at significantly less than their capacity as these systems continue to suffer from issues such as security, availability, and performance, especially for the users that are far from these systems.

Decentralized data storage addresses these issues by using existing underutilized storage and bandwidth to provide a system that is both cost effective and efficient. Moreover, the surge in data needs across the web requires DeFi solutions to financially empower users to monetize their under-utilized data storage and expand the space.

DeFi has been disrupting the traditional financial sector, and given that the world generated over 44 zettabytes of data by the end of last year, the collision of DeFi and decentralized storage could translate to a whole new ecosystem with incentives and democratization.

Transition From Web 2.0 to Web 3.0 With Decentralized Storage

The web content we consume today is hosted on a very fragile infrastructure that could potentially fail at any moment, making your data inaccessible. Centralization amplifies this effect by creating single points of failure mainly because centralized cloud servers are spread around the world but in a very few locations, isolating billions of users far away from their data and giving too much control to these companies to dictate prices, jurisdictions, and who can use their services.

Instead of a few big players dominating our digital future, the internet needs an open market. Decentralized storage systems connect the world with new storage mechanisms coupled with an economic model. No matter the level of existing connectivity, we need solutions that put content and data on every corner creating a hyper-local and efficient storage so people can finally break free from big centralized storage and limited locations.

Decentralized storage systems are based on a peer-to-peer network of users who hold a portion of the data that creates a resilient system of file storage and sharing. However, that doesn’t mean we store large amounts of data on the blockchain itself because it will become very inefficient to deploy new data because of the rising size of the public chains.

Due to these drawbacks, we need a whole different methodology of storing large amounts of data in a decentralized manner. At the moment we have four different structures in the decentralized storage space:

  • Incentive Structure
  • Data Retention Enforcement
  • Decentrality
  • Consensus

While these structures provide resiliency and efficiency, they’re not as rewarding as they should be. The success of DeFi is attributed to its rewards structure, high composability, and liquidity. The rewarding structure is a good enough reason for users to join the space and test out various protocols.

Decentralized data storage could follow suit and merge with DeFi, providing an ideal distributed system that is accessible, programmable, trustless, and verifiable. Projects such as Swarm, Filecoin, Dfinity, and Coin are some amazing projects in the space that provide an almost ideal distributed system; however, they lack an immersive DeFi gateway and a rewards structure that will incentivize users to use their services.

Talking about the merge of DeFi and decentralized storage, is a secure DeFi platform that bridges decentralized data storage projects to DeFi through high-performance blockchain. YeFi couples DeFi with projects such as FileCoin, Swarm, Chia, and more, where users are incentivized to participate and secure the network.

YeFi also offers a non-custodial staking system that utilizes impermanent loss protection where users may withdraw the same amount of assets they deposit. Unlike custodial stalking platforms, users on YeFi have complete control over their assets, making them adequately secure in contrast to custodial staking platforms such as Fireblocks that lost over $70 million worth of ETH by losing keys stored outside of its platform.

Filecoin is a decentralized storage solution that allows anyone to rent out their local unused storage. With its peer-to-peer network of nodes renting out their storage space, Filecoin creates a larger free market for data storage that is cost-effective, highly scalable, and economically efficient since it uses the existing under-utilized resources to scale and operate.

Dfinity is another decentralized storage solution that is attempting to disrupt the cloud computing industry. Dfinity Foundation has recently launched their project called Internet Computer that allows software companies to deploy their code in safe and decentralized execution environments. As the name suggests, the Internet Computer is like a global blockchain computer (think of it as a server) that both companies and individuals can use based on their needs.


Decentralized storage is emerging as a critical element of the Web 3.0 architecture and we need more promising projects that will challenge the economic and storage paradigm of data. There’s an urgency for a peer-to-peer network that will allow for faster and cheaper storage of data that reduces our reliance on centralized services.

From emerging lending and borrowing platforms to stablecoins and tokenized cryptocurrency, the DeFi ecosystem continues to grow into a wider network of integrated protocols and innovative financial instruments representing billions of dollars.

Soon, decentralized storage could also emerge as a promising DeFi product and catalyze the growth of the space. Projects such as Filecoin, Storj, Swarm, and others are driving the decentralized storage narrative, and emerging protocols like YeFi could help accelerate the progress by serving as the ideal hub for all of these protocols coupled with DeFi.

More from Entrepreneur
  3. Launch your new franchise organization
  • Premium articles, videos, and webinars
  • An ad-free experience
  • A weekly newsletter
  • A 1-year Entrepreneur magazine subscription delivered directly to you
  • Get step-by-step guidance for writing your plan
  • Gain inspiration from 500+ sample plans
  • Utilize business and legal templates
  • And much more

Latest on Entrepreneur