Abstract
In this short blog post, I will share some of my concerns with respect to the Storj project and their token sell tomorrow, May 19th. More precisely, I will discuss some misleading and factually incorrect claims they made, a lack of actual decentralization and a questionable market plan. However, these criticisms are to take with caution, as they are only problems within my current perspective of and I highly encourage the readers to do their own research. Note that I will not discuss other related projects as I do not mean to sell another product. In fact, Storj is the cloud storage project I invested the most money and time in so far.
1. Introduction
1.1 What is Storj
Storj is a company using blockchain technology to allow distributed cloud storage, where farmers rent their spare Tbs and rent them to renters. You can see Storj as a distributed version of Dropbox, where files are broke into pieces (shards) and distributed to multiple farmers. There is redundancy in order to insure that files don't disappear if a farmer decides to destroy them or simply to leave the network.
1.2 Storjx Token Sell May 19th
Storj, which is currently using the Counterparty blockchain, will soon migrate to the Ethereum blockchain (somewhere in July) and are holding a token sell tomorrow, May 19th, for the occasion. Investors will be able to purchase Storjx tokens at a price of 0.50$, until a 30 million USD cap is reached (or until June 19th if cap is not reached).
2. Concerns
2.1 Misleading Claim : Network Usage
The first major misleading claim would be related to their network usage.
In this image (taken from the token sale page), Storj claims to have 18 000 farmers. In reality, the number is probably closer to 3000-4000. If one consider Storj's April payout document, we can see that 8000 payments addresses are disclosed, out of which 4000 were actually paid, 2200 had at least 10 GB held for the whole more and only 700 downloaded more than 1 GB of new data. This discrepancy in terms of claimed farmers and payment addresses is explained by the fact that the graph is showing the number of nodes, not the number of farmers. I personally have above 50 nodes running on a old windows machine and there has been people claiming to run more than 500 nodes on a single machine. In fact, almost every farmer as multiple nodes, as you get more shards (piece of data) the more nodes you have, hence a deceiving statistics for counting the number of farmers.
2.2 Misleading Claim : Number of Tokens In Circulation
According to their *Transparency Plan Pt. 1, the Storj team made the following pledge :
"Today, we are making a new commitment with respect to the responsible use of SJCX. We pledge to introduce no more than 10 million SJCX per year to the supply in 2016-2017."
Currently, there are 51 million Storj coin being traded and 449 million held by the team (~90%). Now, instead of the 10 million release promise, Storj aims at selling for 30 Million USD worth of Storj at a maximum price of 0.5 USD. Taking these tokens from their 449 Million stash, this is effectively aiming at releasing at least 60 million tokens if the cap is reached, but potentially more since discounts are available for larger purchases during the pre-sale (ending today).
For further discussion, you might find this reddit discussion interesting.
2.3 Centralization
Storj is at the moment not a decentralized storage system, mostly due to their payment system. Currently, renters do not directly pay farmers, but pay Storj and Storj payback their farmers once every month. This caused some problems where the last payments was being delayed by many days, both due to the amount of work on the team's end but also due to processing speed of transaction. There is also a concern that the payment sheets are completely generated by the Storj team and we do not have access to the raw information where the data is gathered. It would therefore be hard to know if the value were altered, a potential lost to the farmers. Due to this centralization, if the Storj team disappears, there would be no way for the farmers and renters to directly interact. This is something the team wants to move toward, but I find it concerning that this was not the primary direction and is not among the most important incoming features.
2.4 Market Plan
Storj seems to put most of its current energy on the farmers, attracting them by uploading a large amount of data to test the network and therefore paying the farmers a substantial amount. In addition the price for renters are relatively high compared to other options. Indeed, Storj currently charges renter 15 USD / 1 Tb per month, which is surprisingly more expensive than the current Dropbox offer of 10 USD / 1 Tb per month. I believe having a strong team of farmers is necessary, but fundamentally, the renters should drive the amount of farmers, not the other way around.
Dropbox :
Conclusion
To conclude, I believe there are reasons to be skeptical about the Storj project. The idea and approach are obviously interesting and promising, but some decisions and actions by the team are questionable, such as misleading claims, centralization and high renting fees. However, it is important to note that although questionable in my view, these positions and decisions might've been genuinely taken for the greater good of the project. Hence, I encourage the reader again to make their own research before investing.
It is my hope to encourage skepticism, both for a healthier investing and developing community.
“ The noösphere, that is, the biosphere reworked by scientific thought [...] is not a short time and transient geological phenomenon. Processes which took many billions of years cannot cease. It follows that the biosphere will transform (one way or another, sooner or later) into the noösphere.”
-Vladimir Vernadsky, 1938. Scientific thought as a Planetary Phenomenon
Good info. Thank you for the post.
Thank you.
They also has like 3 ico if sum in total? why the heck need more ico if you did already in past. how much money the needed it.
I wish I found your blog before i invested into storj ;)
I believe the real risk is not in the short term per say, so there is still plenty of time to adjust. Again, this is my opinion and they might adjust in ways that I currently cannot fathom.
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Great post. Funny I can't resteem it.
Your concerns turned out to be valid, with management and board departures. Looks like they have serious issues.
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