Comparing the Economics of Centralized and Decentralized Cloud Storage

July 15, 2021

The economics of cloud storage have changed over the years. At first companies stored their data on premise. As cloud storage evolved, the alternative option was created for companies (and eventually individuals) to store their data in the cloud. When it started, centralized cloud storage was significantly easier to use, especially when compared to owning and running your own servers and hiring employees to manage them. More than a decade of migration has taken place where many companies now rely in part or fully on centralized cloud storage providers. 

However, what once was a sensible dynamic has been flipped because of the exponential growth of data, and companies are much more cost sensitive. While data storage used to be a relatively small cost, it can now be half or more of a company’s entire infrastructure bill. Now a new option for cloud storage has arrived—decentralized cloud storage. This model uses untapped capacity on computers of individuals and utilizes it inexpensively for data storage while end-to-end encryption keeps the data completely secure. It is a compelling alternative, but to be certain, let’s break down the economics of both options.

The Volume of Data is Growing Exponentially—And This is a Costly Problem!

As cloud computing has evolved and more cloud applications were created, there has correspondingly been an explosion of data. IDC has said we are seeing a 61% compounded annual growth rate of data and that it will reach 175 zettabytes by 2025. (In case you are wondering, that is 175 million terabytes.) For our visual learners, if you took all the data created in 2020 and put them on a stack of CDs, they would stretch around the orbit of Mars and back. 

While centralized cloud computing is very easy for a developer to use to start an application, as that application becomes successful and users generate data with it, the costs of cloud storage are quickly rising to a point where that cost is becoming untenable. 

There has been little to no reduction in the price of centralized cloud storage in the last 6 years. But, companies continue to create more data, and still have all the data they created last week and the week before. And if it costs them the same amount to put the data in there, the same amount to keep it there, the same amount to take it out, costs get out of control. 

Additionally, the need for multi-region and multi-geography redundancy has increased costs and fees have been added for data movement and egress. New data centers have been built and require significant expenditure in servers, energy and cybersecurity expertise. 

Are Centralized Cloud Storage Costs Really That Bad?

Yes, yes they are. Here’s a great example. A Twitter user recently did the math for accessing their data stored in AWS and compared it to what it would cost to pay for the same bandwidth from a local bandwidth provider, Hurricane Electric. The user claimed that using one gigabit a second of bandwidth egress out of AWS for a month, cost them $21,000. If they bought that same bandwidth from Hurricane Electric it's about $400 a month to get one gigabit a second of symmetrical transit. What good is your data if you can’t afford to access it? And indeed, this cost dynamic is leaving many customers of centralized cloud storage providers wondering “Where did we go wrong?”

In fact, centralized cloud storage and usage costs have gotten so large and complex with hidden fees that developers often get hit with large bills they weren’t expecting. Because of this, websites and business models have been built just to try and help developers understand their centralized cloud storage bills and where the charges are coming from.

Decentralized Cloud Storage is a Fraction of the Cost of Centralized Cloud Storage

In comparison, decentralized cloud storage takes advantage of storage and bandwidth that already exists or is provisioned at the edge. If you add up all the storage capacity in data centers, it is dwarfed by the storage capacity on computers in people’s homes. Furthermore, 75% of those drives are less than 25% full. Decentralized storage takes advantage of this unused capacity and can offer it at a fraction of the cost of centralized cloud storage because there is no overhead. Further, bandwidth is cheaper because the data is already at the edge. And there is such an excess of unused capacity that costs can stay low and don’t need to rise in conjunction with data growth.

Decentralized cloud storage has no upfront investment in data centers to get the service running. Additionally, there is a marketplace of individuals providing storage space that are incentivized to provide high quality storage. This creates healthy competition which keeps costs low and quality high. And all of this cost savings is passed on to the developers.

Simplicity and No Hidden Fees in Decentralized Cloud Storage

The significant decrease in the cost of bulk bandwidth over time and the availability of new  services, hosting environments and bandwidth alliances all make it possible for decentralized cloud storage services to offer ultra low cost capacity and ultra low cost bandwidth. Additionally, this allows for something even more exciting—predictable and simple pricing. 

Centralized cloud storage providers add high fees for data egress to try to lock-in their customers to their service. Fundamentally, these are exorbitant cloud computing taxes disguised as egress bandwidth fees. This complexity is eliminated with decentralized cloud storage. No hidden or complex charges, no taxes from managing large data centers. Decentralized services providers don’t have the same overhead so there are fewer costs to scale. This keeps billing simple and very affordable.

Decentralized Cloud Storage Costs WIll Actually Decrease in the Future

Believe it or not, we predict decentralized cloud storage is going to get more and more affordable over time. Why? A decentralized network can better utilize local dynamics and excess capacity than centrally planned datacenters. As the network grows and more drives and bandwidth are added, a decentralized network can choose the most efficient route for your data, instead of relying on the centralized hub-and-spoke model. And because there are lots and lots of individuals involved in this as opposed to three large players, the economics work in favor of the end user and developer, as it should.

Experience the Superior Economics of Decentralized Cloud Storage for Yourself!

When you compare decentralized and centralized storage costs, you recognize that  decentralization brings about a far more compelling and sustainable economic model for the people who are storing data. Decentralized cloud storage is an opportunity for developers to actually interact with a different category of storage service that meets their needs, that enhances their privacy and security, all while delivering fantastic economic benefits for their applications and for their end users. Still not sure? Try Storj DCS for free.

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