Siacoin

What is Siacoin (SC)?

Sia is a decentralized cloud storage platform secured by proof-of-work blockchain technology.

It leverages unused or underutilized hard drive capacity of users worldwide to create a data storage marketplace that is more reliable and costs far less than traditional cloud storage providers.

Sia can keep data encrypted and private while also eliminating any single point of failure and ensuring an uptime that is as high as possible. As a result, Sia’s data can’t be de-platformed, and files can’t be hacked.

When was Siacoin Launched?

The Siacoin project first began in the summer of 2013, when founder David Vorick discussed the idea with college friend Luke Champine over email.

Then referred to as “the Nimbus network,” Vorick formally created the first draft of the whitepaper and presented it at the HackMIT hackathon in September 2013.

At this point, referring to it as “Bytecoin,” Vorick secured Champine’s formal involvement in the project by asking him to review a presentation outlining the idea further.

In early 2014, Vorick and Champine renamed the project “Sia” in homage to the Egyptian god of perception and announced it on the famous BitcoinTalk forum. While Vorick and Champine were rejected by the Y Combinator startup accelerator, they went ahead and incorporated under the name Nebulous Inc. The firm and ecosystem around Sia are now known as Skynet. In the meantime, Sia was crowdfunded, selling “Sianotes” via Bitcoin and on the NXT Asset Exchange, which would later be convertible to Siafunds.

In the Summer of 2014, Sia was using a proof-of-storage consensus mechanism instead of proof-of-work. However, Vorick discovered certain terminable flaws in the algorithm, and the team made the difficult decision to rewrite Sia from scratch.

This new iteration, published in November 2014, was based very closely on Bitcoin. It differed only by adding a transaction type that enabled storage contracts. Sia’s genesis block came after half a year of work on achieving a working release and was created on June 6, 2015.

A year later, the Sia team was able to release stable version 1.0, and the project was listed in July by the Shapeshift exchange. In September 2016, the firm behind Sia, still called Nebulous, received $750,000 in seed funding from Procyon Ventures, Raptor Group, Fenbushi Capital, and angel investor Xiaolai Li.

Much of the infrastructure around the Sia network was developed by Skynet Labs, but the company closed its doors in August 2022. However, its network and infrastructure are still accessible and remain online.

How Does Sia Work?

The Skynet protocol is key to how Sia works since it allows the decentralized hosting of applications and data atop the Sia blockchain. Skynet Portals are used for uploading data and establishing a persistent “skylink.” These skylinks retrieve the data from any portal, even if the original uploader goes down.

This system allows data to be immutable and last for as long as at least one public portal “pins” the data. This system allows developers to build Skynet apps (skapps) that are accessible from any portal, secure, and resistant to censorship.

In this manner, Sia can eliminate the need for centralized hosting services, allowing this to be done in a decentralized manner. Users also have the complications of blockchain technology, such as nodes, wallets, and cryptocurrencies, abstracted away since they can access Skynet using a simple web portal.

What Makes Siacoin Unique?

Sia is a smart contract blockchain that makes ecosystems like Skynet possible. It functions via storage smart contracts that link a host to a renter.

Renters own data but need space, and hosts store the renter’s data and are compensated for it. They also have to periodically prove that they still have the data or face collateral loss.

Data stored by the network is broken into 30 encrypted chunks, each of which is uploaded to a unique host. Renters pay these hosts using the SC utility token, and hosts lock SC into smart contracts as collateral.

From each completed contract, a small fee is extracted. This fee goes to the holders of Siafunds, a secondary revenue-sharing token on the Sia network held by various stakeholders.

How is the Sia Network Secured?

Sia is secured by a proof-of-work consensus algorithm similar to that of Bitcoin. Its founder, David Vorick, published a blog post in 2017 going into detail on the benefits of proof-of-work. Among other things, he argued that alternate histories on proof-of-work blockchains are extremely expensive, saying:

“Proof of Work provides a powerful stamp that says ‘this history cannot be changed without doing a lot of work.’”

Vorick’s point was that a block requires a lot of energy-intensive computation. If someone makes an alternate history, they are required to spend as much money on energy to do so, assuming they have efficient hardware.

What is the Use of SC?

Siacoins are the utility tokens that power the Sia network and are required for any action, such as trading or renting/hosting data. Uploading data is also paid for in SC, with the coin facilitating operations across the network. SC is also used to pay out revenue shares to Siafund holders.

Who Controls Sia?

Sia is supported, developed, and promoted by the Sia Foundation. A non-profit entity, the Foundation was created when Sia version 1.5.4 introduced a network hard fork. This fork created a block subsidy to fund the Foundation and an initial subsidy of $1.57 billion SC for initial development and activities.

How Much SC is In Circulation?

SC is an inflationary coin with no maximum supply. According to the Sia team, the limitless amount of data that can be created and stored must be matched by a limitless supply of SC.

New SC is generated by mining, in a process very similar to Bitcoin. However, SC isn’t subject to halving. Instead, the reward issued decreased at a rate of 1 SC per block, beginning at 300,000 SC at genesis and ending at 30,000 SC in July 2020, where it will remain constant.

SC was also pre-mined, with the team mining 100 blocks (30 million SC) before releasing the code and miner to the public.

The smallest currency unit in Sia is the Hasting, with 1 Hasting equal to 10-24 SC. The reason for this minute unit is that the network relies on very small microtransactions. Storage prices on Sia are calculated as Hastings per Byte per block, which can be a tiny figure.

The largest unit of Siacoin is the Tera, which is 1 trillion SC. While currently impossible, the first TeraSia is expected to be generated in the year 2626. Currently, the circulating supply of SC stands at over 52 billion.

How Do You Buy SC?

SC is one of the oldest cryptocurrencies on the market and is available on many exchange platforms. You can buy it on any one of them by creating an account. Some exchanges may require identity verification before allowing you to withdraw SC into your own wallet.

How Do You Store SC?

You can store your Siacoins on one of the official wallets made by the developers, Sia-UI and siac. Sia-UI allows you to store SC and/or sell storage space on Sia, so it’s a great option for most users. Siac is a command-line client for Sia and is only recommended for advanced users.

You could store SC on an exchange, but that’s particularly risky at a time when several CEX platforms have failed and others are coming under heavy scrutiny.

Bank runs shouldn’t impact crypto exchanges since they’re meant to make money on fees and not operate fractional reserve models. While the norm for the financial sector tends to be fines akin to a slap on the wrist, some crypto exchanges have found that they aren’t too big to fail.

Sia Energy Consumption

Sia is a proof-of-work (PoW) network that intentionally relies on significant energy consumption for security. While the efficiency of mining via hashrate is a significant factor, PoW blockchains are generally more secure the more power, and therefore computing resources, are devoted to them.

However, Sia’s energy consumption isn’t anywhere near that of Bitcoin. If it were to reach a level of real mass adoption, it could certainly be, but that hasn’t happened just yet.

Is SC a Good Investment?

As the utility token that powers the entirety of the Sia network, the worth of SC as an investment is linked to the platform’s adoption.

If usage in terms of renters and hosts, as well as raw data, continues to rise, then there will naturally be a demand for Siacoin to pay for all of the resulting contracts and transactions.

The fact that SC is inflationary can even be overlooked, especially because of plans to implement a proof-of-burn mechanic. However, the fact remains that Sia needs to establish a real foothold in the mass market if SC is to appreciate in any meaningful way.