Unveiling the Undervalued Potential of Decentralized Storage: A Deep Dive into EthStorage

LD Capital
LD Capital
Aug 30, 2023

Written by Alfred, LD Capital

One of the hottest topics this year is the Layer 2 (L2) solution aimed at enhancing blockchain scalability. Once successfully implemented, faster speeds and lower costs will gradually lead to the prosperity of Web3 applications, predicting a surge in data storage needs. This article focuses on EthStorage, which ranked first in this year’s EDCON Super Demo, and revisits the decentralized storage track, which despite being under the radar recently, holds significant potential.

I. Evolution of Network Storage

Consensus, computation, and storage are known as the three main pillars and fundamental infrastructures of Web3. Since the inception of computers, storage technology has been continually evolving, and this article divides its development into four stages:

1. Centralized Storage: Centralized Storage + Centralized Management

Initially, computers used punched tape to record data. Later, in 1956, IBM introduced the first hard disk, marking the beginning of the familiar computer storage method we know today.

Centralized storage devices have been constantly upgraded, including hard drives, tapes, memory cards, SSDs, etc. The storage architecture remains constant, where devices can access and request data from storage resources over the network, but all data storage resources are centralized in one location or server, under unified control and management.

2. Cloud Storage: Distributed Storage + Centralized Management

In 2006, Amazon AWS was launched, introducing EC2 and S3 cloud storage services, heralding a new era of storage. Tech giants like Microsoft, Google, and Alibaba followed suit, making it the most widely adopted storage method today.

Cloud storage uses a distributed architecture, storing data across multiple servers and backing up data fragments on several servers, thereby reducing single-point failures and data redundancy while ensuring scalability. However, the servers for cloud storage are centrally managed by the service providers, with users not having actual control over their data.

3. Traditional Blockchain Storage: Distributed, Full-node Storage + Decentralized Management

Since the birth of Bitcoin, blockchain network storage emerged as an alternative to centralized storage and management. By combining distributed storage, consensus mechanisms, and transaction verification processes, blockchain ensures data security and immutability while embodying the characteristics of decentralized storage and management.

However, networks like Bitcoin and Ethereum have high storage costs and low efficiency because their architecture isn’t primarily designed from a storage perspective. Every node must maintain a copy of the data, and the block space is limited. For instance, storing a single piece on Bitcoin or Ethereum networks can cost hundreds of dollars.

Source: Fundamental Labs

4. Web3 Decentralized Storage: Distributed, Multi-node Storage + Decentralized Management

Storing data directly on the blockchain is prohibitively expensive, leading to the emergence of various Web3 decentralized storage solutions and projects, such as IFPS, Filecoin, Storj, Arweave, Swarm, EthStorage, and more. These projects aim to increase storage capacity and reduce costs while retaining the principles of decentralized storage and management. This is achieved through techniques like data fragmentation, multi-node storage, and on-chain proofs.

II. ETH Modularization and the World Computer

1. ETH Modularization

Since 2021, with the introduction of a Rollup-centric roadmap, Ethereum’s modularization has begun. This approach breaks down the all-encompassing single shard blockchain into distinct levels, with different functionalities being managed by different modules or chains for scalability. This direction has also been referred to by Vitalik as the “Endgame”.

Blockchains, represented by Ethereum, split the chain into four key levels:

1) Execution Layer: Deals with transaction processing, smart contract execution, and calculations.

2) Settlement Layer: Verifies execution results, resolves disputes, and commits to a state.

3) Consensus Layer: Determines transaction sequencing, validity, and consistency between nodes.

4) Data Availability Layer: Ensures data can be accessed, stored, and verified.

In a single shard blockchain, the chain manages all four functions, facing the “trilemma” of blockchains. Modularization of the blockchain means each function can be handled by specialized layers, each addressing different issues.

After ETH’s modularization, the ETH main chain became L1, and many L2s have emerged above it, primarily serving as ETH’s execution layer. Technologies such as the L2 from OP Stack have also adopted a modular architecture to enhance future scalability. Through modularization + Rollup, ETH will mainly maintain the Data Availability and Consensus Layers in the future, becoming the mainstream and most secure foundation layer. The functions of other layers will be upgraded through other chains and schemes, expanding and improving the scalability of the entire ETH ecosystem.

2. World Computer

Ethereum aims to build a world supercomputer. While Ethereum currently excels in security, it’s still breaking ground in scalability. Rollup is a crucial direction to address scalability. Modularization can somewhat solve the blockchain trilemma. However, to become a supercomputer, there are three main challenges: consensus, computation, and storage, all of which have interdependent constraints.

Source: “Towards World Supercomputer”

Different priorities for these challenges result in different trade-offs:

Strong consensus ledger: Requires repeated storage and computations, making it ill-suited for extensive storage and computation.

Strong computational power: Requires repeatedly employing consensus for heavy calculations and proofs, making it ill-suited for vast storage.

Strong storage capability: Requires frequently employing consensus for random space proofs, making it ill-suited for computation.

Currently, traditional L2 solutions face a balance between centralized orderers and computational efficiency while failing to provide strong storage capability. The authors of “Towards World Supercomputer” propose an architecture based on functional zoning of the world computer, extending it to solve these challenges.

The ultimate world supercomputer will consist of three topologically heterogeneous P2P networks, similar to building physical computers, connected through trustless buses (connectors) like zero-knowledge proofs. This setup will connect consensus ledgers, computing networks, and storage networks to assemble a world supercomputer. Depending on specific application needs, other components can be added. The appropriate selection and connection of each component will balance the trilemma of consensus ledger, computational power, and storage capacity, ensuring decentralization, high performance, and security of the world supercomputer. Within this architecture, EthStorage serves as the storage solution in the supercomputer.

Source: “Towards World Supercomputer”

Based on this framework, Ethereum’s world supercomputer transaction process will be:

1) Consensus: Ethereum processes and reaches transaction consensus.

2) Computation: zkOracle network quickly verifies proofs and consensus data transmitted by zkPoS as a bus, executing off-chain calculations.

3) Consensus: In some cases, like automation and machine learning, the computation network will transmit data and transactions back to Ethereum or EthStorage through proofs.

4) Storage: For storing vast data from Ethereum (e.g., NFT metadata), zkPoS acts as a messenger between Ethereum smart contracts and EthStorage.

Source: Towards World Supercomputer

III. ETH Storage

1. Overview

EthStorage is the first Layer 2 solution based on Ethereum’s Data Availability, offering programmable dynamic storage, extending programmable storage to hundreds of TBs or even PBs at 1/100 to 1/1000 of the cost.

The team has twice been awarded grants from the Ethereum Foundation, assisting Ethereum in Data Availability research and L2 dynamic dataset storage proof research based on Ethereum L1 contracts. They also won first place in the 2023 EDCON Super Demo.

2. Technical Features

1) Highly Integrated with ETH

EthStorage’s client is a superset of Ethereum’s client, Geth. This means when running an EthStorage node, it can still participate normally in any Ethereum process. A node can simultaneously be an Ethereum validator node and an EthStorage data node. Each EthStorage Node’s Data Provider module will connect with other EthStorage Node’s Data Provider, forming a decentralized storage network.

Source: EthStorage — The First Ethereum Storage L2

Users of EthStorage can directly use their existing wallets to interact with all apps built on this storage, whether they are NFTs, decentralized social networks, or decentralized games, maximizing user accessibility to EthStorage. Moreover, EVM-compatible EthStorage offers excellent interoperability for smart contracts. For example, if user A wants to set a picture for their minted NFT through EthStorage, they only need to execute one Ethereum transaction. In contrast, using Arweave, A would need to commit one Arweave transaction and two Ethereum transactions, without achieving synchronous execution like EthStorage.

Source: “EthStorage — The First Ethereum Storage L2”

(2) L2 Decentralized Solution Based on the DA Layer

EthStorage essentially adopts a structure similar to L2. On Ethereum, a storage contract is deployed to serve as the entry point for EthStorage’s data operations. At the same time, the proof for data node off-chain storage also needs to be verified through this contract.

Compared with the current L2:

Rollup (L2) stores the state tree off-chain, and its on-chain commitment is the state tree root. After receiving new data, Rollup also needs to execute transactions off-chain to complete the state transformation and establish a new state tree.

EthStorage stores data off-chain, and its on-chain commitment is the proof of data storage. When EthStorage receives requests to update stored data, it generates new storage proofs for this data.

From the above, it can be seen that the scaling direction of the current Optimism Rollup or ZK-Rollup is to expand Ethereum’s computational capacity, whereas the scaling direction of EthStorage Rollup is to expand Ethereum’s data storage capacity.

Furthermore, EthStorage is a modular storage layer. As long as there is an EVM and a DA to reduce storage costs, it can run on any blockchain (though many current Layer1s lack a DA layer), and even on Layer2. For example, EthStorage is currently considering how to implement fraud proofs on Optimism using its technology and has enabled the corresponding DA layer on Optimism.

(3) Achieving Dynamic Storage

Both Filecoin and Arweave are more designed for static storage. Large amounts of data can be uploaded to decentralized storage, but it cannot be modified or deleted, only new data can be re-uploaded. Thanks to the key-value storage paradigm, EthStorage can support CRUD, meaning creating, updating, reading, and deleting stored data. This is easy to implement in centralized storage, but currently, only EthStorage can achieve it in the decentralized storage domain.

Source: EthStorage Official

(4) Creating an Ethereum Network Access Protocol

In Web2, behaviors like browsing web pages, sending emails, and downloading files all rely on the HTTP protocol, which is one of the most common protocols on the internet. The HTTP protocol defines how clients and servers exchange resources, with URLs indicating the location of these resources online. When entering a website address or clicking a link in a web browser, an HTTP request is triggered. The browser interprets the URL and communicates with the server using HTTP to request specific resources, displaying them to the user after receiving the server’s response. However, Web2 pages or internet services are hosted on centralized servers. When subscription fees for servers are not renewed, the cloud services used by the application will cease, and the data will be deleted by the centralized service provider.

The founder of EthStorage proposed a Web3 network access protocol based on ERC-4804, which passed the EIP final review. ERC-4804, officially named “EVM Call Information Interpretation Web3 URL”, is an HTTP-style Web3 URL (*web3://) for EVM information calls and represents the first network access protocol on Ethereum. Unlike Web2 which accesses server resources, the web3:// Access protocol renders resources hosted on Ethereum smart contracts via the Web3 URL, including files like HTML, CSS, and PDF.

In simple terms, web3:// (*http://web3url.io) is a decentralized version of http://. It adds a decentralized representation layer to Ethereum, allowing users to directly browse web content on the EVM, such as web pages, images, songs, with the EVM serving as a decentralized backend.

Source: EthStorage Official

3. Current Situation and Plans

(1) Product Application

With EthStorage, internet applications can be relaunched with decentralized storage as the foundation. This includes dynamic NFTs, on-chain music NFTs, personal websites, non-hosted wallets, Dapp, and Deweb, among others.

Source: EthStorage Official

Taking DeWeb as an example:

We know that Ethereum is a decentralized network. Many decentralized dapps were born on Ethereum, but these dapps are not entirely decentralized. Many application front-ends are still hosted through centralized cloud services. For instance, Uniswap’s front-end webpage going down, deletion of trading pairs, or Tornado.Cash being shut down due to alleged money laundering are all because their front-end is hosted on centralized servers, making them unable to resist censorship effectively. However, with EthStorage’s solution, web page files and data are hosted in smart contracts, run and maintained by a decentralized network, significantly improving resistance to censorship. Through the programmability of smart contracts, DeWeb can realize many interesting applications, like De-github, De-blog, and the front-ends of various dapps.

Source: EthStorage Official

Currently, EthStorage has not announced a token plan, but on the testnet, you can use the test token W3Q for testnet usage and interaction.

(2) Roadmap According to the roadmap released by EDCON, in 2023, EthStorage will mainly be in the testnet phase and will adapt to the Ethereum Cancun upgrade for development and testing. It might launch on the mainnet in 2024, fully integrating Danksharding, CL+EL clients, and Web3 browser access.

Source: Official EthStorage

IV. A Brief Overview of Other Storage Projects

(1) Filecoin: Filecoin is a decentralized storage network with an incentive system built on top of IPFS. IPFS uses a distributed hash table (DHT), a protocol for storing, addressing, and transmitting data (akin to the HTTP protocol). Filecoin acts as the incentive layer for IPFS and also as an open storage marketplace. Filecoin uses a contract-based model to ensure data persistence combined with zero-knowledge proofs, especially space-time proofs and replication proofs. On March 14th of this year, Filecoin announced the official launch of the Virtual Machine (FVM) to support smart contracts and user programmability.

Features: Has its own blockchain and incentive system; large static storage space with low cost; supports FVM after the upgrade.

(2) Arweave: Arweave adopts a “pay once, store forever” model where a one-time payment covers the cost of perpetual data storage, and retrieving that data does not incur additional fees. Arweave uses succinct proofs of random access and has created a native data structure known as Blockweave. Here, each block links to a previous block and a historical Recall Block. For nodes, the prerequisite for minting a new block is to synchronize with a Recall-Block and the newly generated block data.

Features: Has its own blockchain and incentive system; on-chain storage, perpetual storage; relatively weak interoperability with other chains.

(3) BNB Greenfield: Greenfield focuses on promoting decentralized data management and access. It aims to simplify data storage and management while linking data ownership with the DeFi ecosystem of BNB Smart Chain (BSC). The complete BNB Greenfield system can interact with the mature BSC public chain and the BN community users. When users want to create and use data on Greenfield, they can interact with BNB Greenfield’s core infrastructure through BNB Greenfield dApps (decentralized applications).

Features of BNB Greenfield: The final piece of Binance’s “trinity” ecosystem; strong operability within the ecosystem; BNB circulates and is used across multiple chains; adopts the Amazon S3 “bucket” structural concept; off-chain storage, on-chain verification.

V. Conclusion

Storage is one of the three pillars of the Web3 network. Only when decentralized storage is grounded can true data rights and sovereign networks be realized. Otherwise, sacrificing centralized efficiency to develop blockchain networks has little meaning. This field is fundamental and holds significant potential.

Currently, compared to other sectors, the heat of decentralized storage in the market is relatively low. This is mainly because its development stage has not met sufficient demand yet. As L2 development makes Dapp applications cheaper and faster, the accumulation of a large amount of data and its value demand will push the market heat towards the decentralized storage sector.

EthStorage, as an emerging project, has a good Ethereum ecosystem foundation. It has strong interoperability and can be combined with other L1 and L2 layers that have a DA layer, offering new development directions and solutions. Today’s various decentralized storage projects also have their main focus and are continuously developing. We look forward to the era when the market gear shifts to the storage sector.

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