Announcement: Changes to Storj Node Payouts

Hello Storage Node Operators!

Important: This is an announcement of changes to payout rates for storage nodes on three satellites: Salt Lake, europe-north-1, us2 effective May 1st. See below for details.

As we have been discussing in our forum posts (Mar. 8, 2023 post & Apr. 5, 2023 post), the time has come for us to make some adjustments to the payout rates for Storj node operators. Thank you so much for all of you that have contributed to the conversation so far. We’ve read your comments and incorporated much of your feedback as we have gone through this process. We really appreciate all of the insight and perspective we have gained through this.

Please read the following FAQ carefully as it has adjustments based on feedback from our two previous proposals and also includes more details on plans for future changes. We know that these changes might be difficult for some but we know that we need to take action in order to secure a sustainable future for the Storj project. As always we would love to hear from you and understand your thoughts and/or concerns on these changes. You can share any thoughts you have regarding this in the forum post.

The Storj Team

Q: What is the current situation regarding Storj’s storage node operator (SNO) payments?
A: Storj is stuck between a couple of facts, namely: (a) we pay SNOs more for egress than we charge, (b) The sustainability of the company requires us to make changes in these payouts so that we can continue to fund the development of the network, and, (c) we have hard-earned evidence that the market does not currently support raising prices.

Fundamentally, as we have said a number of times, SNO payments right now are being subsidized by us to grow the network, and we are currently in a position where the network is larger than it needs to be for the demand we have, and it is continuing to grow faster than we need. We have been transparent that the time would come when we would need to decrease SNO payment rates, and we feel that that time is now. We realize that dropping payment rates will slow the growth of and maybe even shrink the network, and that is precisely what we have decided we need to do.

In doing this we are targeting greater utilization of the network. This should enable SNO’s drives to fill faster and produce higher returns over time. As the network stabilizes and our customer growth increases we will slowly remove any synthetic load until the network is operating completely without subsidy from Storj.

Q: What other things have we considered to improve this situation beyond just lowering SNO payments?

A: There are a number of things we can do to improve our unit economics beyond just lowering SNO payments, such as adjust Reed-Solomon parameters, charge more for add ons (such as edge services), restructure the free plan (see this post for an update), etc. We are planning to make some of these changes, and are taking them into account as we determine where we need SNO payments to be in order for Storj to be sustainable long term. Please stay tuned for more information about these things.

Q: What is the proposed path forward with SNO payments?
A: We have decided based on the feedback from the forum and considering some of the points mentioned above that we can avoid changing the payout for data stored, so we are planning to hold that at $1.50 per TB-Mo of storage for the foreseeable future. We are, however, proposing to adjust the payouts for egress and repair. At the moment, we plan to only change payouts on non-production satellites. After this change, we will evaluate the impact on the network and use that information to determine what, if any, future changes should be made.

This is the new pricing schedule which will take effect as of May 1st, 2023:

Satellite / Payment Category **Current Payment PaymentAs of May 1st** : Storage (per TB Mo) $1.50 $1.50 : Egress (per TB) $20.00 $10.00 : Repair (per TB) $10.00 $10.00 : Storage (per TB Mo) $1.50 $1.50 : Egress (per TB) $20.00 $5.00 : Repair (per TB) $10.00 $5.00 : Storage (per TB Mo) $1.50 $1.50 : Egress (per TB) $20.00 $2.50 : Repair (per TB) $10.00 $2.50

Q: How will Storj minimize impacts to Storj Node Operators?

A: Throughout this process we are committed to maintaining relatively stable aggregate SNO payouts through the addition of data and egress to the network. We plan to do this through our regular customer growth and also through the use of synthetic load (test data and egress that Storj does) if necessary. Given the relatively small egress and repair loads on these non-production satellites we will not be adding any additional synthetic load at this time, but will consider this option if changes are made in the future that have a more material impact on payouts. Even though these changes right now are not material, it will allow us to test our process for making changes, and solicit more feedback from the community before we decide what if any future steps we should take.

We do not yet know exactly where we will land in the long term on the payout amounts but we trust that the conversations we have, the economic signals we receive, and the corresponding network statistics will inform this process for us.

Q: If Storj wants to save costs, why would it add synthetic load?

A: While adding synthetic load to the network does add cost It is important to note that right now our main concern is our unit costs. Our objective is to get to the point where every TB of data that we sell earns us money instead of losing us money like it does now. This is why we need to make changes to the SNO payments (as well as to R/S numbers, etc.) Once we are unit profitable then as we scale we become more profitable overall instead of less. Also, we plan to increase the synthetic load in step with any payout decreases such that the total amount we pay SNOs remains relatively constant. This means that overall the addition won’t increase our costs. It will just keep them flat until customer growth catches up.

Q: How will Storj evaluate the impact of these changes?
A: We will monitor network capacity, sustainability, node churn, stability, and health at each step of the process, using this information to determine what, if any, further actions are needed.

Q: What options do SNOs have if the new payout structure doesn’t work for them?
A: If at some point in this process the payouts for a satellite do not work for you, you can of course gracefully exit the given Satellite.

Q: What future payout changes will you make & what is the final payout pricing Storj will set?

A: We do not yet know exactly where we will land in the long term on the payout amounts but we trust that the conversations we have, the economic signals we receive, and the corresponding network statistics will inform this process for us.

Q: What is the ultimate goal of these changes?
A: Ultimately, we believe we can achieve the dual goals of Storj’s long-term sustainability and that running a storage node can remain profitable in many locations.