Let's talk about the elephant in the room: The Storj economic model (node operator payout model)

and I think current reported free space on storjstats is not correct, since you can see sharp step from ~6.8 to ~22.4 PB on october 13th

Well then, let my add my 2 cents. They are probably totally unsorted, because I still have to make my mind about the whole situation.

First of all I have to agree with @BrightSilence that the wording and intention is unclear. So it is hard to make good suggestions. Basically the only hard fact is that Storj pays to their node operators more than they receive from their customers, so naturally if you talk about viable economics, the idea of cutting node operator payouts comes to my mind as well.

However the current economic situation with inflation all over the place, it would be a bad timing to reduce payments to node operators. Just to give you 2 examples: Within a week I personally have received announcement from a server hoster that they will increase their price by 300% and my electricity provider announced an increase of 100%. This goes into effect immediately resp. by January 1st. Prices are going up everywhere making running a node more costly.

On the other hand it is a good time to increase prices to customers as in the current economic situation this is what everybody expects and (kind of) understands.
As Backblaze has been mentioned as competitor, I have had a look at their prices and they charge $0.005 GB/Month ($5) for storage and $0.01 GB/Month ($10) for Egress.
So Storj could increase prices and still remain below their level, like $4.50 for storage and and $9 for Egress.
As a bit of a compensation Storj could increase the discount for payment with Storj tokens.

That’s the revenue side. The other side is the cost side. It has been mentioned, we see the test data still occupying space and inducing cost, and maybe the free tier should be reworked in a way that data gets deleted from accounts that are no longer in use. (You could impose a requirement to login monthly or something like that to make sure these are not throw away accounts that don’t bring any revenue but only cost money.)
Another idea that may work is a dedicated satellite for free accounts where node operators could subscribe and agree to either not getting paid or agree to less payment.
I do see and understand the need for the free tier and I think it is a great way to attract potential customers but the question is, is it required to have this data online for free forever or can this data be deleted at some point or slowly transformed into paying data for example by restricting the free duration and then start to charge for it?

Without a doubt to keep SNOs on board, running a node must be rewarding. It needs to work for both small and large setups and it must be rewarding from day one. If simply payout gets reduced, then it won’t really work for smaller setups anymore which will probably lead to larger setups and less decentralization.

But again, it is hard to make detailed suggestions, without knowing which problem should be solved. In general I would say: Incentivize the node behavior that you want to see (like with surge payouts, bonus payments or earlier (partly) return of held amounts) and penalize what hurts or negatively impacts the network.

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This would be useful if it was possible to limit used space for each satellite or set priorities.

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It was mentioned elsewhere that they made corrections to how this is calculated. It turns out they were being a little too conservative about this. These numbers will remain an estimate as it is impossible to actually know whether free space reported by nodes is correct. Some might overreport, while others might report correctly but will expand whenever free space starts to run out. (As we speak I am expanding my array to facilitate more storage)

same here, just last month installed 3x3tb new nodes. and each already have 120GB of data.

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That would be ideal.

Lots of good topics here. I need to block time to go through this. It’s hard to keep up. We have the twitter spaces later today. We’ll add to the list:

  • Compliance and certification
  • Network capacity planning and available space
  • How we calculate space
  • Near-term pricing and costing changes
  • Free tier vs free trial
  • Dials we can tune (R/S, Segment size, node selection criteria)
  • Business decisions and strategy in general

I’ll try to cover as many of the main points as I can today. Convenience link:

https://twitter.com/storj/status/1588231558070239236?s=19

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If an AMA here or on reddit would be useful, like this post.

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If you would be open to sharing information about your cost structure, your method of evaluating ROI, just generally what you want as a node operator, and what would make it viable vs. non-viable, please like this post.

All information will be treated as confidential. We’ve gotten some great insight from community members along the way and would appreciate the opportunity to engage more on this topic.

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For anyone interested this topic was discussed during the twitter spaces. You can listen to it here: https://twitter.com/storj/status/1588607064955588608

Thanks for addressing my question to the extent possible at this moment @john. I’m looking forward to seeing more specific ideas/proposals in the course of December and later.

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I’m looking forward to collaborating on the proposals. Thanks for joining us and is was great speaking with you live!

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I listened to the twitter spaces presentation and there was mention of changing node ROI…
I assume this would be done by reducing the vetting timeframe.
However, making this change will NOT significantly increase node earnings since during the first 9 months of a node’s life most earnings are retained by storj for the current held- back model.
It is only at month 10 that a node’s earnings start to be noticeable where the SNO retains 100% of those earnings.
If the aim is to significantly change SNO ROI then the held back model would also need to be changed as well or you would literally be mucking around with cents. It has been proposed on the forum many times that the held back period should be increased to greater than 15 months and a lower percentage retained by storj on the early life of the node. Does storj have any updated figures on average node life you can release?

I didn’t use to consider energy costs much, but with prices skyrocketing I now have to consider that running the HDD alone will cost me about 3 EUR a month. That starts to dig into earnings a little. And for that reason I’m currently buying the biggest HDD’s possible when I expand.

I recently bought a 20TB HDD for about 400 EUR. Knowing it would take about 2 years to earn that back taking energy costs into account. It wouldn’t surprise you to hear I use my own earnings calculator to determine that. Of course should payouts drop, this HDD purchase could become iffy. 2 years is already quite a long time.

Personally I have one other consideration that many others don’t have the luxury to do yet. I want to always cover costs of expansion with previous Storj earnings. So if I haven’t made enough money since purchasing my previous expansion, I would probably not buy a new HDD to expand. Now I’ve been around since 2019 and profited from both high surge payouts and testing traffic as well as being able to sell high. So this is currently not my biggest concern. But I think this is where surge payout could help people justify paying for a long term investment with surge payouts.

As for the impact of vetting and held amount. Vetting on the customer facing satellites took about 6 weeks to 2 months on relatively new nodes I launches near the beginning of this year. That has an impact, but on a 2 year timeframe, that really isn’t that important. Held amount is fairly similar and maybe even less impactful. It would only add up to about $26 total and then you get half back in month 16. If neither of these systems existed at all (which is probably not a good idea) it would at most reduce that ROI period by 2-3 months.

However, I’m in the luxury position that I run my nodes on hardware that would have already been online anyway. I only have to consider energy costs of additional HDD’s I run. This is not the case for many node operators who have to take running costs of the additional hardware into account too.

In any case, $5 is a robbery!
Increase the price for end users by $1 for traffic and storage, customers will not scatter, but if operators are paid 4 times less, then everyone will leave.
Keep those $2 off your markup on expenses. Add to your $0.09+2.0 and it will increase your income by 20 times.

I don’t follow your suggestion here. They also lose $13 per TB of egress. $2 more is not going to cover those costs.

But whatever I mentioned was just a shot in the dark. Just a starting point to discuss. But I can’t figure out what you are suggesting without you mentioning all the numbers.

What was the original plan? Pay existing users at the expense of new ones? Pyramid?
At Google, for example, storage of 2tb per month costs $ 5.7. You can’t beat Google! Everything is lost?

You’re making even less sense now… Who’s initial plan? How is it anything like a pyramid scheme?

If you’re wondering about Storj Labs initial plan, they used to charge customers $10 per TB of storage and $45 per TB of egress, making a decent profit. But they realized to break through as an unknown name and a new type of storage, they needed to be price competitive. Customer price dropped to $4/$7. But node payouts didn’t change. Nothing new for start ups to take a loss initially to grow market share.

I don’t know where your pricing for Google storage comes from, but that can at beat be archival storage. Storj provides hot storage instantly accessible at high speeds.

No, I don’t understand what’s going on.
If the original plan was to sell for $45 and pay for $20 why not use this plan? And that’s why, because no one will buy for 45! But the user is offered to pay $ 5 for just allocated space, no need to install additional equipment, just allocate space on your home PC. But at the same time, draconian SLA conditions for operators apply. For some reason, it seems to me that you saw the node itself and its work only at the presentation in power point.
Spend 500-600 on a computer and try to return the investment.

That’s cute. I currently run 13 nodes and have been running nodes since the V3 network started early 2019. I’ve been an active member of this community since then as well and have read the whitepaper and follow all town halls, Twitter spaces and other Storj announcements. I also created several tools for node operators to monitor their nodes, calculate their earnings or predict what to expect. So can we please go back to arguing the substance and put a halt on the ad hominem?

I literally posted my ROI considerations just a few posts up. I know what the costs of running nodes is. I also know it’s a bad idea to spend 500-600 on a computer to run Storj.

I don’t know what pricing you see for Google one, but for me it says 100 per year, if you sign up for a while year otherwise 10 per month. And you pay that amount whether you use the whole space or not. With Storj you only pay for used space. That makes a huge difference.

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