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

As it shows the reality is not that operators are healthy.

From my previous post: Untitled spreadsheet - Google Sheets

Just increasing the storage price from 4$/TB to 5$/TB would make it profitable (without considering other resources…). Decreasing the piece ratio can also make it profitable with the same pricing. However, the pricing is bad from the beginning and discounter logic. Actually storj would have had advantages in competition to the other products out there, but massively undersold itself. Instead of selling at a proper price you went for being the cheapest. There has never been a value in being cheap rather than being good. Customers ultimately expect to trust a service and the first part must be that the business model is not thin air.


A post was split to a new topic: Can you give the exact date and time when you will pay?

Maybe whould be useful some statistics displayed on the “Become a SNO” page, that shows the last 30 days/ 60 days ingress in each zone/country, informing someone who wants to become a SNO of what to expect. Maybe will discourage creating more nodes in some overpopulated regions, keeping it profitable for the ones that already have nodes in those regions, and encourage new nodes in lesspopulated areas (populated with storagenodes).

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Unfortunately, based on the anecdotes, it seems to be the other way around. Western Europe seems to get MORE ingress than eastern Europe, despite also having more nodes. Though as @Vadim pointed out, that is not consistently true.

I think it’s just tough to determine a working economic model at this very moment because we just don’t know how storj customer base will develop. Storj charges the same amount of money regardless of the customers usecase (hot or cold storage, multi-region availability etc.) and therefore has great potential to increase prices in the future or generate additional revenue with additional services.

The subsidy is only a fraction of the monthly expenses of the company and adjusting it now won’t make too big of a difference. With future success and additional features we will have less moving parts and therefore will be able to judge better how to adjust the payouts to meet reality.

Actually I am more concerned about the future scalability of the nodes than the current burn of storj for the egress.

As for now costs for the node operators are very low (often just attaching otherwise unused disks on systems that already run 24/7 anyway).

Let’s assume storj is very successful and steers into exabyte territory. Then of course subsidised payouts are not an option anymore. Additionally at some point the resource of “free hardware/disks” from node operators will be exhausted. To be able to grow available disk space you need to buy hardware and still be profitable. But if you don’t get a discount if you buy a couple of HDs and you can’t choose a location where electricity is inexpensive how can you compete with the big guys?

On the other hand if we’re at this point storj made an even greater splash on the market and this opens up new possibilities…

In other words: there is no need to change the payout model now. Once we have more data on how the customer base grows and what kind of traffic it attracts it’ll be easier to determine a model that will ensure sustainability.

Still, I’m looking forward to see what changes storj will propose :smiley:

Edit: was not aware that 12.5% of the full time staff had to go :frowning: , leaving the subsidised payouts as they are in a phase of growth while firing 12.5% of full time staff might at least be morally questionable (my personal point of view)

True, but it’s the one cost that will scale with size. Changes will be needed when that scale goes up. It’s a tricky balance, growing is more important than making money in this phase, but Storj Labs has the downside of having a volatile runway because of token value fluctuations. The crypto market drop was a pretty rough hit on that runway. Luckily value seems to be increasing a bit again.

But with good growth, perhaps they could attract some traditional investors to increase and stabilize that runway. I’m not sure though if this is something they are working on. I hope so to be honest.

As for letting people go… It sucks. But if making the wrong choices means Storj Labs runs out of runway before it’s profitable, it’s 100% of their staff out of a job. Storj isn’t (yet) a large corporate choosing profit over people, like the large layoffs we’ve seen in the news recently. Weathering the crypto crash and surviving is a real concern still. I’m sure they didn’t make that decision lightly. But I do feel for the people who worked hard for this who are now out of a job. (Though from what I’ve seen from anyone from the Storj Labs team, I’m betting they won’t be out of a job for long.)

As for node operator economics, it hasn’t been a great time for them either. Energy prices have skyrocketed in large parts of the world, while HDD prices have stagnated. Luckily that last one seems to be changing a little and HDD prices are dropping a little again. I still expect payouts will be effected when the new economic model drops, but they can afford to lower it too much when costs to operate have already increased a lot. It’s a bit of a perfect storm of bad luck at the moment that has very little to do with the long term viability of the Store model. So hopefully they can make it through this phase and come out swinging at the other end.

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Reposting this here from another thread:

How about the 150 GB free tier goes down? Or the price per TB goes UP?

You know, I was really excited for Storj. Especially seeing the progress they have been making. But it’s starting to sound like just another soon to be dead crypto project if this happens.

It already isn’t very profitable to begin with and everyone has been waiting and hoping for it to become MORE profitable, not less. Especially long term sno’s like myself. It’s been a hobby for now with the hopes of it turning into something more. In terms of current payouts, I don’t think most of us are looking for more per TB, just more data altogether. We understand this takes time… But if in a world where inflation is spiraling out of control, Storj is going to continue to practically give away storage at a loss only to pass that loss onto sno’s, why should we stick around?

Unless… the plan is to cut out the little guys and go with “commercial” node operators since at scale Storj WOULD be profitable enough to cut costs especially if done on already existing infrastructure.

Storj advertises itself as being 80% less than existing storage options. Sounds like my wife undervaluing herself because she lacks the confidence even though she’s brilliant. Does Storj lack confidence in their own product? Storj is new tech, superior to the existing storage platforms in many ways. Since when does anything new in the tech scene come in at 80% less than the old tech? I understand that the project is still small, trying to get it’s foot in the door and be competitive but 80%? Seems like theres PLENTY of “wiggle room” there… but instead let’s punish our dedicated node operators that have made this all possible in the first place!

The fact that they’ve always told us from the beginning not to buy hardware specifically for Storj should be a red flag at this point. I always figured it was in regards not wanting people to blame Storj if the project tanked or whatever but I’m starting to think smaller sno’s were never really part of the long term plan.

Let’s face it… Storj claims they want to reach exebyte scale right? This will NEVER happen with average everyday people sharing “unused disk space”. This would require sno’s willing and able, to expand and scale with the network, something we’re told not to do, and now there’s going to be even less incentive? Telling you right now people, they start this and it goes the way of bitcoin mining. Only the people with stupid money will be able to make anything and everyone else get’s the short end of the stick.

Oh, and for those who will respond to remind me about the /24 limitations, I’m fully aware… but you have to remember Storj can change that if it’s financially beneficial to them.

End of rant.

If Storj does do as expected and reduces payouts - I wonder what that means for the future of the current test network as well. Since SNO’s are providing a free service for what hopes to be a for profit company.

Ok maybe not the end.

I’d like to clarify that some of my frustration here with all of this stems from other areas. My wife and I own a financial consulting company that works with multiple crypto companies so I have some insight on the internal workings of many projects. I obviously can’t say who they are but I want to be very clear that Storj is NOT one of them. I have no knowledge of the internal workings of Storj or their finances and only know what has been shared publicaly. Anything else here is pure speculation. Again, I have NO affiliation with Storj whatsoever other than being a node operator and holding Storj tokens.

That said, I do see multiple projects on the verge of tanking mainly due to mismanagement of funds and / or having no clear means of turning a profit. There are also a lot of young people involved with managing new businesses with a lot of “free” money coming from the crypto craze. I’ve seen multiple buisness models that have negative cash flows due to the heavy reliance on this “free” money and the hope that markets will simply never stop going up. Now this is understandable for a company that has a product or service still in development, but once you have something marketable this should start to change.

In the case of Storj, there is and has been a marketable product for a while now. However Storj is still to heavily reliant on that “free” money. It’s fine if the company might still be in the red due to other expenses like continued development, marketing etc, but the’re not even charging enough to cover the most basic expense of the storage network itself. Even if they cut payouts to sno’s down to match what they currently charge, which is a pretty big cut, they’re still only breaking even TB for TB. There’s still nothing left over to start covering other costs. I can only see one way this model could possibly be successful, and that’s if the end goal is to cut out Storj as a company altogether in favor of a 100% fully decentralized model where the customer pays and the node operators receive all without the middleman. This would also mean no funds for marketing or further development so this would have to come from other means.

Now I’ve mentioned this briefly in another post somewhere but I’ll repeat it here. Storj claims to want to compete with the big data giants and achieve exebyte scale someday, but I don’t understand how this is supposed to work. Storj has no fully featured front end UI like what we’ve come to expect from cloud storage providers. Storj is more of a backend storage solution for other developers to build upon. This essentially makes Storj a middleman. They help facilitate the sale of storage space to other companies who need it… a company who’s name will mainly only be known within the tech world and never publically on a mass scale like Google, Amazon etc who they claim to be in competition with. In certain cases yes, they are a competitor, but unless Storj directly targets the retail market in some way, meaning everyday consumers, I just don’t see how they plan to do it. They don’t specifically target the retail consumer market, yet the price being advertised as an 80% savings seems to be geared towards just that. Companies with huge amounts of anything will typically switch providers / suppliers for FAR less grated the’re a solid option without any huge risk involved. If this is why Storj is so cheap right now fine, but it should be temporary. An introductory / promotional price, not the permenant one.

You wonder why people (especially large companies) would be hesitant to move to the Storj network? Remember what I said before about switching to a new provider? If I’m someone in charge of looking into moving huge amounts of data somewhere else I’m going to do my homework first. I want to know that it’s a long term solid option. And from what I can see, there’s no way to reasure me that Storj will be around once that “free money” dries up. I would never consider Storj even at an 80% savings because it’s an unsustainable business model. So forget marketing for now and fix this. Otherwise the only customers will be experimental and “ehh what the hell” customers because maybe their data isn’t all that important. The best example of this would probably be backup data like in the case of iXSystems. If Storj went away and all I had there was backup data, I’ll just back it up somewhere else. This also hurts node operators as backup data generally isn’t high egress data. Just saying…

So yeah, I’m real curious to see what Storj is going to do about all this because it looks to me like even if we gave all our data to Storj for free it wouldn’t be enough to sustain the company. This doesn’t look good and doesn’t help recruit customers. Maybe Storj should offer only a marginal savings but prove themselves as a solid company that’s not going to blow away in the crypto winds. I also think developing a front end comparable to other cloud storage providers to target the consumer market would be huge. Then offer THEM the insane savings (with limitations) as a promotional marketing strategy. This will get Storj’s name out there as a competitor with other tech giants. The general public will have a better understanding of the tech. Use the consumer market to prove the network to the commercial market which has far higher standards then everyday people. Storj could also profit by charging more for premium features. Storj might not want to get involved with all this, but what else do they have to offer in order to turn a profit?

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Storj Labs works with and has many corporate customers. The use cases vary. The low price is significant but so is the great performance. There are certain things Storj does very well and offers solutions that the entrenched companies do not.

I don’t know how deals are negotiated at Storj, but typically a large customer has asks they want completed before they will sign. And corporate deals usually have additional support contracts built into them that cost additional dollars over storage costs. I am sure Storj works similarly.

As JG pointed out previously, the adjustments being made are to secure a long term future for the company. There are a lot of very smart people working at Storj Labs day and night to make this a reality. Since the start, this hasn’t been like any other crypto project I’ve seen. The people here are dedicated to making a great product and a great company. Nobody is buying lambos and mansions. Some of the sacrifices employees have made to further Storj along are notable.

We want SNO’s to succeed. But we can’t subsidize them forever. How that gets worked out, we will find out soon enough. I have been here a long time and I know from experience that any changes will meet resistance and threats of people quitting and all that. All of it is a concern to us, and we would like everyone that is a SNO to stay being a SNO. But the reality is that the economic model will change and it likely won’t work for some. But in the end, it will be a sustainable earnings amount that a SNO may find themselves earning consistently a decade or more from now. That’s the ultimate goal, so Storj doesn’t end up in the red and instead builds itself up firmly in the black.


Don’t get me wrong, I love what Storj has done and I am hopeful that it will succeed. But the simple fact is the company isn’t making any money. It’s bleeding out because of the current market condition. This is happening all over the place and everyones trying to cut costs in every sector right now.

The adjustments are a bandaid. A temporary solution to a problem yet to be solved. It’s buying time at the node operators expense.

There are a lot of very smart people working on many other projects as well. This is not enough to convince me.

It’s exactly how many other crypto projects work. Very similar to regular startups that have a large funding pool to pull from. Luckily Storj has an actual marketable product though. Can’t say that for all of them. And to be clear, I’m not referring to wasting funds buying lambos or other pointless spending. I have no reason to believe anyone at Storj is doing anything other than what’s in the best interest of the company.

This is like saying you can’t live off your credit card forever. True… charge more for the product or find more products to sell!

Such is life. But there is a difference between people disagreeing with certain aspects of the project and it not being profitable for people to stick around. If you worked for me at a desk job and I said go clean the toilets there would probably be some disagreement there, but could be worked out. But if I say I’m barely going to pay you enough to cover fuel and lunch, even if you love your job, your probably going to quit.

In fewer words… pay cuts!

How? People already complain they don’t make enough, especially with rising energy prices.

Lol, sno’s aren’t going to wait another decade without making anything. Chances are when many peoples current drives die they will be out.

Appears that Storj IS in the red. Otherwise we wouldn’t be discussing changes to the “economic model” (cough, pay cuts). If Storj tokens tank, the company is dead in the water. The only reason it’s still there is because people are either stupid and blindly investing in utility tokens, or actually still have faith in the long term potential of the project.

Again, I’m hopeful for Storj, and I don’t mean any of this to seem like personal attacks or anything like that. And if I’m wrong about something please correct me (preferrably with sources if it’s that sort of thing).

I’m not claiming to know everything, I’m just trying to call things out for what they are base on my own observations.

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You’re making a lot of assumptions about the business and its financial condition and much of it is inaccurate.

Anyone can see that the economics of the SNO payout versus the customer payment is out of balance in favor of the SNO’s. This is why it has to change.

Guessing at the financial status of the company without the correct info is just FUD. I’ve been in recent meetings where discussions on the company ten years out have been happening. We have a long runway. Trying to correctly balance what we charge customers and what we pay SNO’s is not reflective of the status of the company. We are exiting the growth model we’ve been on for a couple years now and transitioning to a sustainable business model.

There’s been a lot of big news lately, and more to come. Storj has a bright future.

Anyway, I’m done talking about it for now as it is late here. Have a good evening.

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I hope if earnings are cut back the withheld model will also change at the same time. 10 months to get anything decent is already a long time. Reducing earnings per TB will impact that even more.

Can Storj update us as to average node life now since we are significantly down the track in terms of the last update?

Unfortunately, that doesn’t mean every SNO has one. We are going to see change - that much is certain.

Yes, I am making assumptions. And some of those assumptions stem from some similarities I see from other areas. I though I made that pretty clear. But so are many other people and for good reason. When a company has essentially one product to sell, and that product is clearly costing substantially more than it’s being sold for, thats a problem. Now if there’s other aspects to it and Storj has other sources of income then great! But as far as I’m aware, we don’t know about them.

So to reiterate one of my points, if I’m looking to move large amounts of data somewhere else, I want reasurances that the company is sustainable (among other things). I want to know I’m not taking a huge risk, otherwise it simply isn’t happening. I don’t think this is to much to ask for someone in that position. And considering that Storj currently only holds 17.5 PB of customer data (some of which is still test data) it doesn’t look to me like there’s any major customers onboarding large datasets yet.

Trust me, I want Storj to succeed. I love the project and I will continue to contribute as a node operator for now unless or until it’s no longer profitable, but if it never reaches a point that makes it actually worth the time put into it and on a large enough scale, enough to matter at least, I can’t say there’s much incentive for the long term. Making $20/mo won’t make or break most people. People will loose interest eventually. Please know I’m not trying to speak ill of the company or anything, but clearly there are concerns that people have on both sides.

I’ve been a sno since v2 and even with as far as it’s come, these concerns are still up in the air. It also hasn’t really gotten any more profitable yet as it’s been pretty consistent per /24 over the years, and now we’re being told it’s actually going to be less profitable… shortly after a bunch of people were laid off from the company. Point is, it generally doesn’t look good from an outside perspective, and simply saying things like everyones trying really hard etc isn’t very reassuring.

I understand that some if not many won’t like what I’m saying here. And again, I’m just calling it like I see it. Feel free to explain anything further and fill me in on some details if there are any.

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What does success look like? Storj impacts SNO earnings on two fronts currently.

  1. Withheld - so a node only gets full earnings in month 10
  2. Vetting - so until you are vetted you aren’t even allowed to get a full data flow.

Why does Storj consider it reasonable to make a node operator wait 10 months to even access the minute income stream - which even now is unsustainable for Storj? I’d be really pissed if I was an SNO with a node about to enter month 10 only to have Storj cut my earnings again.

The hold period is basically to build some collateral. It’s your “skin in the game” so to speak to cover repair costs if your node goes offline. The vetting process is to make sure your nodes are kept online and reliable before onboarding to much customer data… more or less. This makes for a nice easy barrier to entry for snos as other models on other projects generally require you to fund and stake tokens initially from the start.

Personally I don’t have any issue with either of these and I think they make sense.

I understand the purpose of them but can you imagine being an SNO and you are finally about to hit month 10 and then the earnings get cut back again - after 9 whole months of waiting for something?

From my understanding you would still receive payment for the current rate throughout those months and it would only be reduced at the time the “economic model” changed. I don’t think you would loose anything. However at that point you would have to reassess whether or not it’s still profitable for you to continue running the node. Although I think you have to continue until month 15 to get half the held funds back followed by a graceful exit to get the rest.