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

Node Operators
878

I know I sound like a broken record, but here is an updated version of what I said previously at #517 :

Prices for customers need to go down, not up
Currently, there is not enough data. As a customer, I compare STORJ with Backblaze. So let’s start comparing ourselves with them and not some AWS S3 class nobody uses. We can’t fight Backblaze on $/TB so we have to compete on bandwidth. Make it 5$ for customers, that is half of Backblaze, something your marketing can work with. Pay the nodes 4$ and keep 1$ for yourself.

Current STORJ Node operators are mostly the wrong kind of operators
Lets remember for a second, what the unique selling point STORJ offers.
We use unused storage and bandwidth and because of that have a lower cost of doing business. Emphasis on unused. We don’t buy hardware, we don’t run extra servers! Because otherwise, we don’t have any competitive advantage. Neither technological nor economical. Economics will wash out node operators that don’t follow that principle. They only survived because of subsidies. This does not really bother me, the sooner these nodes vanish, the better for the other node operators. In the end, you can’t outrun economics.

Is there enough storage in the system when the subsidies are gone?
This is an interesting one. Some node operators like BrightSilence maybe stop nodes due to high energy prices. I on the other hand will start a node when the supply/demand balance changes. So there is a balance here, but nobody knows if it will work.

Ditch the crypto bs
Fade out the Token and the Web3 marketing. It scares away traditional S3 customers. And the Web3 crowd does not care, because STORJ isn’t decentralized. Let alone the fact that Web3 does not need Web2 technologies like S3 storage :wink:

Where to go from here?
I personally think there are only two ways. Maybe STORJ is robust enough to handle the fade-out of subsidies. That would be great, and STORJ would not need to change anything in the near future.

Another solution would be to make the node hosting A LOT LESS COMPLICATED!
So simple, that your average +50y old parent can set it up!

  • Easy to install
  • No identity, traditional account login for multiple nodes
  • No port forwarding
  • UPnP
  • Integrated DynDNS
  • Payout in FIAT
  • relaxed uptime requirements

For example, Lisa works in marketing from home. She is using an iMac and an external Disk for her photography hobby. During the 8h she is working, STROJ is running in the background and earning her some money. Once a year, she gets a FIAT payout. Small business ACME inc. has 50 employees. They all have workstations with secondary HDDs. CEO Frank has installed STORJ on all systems with one single login. STORJ runs in the background during workdays. Fabian likes self-hosting his photos and music collection. He has a Synology NAS with unused storage at home. His NAS runs 24/7. On the weekends he earns some extra money, because he wins all races against Lisa and Frank, who are both offline.

No matter what way STORJ decides to do, the headcount has to be as low as possible to get the job done. This is why all major tech companies shrunk their headcount in the last few months. The party is over.

879

This thread is long enough without repeating posts. You can just link to a previous post and add context instead. Now I’m trying to figure out which parts are new and which parts I already responded to before.

880

You only need to read my previous post, if you wanna check my prediction track record :wink:
Otherwise, you can just reply to this slimmed-down new post.

1 Like
881

I’m not sure what prediction you are talking about. But why make people compare posts to find out what they’ve already responded to? Just post your new thoughts and link to the old post for context. People aren’t looking for a homework assignment here, but an informed discussion. I think I’ve already responded to most of what your post said, so yeah… I kind of wasted my time reading everything again.

882

It is a 463 posts long thread. Everything here is just the same argument over and over again. We could condense this thread into a pretty simple flow chart.

I would argue you didn’t in the past and you won’t in the future.
But even if you did respond in the past, maybe you have a different opinion on it now because we have a different situation now?

Anyway, I will just grab some popcorn and wait. Like I said, you can’t outrun economics forever, and these new announcements support that fact.

883

Please provide a simple flow chart or stop posting nonsense replies. Thank you very much.

3 Likes
884

Everything is just “IsThisOn” drowns for the fact that everyone would not be node operators, but housewives who will be enough to get $ 10 once a year and buy lollipops.

I believe that the world is full of competent specialists who can provide redundancy, volume, monitor the status of disks, and so on. For such literate people, a platform is needed where they can realize themselves and their equipment, which are ready to be self-employed.

In turn, I definitely won’t keep a backup copy knowing that this is a disk image of, for example, 500 GB, divided into pieces of 2 MB and stored by housewives who are turned on only during working hours … But I am ready to pay for a convenient interface and confidence. As I wrote in the next thread, I pay for Google drive, iCloud, Asus because the interface is simple, it’s easy to transfer everything you need and, most importantly, it’s easy to pay.

If Storj cooperates, for example, with TON, it will be a gun race, convenient and huge potential. Moreover, TON wants to make its own repository and perhaps the projects will complement each other.

I propose to let the project management re-read all this, look at the prices for electricity and give a proposal for discussion, and now close this discussion.

2 Likes
885

But, will it be worth it to her to run the node just to get something like $2/year? If so much downtime is allowed, the file would need to be split into so many pieces that node operators would not really get anything. Combine that with low uptime and low amount of data.

That $2/year will be eaten by transfer fees.

There are multiple reasons why the “only unused storage” model may not work. For one, it is not worth doing anything if your maximum expected payment is $2/year. $2 may be a lot of money in some poor countries, but people usually do not have computers or reliable internet connections there.
Another reason is that there is no way to shrink the node. Running some distributed computing project or CPU/GPU mining coins (when it was possible) can be done by using the idle time of the CPU (power consumption goes up though). As soon as I want to play a game, the other process stops. However, if I decide to use my previously unused storage, I cannot, not without losing some income by deleting a node and creating a new one. I cannot just shrink it so I can store a video or something on my server.
So, the model is basically for people, who:

  1. Are OK with spending time and effort for a bottle of beer per year
  2. Have some unused capacity in their drives
  3. Do not plan on using that capacity ever (why did they buy a drive that was too big then?)
2 Likes
886

I’m not sure why you would say I won’t respond. Feel free to point to something I didn’t respond to yet and I’ll be happy to share my opinion on it.
That said, I don’t see what’s changed since I started this topic. If you’re referring to the post saying payouts will likely drop, this isn’t news. That’s the whole reason I started this topic. And there have been enough hints about this in other Storj communications. At most it’s a little more concrete. And yes, energy prices have gotten a little worse too. It doesn’t change my opinion on anything substantial. I’ll stick around with the nodes for which it makes sense. I’ll have to decide what to do with the others.

I know for a fact that they do. Which is why I would prefer to not repeat things in this topic. As it is enough of a chore for them to work through it already.

887

How do you come up with 2$/year?
One example. Lisa needs a new external HDD. She really needs 2TB but wants 4TB just to be save. Instead of spending 80$ on a 4TB, she spends 270$ on a 16TB drive. That way she has 12TB for STORJ. 12TB gives her 16$ a month or 192$ per year for storage without egress.

Transfer fees are roughly the same if not higher for STORJ.

I am not denying that. Hence my best guess is that it does not work! But what is the alternative?

The “Somehow we can provide S3 storage cheaper than the professionals” model?
I don’t believe in that model for the reasons we already discussed in this thread.
But there is only one way to find out: Get rid of subsidies.

888

Not with less than 30% of uptime. If her PC is accessible 8 hours per day and only on working days, she would get proportionally less. Why? Because the data would need to be distributed to more nodes (totaling more copies) to compensate for the intermittent nature of the nodes. Best case scenario she gets $192 times her uptime. So, if her PC is on 40 hours per week, that’s 23.8% uptime and $38/year.
But, it gets worse. Her PC being on 24% of the time means it will take years to get the 12TB, likely the drive will fail before that (USB drives are not really designed to be accessed all the time).

Node operators live in lots of different countries, it would be very expensive to transfer fiat to all of them due to different laws etc.
For example, if I wanted to send money to the US, it would cost me something like 24EUR, possibly more.

It could work. Part of the expense of a datacenter is the internet connection, another part is hardware. Using “home” internet connections and “desktop” hardware makes it cheaper. Of course, then a lot of the data goes through the Storj S3 gateway (how many customers actually use the uplink or their local S3 gateway?) and its “datacenter-grade” internet connection.

Subsidies were needed to get people interested. Setting up and looking after the node takes about the same amount of effort for 1TB as for 20TB and I may not be interested in doing it if all I can expect is 1TB and $3/month. So, subsidies were meant to bridge the gap until there are enough customers, but, I guess, getting enough customers is a problem.

889

In all this AGAIN I dont see any STORJ word. before this there is nothing more to discuss.
because all this is just asumption.

5 Likes
890

it is a problem i would like to see a report on hows STORJ salesmen did in 2020-2022. Coz STORJ do have sales department, right?.. if sales department doing correct stuff like for example Brian Tracy described in his books, then everything is all right and on track! But if not… then no hope, sorry nooot a single little one, do not expect ppl will just jump in, because they have no clue what the benefits are, if WE KEEP IT SECRET! Also its an effort to change habits, and has to be worthy FOR WHAT to change. So how’s STORJ salesmen doing?

EDIT: sooo have no problem if u cut operators payment by half,
IF You double the network traffic,
coz my nodes are snoring! They need action.
So You can do this by rising sales min.2 times!
You do this first, then You start cutting our nodes payments gradually, mm’kay?
And everyone will be happy.

1 Like
891

I still haven’t seen any information regarding how Storj is supposed to make money as a company. If you want large customers, you need to have a proven platform and sustainable business model. Right now Storj is struggling. This is not an assumption it’s pretty obvious. Just look at the basics. They pay more for the product than they sell it for. Even if they dropped sno payouts to match what they charge they still don’t make any money. They still have employees to pay, marketing expenses, expenses to run satellites, websites, this forum… where does any of this come from? If it’s just coming from reserves, how does this reasure anyone as to the longevity of the company? The Storj network has many advantages over traditional storage, but if I’m worried that the company might not be around next year it’s kind of a moot point. Regular everyday people though typically don’t consider these factors so Storj would be better off targeting the consumer market first with a profitable strategy.

As I said before, even if every sno GAVE AWAY their storage for free, it wouldn’t make much difference at this point in the game. For arguments sake let’s assume all the data is paid, and well call it 10% egress/mo.

17,500 TB @ $4 = $70,000
10% egress @ $7 = $12,250
Total = $82,250

This would barely even pay one persons salary. According to their website Storj has 10 members just on their leadership team alone. This is peanuts…

1 Like
892

You made a little mistake in your calulation. It is per month and I don’t think they get paid $82,250 per employee per month. Anyway it’s still not enough.

But from the Balance and Flow report the Net Network Operation Costs are only peanuts compared to the other expenses, especially the “Other”.

As I read Backblaze B2 here, many times, I am not sure why it is compared this much. It is only comparable if you just care about the price and just another Backup.
Because:

Backblaze now has multiple regions! One in Europe (Netherlands) and one is called “US-West”. Quietly the US-West is actually three separate data centers, but your data will only really land in 1 datacenter somewhere in US-West based on a few internal factors.
To be absolutely clear, if you only upload and store and pay for 1 copy of your Backblaze B2 data, it is living in one region. To get a copy in two locations you have to pay twice as much and take some actions. So if this kind of redundancy is important to you for mission critical reasons Backblaze B2 would only be half as expensive as one copy in Amazon S3, not 1/4 as expensive.
In the one copy in one region in Backblaze B2, any file is “sharded” across 20 different servers in 20 different racks in 20 different locations inside that datacenter. This helps insulate against failures like if one rack loses power (like if a power strip goes bad or a circuit breaker blows). But if a meteor hits that 1 datacenter and wipes out all of the equipment in a 1 mile blast radius, you won’t be getting that data back unless you have a backup somewhere else.

2 Likes
893

You got me… it wasn’t technically a mistake but the thought wasn’t actually finished. I cut it short because of my kids bugging me and didn’t proofread, but the point was simply to point out that the monthly income barely pays one persons yearly salary IF we essentially donated the space. Now from my work with other crypto companies, most salaries are much more than that… at least for the “big guys”. But with 10 employees, even at that rate, if Storj actually made all that money they would just barely be getting by.

894

As for Backblaze, I honestly can’t understand why it’s being compared to Storj all the time especially in terms of pricing. They are NOT the same product.

895

That was what I wanted to say. As I read it again it was maybe not clear, but i mean it don’t has to be the same price not to mention be even cheaper.
If you just care about the price and want another Backup go Backblaze. As Storj has more to offer it don’t have to be the same price level.

896

Sorry, I understood. I agree with you and was just reiterating the fact that they are not the same. It’s not fair to compare the two. Storj is trying to charge less than them while targeting a market that in most cases doesn’t even consider Backblaze as an option.

897

Step 1: slam dunk pricing that takes it away as an argument to not use Storj
Step 2: Initial customer base acquisition.
Step 3: Fix unit economics so everything that scales with growth is profitable
Step 4-10: Scale, scale and scale some more

That’s how you cover all the costs that don’t scale linearly with growth. Storj Labs has a healthy runway still. But if they don’t fix step 3, all they would be doing is scaling losses.

1 Like