Hello storage node operators!
Thank you so much for the lively and exciting conversation over in the other post. We’ve read your comments and really appreciate all of the insight. There has been a lot of thoughtful discussion, and while there are no easy answers, we really appreciate the collaboration.
Based on the input you have given we have adjusted our thinking a bit on the best path forward and we wanted to lay out an updated proposal for you all to get your thoughts. We have outlined where we are at and what we are proposing in an FAQ below. Please look this over and let us know your thoughts.
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) we want to be a sustainable company that can continue to fund the development of this 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 it. 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. Not a ton, but some.
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 RS 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: Right now 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 (we are still finalizing what these changes will be and when they will happen). And then, based on how that goes, we may consider adjusting payouts on 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.
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) if necessary. In doing this we are targeting greater utilization of the network, hopefully getting closer to the network being 80% full so that SNOs’ drives will fill faster and produce higher returns over time. As our customer growth increases we will slowly remove this synthetic load until the network is operating completely without subsidy from Storj.
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. We need 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.
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: 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 do not work for you, you can of course gracefully exit the given Satellite.
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.