I'm finally finding some time to write down my thoughts about my exit from the Storj project.
is a distributed storage provider which aims to compete with well-known and large storage providers. To do so, it built a storage node network and introduced its own token to pay for it.
Back story
In June 2020, I set up my Storj node with a Raspberry Pi and a 2TB disk. My goal was to generate a monthly income with as little electricity costs as possible. That I won't get rich with this was clear from the beginning. I was more interested in the technical aspects and the experience of running a storage node. The node worked flawlessly, data came in and in the beginning, income became a little more each month. In December 2021 or January 2022, I also did a migration from 2TB to 4TB.
Storj announces adjustments for its payouts
On April 17, the following forum post announced that Storj would adjust its payouts to Storage-Node-Operators (SNOs) as of May 1. Here is some text from the post...
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.
Wow, two weeks' time to recalculate the whole thing and react, that's pretty sporty. The first thing I did was create an Excel spreadsheet with my node's earnings since June 2020. What I always noticed was that the payments were decreasing each month. This is best seen in my spreadsheet in 2022 because even though I doubled the storage from 2TB to 4TB at the beginning of the year, by the end of 2022 I had about the same amount of revenue again as I had with 2TB the year before. So with the adjustments that are in effect as of May, it looks to me like my node will be getting revenue in the $2-3 range toward the end of the year.
As written above, I didn't want to make big money with this project. But this latest development and announcement made me think about what I actually have a function in this project. Namely, I provide storage and bandwidth to a company for its business for a fee. And here I notice more and more a disparity in how this company does business with their SNOs and with what SNOs have to operate.
- Storj sells customers their storage for fiat money but pays the SNOs Storj tokens. This is clearly a price risk for the SNO. My earnings above resulted in around 359 STORJ tokens. The actual worth of it is $108, a huge difference from what is shown in my GUI.
- According to Coinmarketcap, there are currently approximately 397,000,000 of 425,000,000 STORJ tokens in circulation. What happens when the limit is reached, will new tokens be minted? What happens with the price then?
- Storj says their network of nodes is growing faster than the need for storage. Why doesn't Storj stop creating more nodes, but cap revenue for all nodes? The only possibility they see is to make a few unnecessary nodes unprofitable so that it becomes more profitable for Storj again. Again risk for the storage vendor as they cannot rely on any terms and conditions to calculate with.
- Storj says they pay SNOs more for egress than what they charge to their customers. For me, it looks like they wanted to enter the market with cheap prices and it did not work out and their Storage Node Operators have to pay it now.
- Storj says, that they have hard-earned evidence that the market does not currently support raising prices. For me, it looks like an obvious gap in the price calculation when you pay more than you earn.
- Storj says, that the sustainability of the company requires them to make changes in these payouts so that they can continue to fund the development of the network. I can't see any announcement from the whole announcement that Storj is cutting back as a company.
The longer I think about it, the deeper I start to ponder. Who bears what risk here, who sets the rules, and who can change them at will? How much value does such a gigantic storage network have and with what values is this compensated? Storj actually rents its storage from SNOs, which are distributed over 16000 nodes all over the world but set the rental price itself.
From my point of view, and this is my opinion, Storj is outsourcing a lot of risk to the storage node operators and compensating them worse than ever before, and trying to make some of them give up with these low payouts to ensure profitability.
It has become clear to me that I no longer want to work for a company that acts like this. For me, it is ethically borderline to continue to provide my time, hardware, and bandwidth for such a project.
Because of all these thoughts and many more that did not make it into this post, I decided to make a Graceful Exit. The next surprise was that it took over 2 1/2 weeks, with only about 3.6TB of data, most of it test data! I don't even want to imagine how long it would take for a large SNO with 100 or 300TB of data. Does anyone have experience with this? I would very much like to know how long such a Graceful Exit takes...
In any case... my Graceful Exit was successfully completed in mid-May and I'm waiting now for the final payout.
