What Is Siacoin (SC)?

Siacoin (SC) is a decentralized platform for cloud storage to compete with existing storage solutions at both the P2P (peer-to-peer) and enterprise levels. The core goal of the platform is to bring decentralization to data storage. The platform strives to ensure that the data is protected against censorship theft and the user is never denied access to the data by miners, hackers, government bodies, or developers. On the network, peers rent storage from each other instead of a centralized provider. Further, the platform itself stores only the storage contracts formed between parties, defining the terms of their arrangement.

According to the Sia documents, the network is secured by blockchain technology and is a variant of the Bitcoin protocol that has created a data storage marketplace. Primarily, the platform connects users who need storage to the hosts providing underutilized hard drive capacity. Sia network comprises a renter, a host, and contracts to facilitate the connection. A renter uploads the files to the network, and the host lends their storage space for uploading the files on the network. Eventually, contracts are formed between renters and hosts.

Explicitly, the network uses an M-of-N multi-signature scheme for all transactions, renouncing the scripting system entirely. Further, this reduces complexity and attacks the surface. M-of-N transactions are referred to as multisig transactions. In such transactions, M is the required number of signatures or keys, and N is the total number of signatures or keys involved in the transaction. Additionally, at least two signatures must approve the transaction between three addresses in a multisig transaction. The Sia network works systematically to facilitate these transactions and follows the subsequent steps:

1. File division and uploading: Firstly, the files are divided into 30 segments for distribution to hosts before uploading. This distribution ensures no single point of failure. Further, the file segmentation is done by Reed-Solomon erasure coding (commonly used in CDs and DVDs). Erasure coding enables recovery files from any 10 of 30 segments. Despite 20 out of 30 hosts being offline, the user can still download the files.

2. Encryption of file segment: Every file segment is encrypted in the Sia network. This feature makes the Sia network more secure, as it only stores the encrypted file segments instead of the whole files.

3. Smart contracts: Using the Sia blockchain, file contracts are formed between the renters and the hosts. The contracts set uptime commitments, pricing, and other related aspects of the network.

4. Payment with Siacoin: On the network, Siacoin is used as a currency by both renters and hosts. Renters use Siacoin to buy storage capacity from hosts. Simultaneously, hosts deposit Siacoin as collateral into each file contract. Like Siacoin is the platform's utility token, Siafunds are tokens used for revenue sharing.

5. Renewal of contracts: Typically, the duration of file contracts is 90 days. The Sia network automatically renews these contracts. Upon non-renewal of the contract, the unused Siacoins are returned to the renter by the Sia network.

6. Storage proofs: In the end, storage proof is required by the host for storing the renter's data. Once the storage proof appears on the blockchain, the host is paid. A missing proof by the host is entitled to a penalty.

History of Siacoin (SC)

Luke Champine and David Vorick conceived Sia network at HackMIT in 2013. At that time, Champine and Vorick were studying computer science at Rensselaer Polytechnic Institute. In 2014, Nebulous, Inc. was established by Champine and Vorick, and Sia is a product of Nebulous, Inc. Nebulous, Inc. is based in Boston and was rebranded as Skynet in 2021. 

The whitepaper of the Sia network was released on November 29, 2014.

How Are New SC Tokens Created & Earned? 

Notably, Siacoins are given as block rewards only. These SC tokens work on the Sia proof-of-work consensus mechanism blockchain.   

Mining on cryptocurrency networks contributes computing power to help process and verify transactions on that network. The blockchain contains Siacoin transactions and smart file contracts between renters and hosts on the Sia network. Further, miners verify the integrity of the blockchain and are rewarded with Siacoins for their service.