Thanks for the breakdown of "profit" definitions, but I still think that all of these observations are largely missing the point...
> I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware
No, it doesn't. Most of the people selling the idea of distributed file storage (Filecoin, Storj, Sia) are thinking about getting the excess capacity of everyone's disks and turning into a marketplace. Getting the hardware and administering are sunk costs. Participants are only supposed to download a client, indicate the payout method and ensure that they don't turn off their computers. It's a one-off effort. Even understanding (or pretending to understand) all of the crypto-babble in order to get paid is something that people are supposed to do only once.
This is the part where these different projects are working out their market dynamics and where I get lost about Filecoin:
- With Storj (and Sia, I believe) the price of the data is determined by the governors of the network. Storj last rollout was paying $5/TB-month for every client. There is no bidding war. As long as you could prove you held the data for that period, you would get the money. This makes sense for me - no matter if I am some dude in a basement with a disk on my laptop or if I am a datacenter and I get to charge more than $5/TB-month from my usual customers, my excess capacity can be sold for $5/TB-month and this becomes a simple matter of waiting for the demand to grow.
- With Filecoin the idea is to have a completely open market, where each node says how much they are willing to charge for the data, and what are the constraints (availability, time to retrieval, etc). This leads to possible (inevitable?) bidding wars. No matter the demand curve, there is always someone who will be willing to put the lowest price possible that gets them "something". For excess capacity, this "something" can be effectively zero or whatever is the lowest price possible in the bid. And if it can be zero, the only thing I see helping them would be if the nodes starting cooperating with each other and acting like a cartel.
To be honest, even Storj and Sia are hard sells for me. I wouldn't bet on these projects for a long run and I don't believe that they will actually threaten the current players, but at least I understand the incentive structure. With Filecoin, it can only be profitable when the demand for data storage grows faster than the storage capacity from the network, but no so profitable as to attract people from the demand-side to the supply-side. It's crazy.
> I would expect that normal profits would probably be above the raw costs of disks and electricity, since it takes some effort to purchase and administer all that hardware
No, it doesn't. Most of the people selling the idea of distributed file storage (Filecoin, Storj, Sia) are thinking about getting the excess capacity of everyone's disks and turning into a marketplace. Getting the hardware and administering are sunk costs. Participants are only supposed to download a client, indicate the payout method and ensure that they don't turn off their computers. It's a one-off effort. Even understanding (or pretending to understand) all of the crypto-babble in order to get paid is something that people are supposed to do only once.
This is the part where these different projects are working out their market dynamics and where I get lost about Filecoin:
- With Storj (and Sia, I believe) the price of the data is determined by the governors of the network. Storj last rollout was paying $5/TB-month for every client. There is no bidding war. As long as you could prove you held the data for that period, you would get the money. This makes sense for me - no matter if I am some dude in a basement with a disk on my laptop or if I am a datacenter and I get to charge more than $5/TB-month from my usual customers, my excess capacity can be sold for $5/TB-month and this becomes a simple matter of waiting for the demand to grow.
- With Filecoin the idea is to have a completely open market, where each node says how much they are willing to charge for the data, and what are the constraints (availability, time to retrieval, etc). This leads to possible (inevitable?) bidding wars. No matter the demand curve, there is always someone who will be willing to put the lowest price possible that gets them "something". For excess capacity, this "something" can be effectively zero or whatever is the lowest price possible in the bid. And if it can be zero, the only thing I see helping them would be if the nodes starting cooperating with each other and acting like a cartel.
To be honest, even Storj and Sia are hard sells for me. I wouldn't bet on these projects for a long run and I don't believe that they will actually threaten the current players, but at least I understand the incentive structure. With Filecoin, it can only be profitable when the demand for data storage grows faster than the storage capacity from the network, but no so profitable as to attract people from the demand-side to the supply-side. It's crazy.