Decentralized Web Hosting: Can You Really Earn Money Renting Your Disk Space?

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Decentralized hosting seems like a logical idea on the surface. It would allow simple users like you and me host sites and apps and earn money. It would end the domination of Amazon Web Services – which now controls 40% of the cloud market. It corresponds with the Web 3.0 principles – and we all want Web 3.0 to come sooner, right?

But just because an idea seems great doesn’t mean that it is.

How It’s Supposed to Work

The main idea behind distributed web hosting is that people have lots of excess disk space. You’ve paid for it when you bought the drive, but it yields nothing – like an empty spare room. And just like you rent your spare room on AirBnB, you could rent your disk space to someone who needs to host a site or an app.

Obviously, there’s no guarantee that you will always be online. So each site would have to be stored in many copies across the network to ensure that it’s always up. (It’s called multiple redundancy.) Hosts receive payment in crypto – either monthly or whenever they serve content.

Some claim that decentralized hosting will be “light years ahead” of traditional hosting companies. It will be cheaper, faster, and more secure. And in any case, it will allow websites to shake off the yoke of evil hosting corporations, so how can it not be good?

Here’s where things get complicated.

Disclaimer: everything I say applies to startups that offer average users to earn money by renting drive space. Of course, there are also Filecoin and IPFS, which use different models. I’ll get to them, too. But for now, let’s do a reality check on the lofty claims of some startup founders.

Myth #1: Excess Space

It’s curious how startup founders tend to base their ideas on one assumption – but never bother to verify it. I googled “what can I do with excess space on my computer” – and here’s what I got:

I tried all sorts of search queries to find any advice on how one can profit from their excess drive space. I found none. Because people generally don’t have any extra space – that’s why we all store our stuff in the cloud.

Data centers have excess space, sure. But the projects we are talking about promise something different: that you, a PC user, can earn money renting your excess space.

Myth #2: It’s More Reliable

A look at any hosting provider ranking website will tell you uptime is what really matters. All top-20 hosting companies offer uptime between 99.5% and 99.99%. That is, your website will be down for no more than 7 minutes in every 24 hours.

If decentralized hosting is to replace traditional providers, it has to offer good uptime. Now think about it: how many copies of a site do you need to make sure that at least one is online 99.5% of the time? Five? Ten? And how can you encourage hosts to stay online? Should they pay a fine in tokens when they go offline? So many questions!

Myth #3: It’s Economically Effective

A common selling point is that since distributed hosting uses less hardware, it costs less. Apparently economies of scale don’t exist in the brave new world of Web 3.0.

Hosting providers run large data centers where the marginal electricity cost for each new site is almost zero. But with private distributed hosting, energy cost is an issue.

Here’s a back-of-an-envelope calculation. Let’s say you host sites on a laptop, which consumes 60 watts or 43 kilowatt-hours a month. If you live in the US ($0.125 per kilowatt-hour), you’ll pay $5.4 to keep your laptop on. It’s $10+ if you have a desktop PC. Let’s say that half of this time you’d keep it on anyway. So you have to earn at least $3 a month just to cover your cost of hosting – plus a margin.

Would you host sites for a grand profit of $1 a month? What about $2? Let’s assume that you are ready to do it for $2, so the cost and profit make $5 in total.

Top hosting providers offer plans for as little as $4 a month. Plans usually include at least 5 GB of space, a free domain, and lots of other perks. If you want people to choose your decentralized system over traditional hosts, you’ll have to beat that price. And – don’t forget – offer multiple redundancies.

Let’s say you charge a site $4 a month for hosting and promise to keep at least 5 copies of it on the network. Each of the hosts will get $4/5=$0.8 per website. We’ve already calculated that you need to earn at least $5 to make it worth your while. So if you get $0.8 from each host, you need a total of 5/0.8=6.25 sites to earn $5. Even if you don’t offer 5GB of space per site but only 2 GB, it makes 6.25*2GB=12.5 GB.

An average WordPress site actually takes up about 1 GB. But who will pay $3 for 1 GB when they can get unlimited bandwidth for $4? Here’s the less than encouraging result. You need to leave your laptop running 24/7 and allocate at least 12.5 GB of free disk space – to earn $2 a month. Not in hard cash, mind you – in tokens.

So here’s the question: would you do it?

Of course, things are a bit different if you live in a country where electricity is cheap, like China or Ukraine. But even with at the cost of $0.04 per kilowatt-hour, you’ll need to host 3.75 websites (7.5 GB of space!) to earn your $2 a month.

The only way to make distributed hosting economically viable is to involve large servers. Not your average PCs but enterprise-grade hardware that can offer some economy of scale. But then it’s not quite “rent your disk space and earn money”, is it?

You might have heard of Filecoin – a decentralized network that had a massive $257 million ICO. The idea is the same: renting free storage space in an open market. However, the solution is geared towards owners of large servers.
The website says, “Rent your hard drives, single disks, racks, whole data centers, every Terabyte you are not using”.
Now, how many free terabytes do you have left on your PC?

IPFS, or Interplanetary File System, is another ambitious project. It really works, and you can host sites on it – for free. Unfortunately, IPFS will only fit enthusiasts for now. For one thing, whenever you make a change to your website, you have to upload it all again. Moreover, URL addresses are ugly. You can host a very simple static page on IPFS, but not a WordPress blog or a WooCommerce store.

The main problem with hosting a site IPFS is frequent downtime. You’ll never get 99.5% uptime – you might not even get 90%. And since it’s decentralized, you have nobody you could complain to.

Look On the Bright Side

Distributed hosting does have its potential advantages:

1. Resistance to censorship. No government authority will be able to take your site down;
2. Protection against DDoS and other attacks. The hackers would have to disable every single copy of the site;
3. No single point of failure. There’s no risk that a massive outage will take thousands of sites down or cause a commotion on crypto exchanges, as it recently happened with AWS, for instance.

True, the economics doesn’t quite work out for average PC owners – yet. But remember what cell phones were like in 2000 – and look at the smartphone in your hand right now. It’s amazing how fast technology changes. Who knows – perhaps in 2030 we’ll look back and wonder how people even lived without decentralized hosting?