Atlanta-based Storj Labs has announced that it intends to move its decentralized storage service to the ethereum blockchain.

Long based on the Counterparty protocol, a top-level software that runs on the bitcoin blockchain, the move positions Storj as the latest blockchain firm to transition operations to ethereum, or at least away from bitcoin, in light of the network’s changing economics.

In interview, Storj CEO Shawn Wilkinson credited a decline in the use of Counterparty, as well as the “network effect” being built by ethereum, as the driving factors in the decision.

Wilkinson told CoinDesk:

“If you’re building a train and they’re building a track, one with the larger network, you’re going to choose the larger network. It’s not only a technical issue of which one do we go to, it’s a question of which one is more widely used.”

The official blog post cited the lack of development in Counterparty as a concern, one that could be solved by ethereum.

It further credited ethereum’s ERC20 token standard (which effectively allows exchanges to more easily add support for new coins), and the progress on its layer-two solutions aimed at micropayments as other influencing factors.

Storj also reported that users (colloquially called ‘farmers’) have been asked to pay increasingly high fees as a result of block size constraints on the bitcoin network. (Due to bitcoin’s limited block size, those who send transactions effectively bid for space, a development driven by increased use and limited capacity).

“For the February farmer payout, we paid over $1,600 in transaction fees, or about 13% of total payouts. This is not sustainable or scalable,” the company said.

Founded in 2014, Storj uses a native cryptographic token called Storjcoin X (SJCX) to incentivize users with spare computer storage to safeguard the files of enterprise users. The combined technology is then sold in a standard software-as-a-service model.

Storj announced it had raised $3m in funding in February, a figure that includes capital raised in traditional crowdsourced fundraising.

Still, Winkinson framed the decision as one that would benefit Storj long term. Faced with its own set of scaling problems and technical concerns, Wilkinson pointed to the performance of ethereum’s core development team as the deciding benefit.

“All of the projects are being built on ethereum. At some point, you have to say that’s a good enough metric.”

Cardboard shipping box image via Shutterstock

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