Decentralised Storage Explained: How Filecoin, Arweave and IPFS Work
IPFS, Filecoin, Arweave — decentralised storage is reshaping how data is kept online. Here’s what UK crypto investors need to know about the protocols and the t
Every NFT you’ve ever bought probably relies on a web server you have no control over. The image file — the thing you actually paid for — lives on a URL that could return a 404 tomorrow if a startup shuts down or forgets to renew a domain. That’s not a hypothetical. It happened to thousands of NFT holders in 2021-2022. Decentralised storage is the infrastructure layer that’s supposed to fix it.
Three projects dominate this space: IPFS, Filecoin, and Arweave. They’re related but distinct. Each takes a different bet on how you solve the “keep data alive forever” problem. And each has a token that UK investors are increasingly asking about.
This article explains what decentralised storage actually is, how these three protocols work, where they differ, and what the risks are before you buy FIL or AR.
What Is Decentralised Storage and Why Does It Matter?
Traditional storage is centralised. You upload a file to Amazon S3 or Google Cloud. Their servers hold it. Their terms of service govern it. Their pricing determines how long it stays. If they go down, your data goes with them.
Decentralised storage breaks that model. Files are split, encrypted, and distributed across thousands of nodes run by independent operators worldwide. No single server holds the complete file. No single company controls access. Retrieval happens by requesting the content itself — identified by a hash of its data — rather than a location URL that can change or disappear.
This matters beyond NFTs. Data sovereignty advocates want it for censorship resistance. Web3 developers need it for permanent on-chain metadata. Enterprises exploring immutable audit trails are looking at it seriously. When I first started tracking this space in 2020, it felt niche. By 2026, the combined network capacity across IPFS and Filecoin exceeds 20 exabytes. That’s not niche anymore.
IPFS: The Protocol Underneath Everything
IPFS — the InterPlanetary File System — was created by Protocol Labs and launched in 2015. It’s a peer-to-peer file sharing protocol, not a blockchain. There’s no token. No incentive layer. Just a protocol for finding and retrieving content by hash.
The key idea is content addressing. On the traditional web, you retrieve a file by location: “go to this server, find this file.” On IPFS, you retrieve by content: “find me the file that has this exact cryptographic hash.” The hash is derived from the file’s data. If anyone changes the file, the hash changes. Tamper-proof by design.
IPFS works well for distribution. It doesn’t work well for persistence. If nobody is actively pinning (storing) your file, it disappears from the network. That’s the fundamental problem IPFS solved halfway. Filecoin and Arweave exist to solve the other half — making sure someone actually keeps the data long-term and has an economic reason to do so.
Today, IPFS underpins most of the NFT ecosystem. OpenSea, Rarible, and the majority of NFT platforms store metadata and images on IPFS by default. It’s the infrastructure. But without a storage incentive, those files are only as permanent as whoever chose to pin them.
Filecoin: Paying People to Keep Your Files
Filecoin is the economic layer built on top of IPFS. It launched mainnet in October 2020 after raising $257 million in a 2017 ICO — one of the largest at the time. The protocol pays storage providers (miners) in FIL tokens to store client data and prove they’re still holding it.
The proof mechanism is clever. Filecoin uses two cryptographic proofs: Proof of Replication (you actually stored a unique copy) and Proof of Spacetime (you kept it for the agreed period). Storage providers must submit these proofs on-chain repeatedly. Fail to submit, and you get slashed — you lose collateral you put up when you joined the network. This creates real economic incentives to actually store data reliably, not just claim to.
As a storage client, you post a “deal” on the Filecoin network: I want this file stored for X months, I’ll pay Y FIL. Storage providers compete to fill the deal. Prices are determined by market forces rather than a corporate pricing page. In 2025, storing 1 TB for a year on Filecoin cost between $0.50 and $2 depending on provider redundancy and retrieval guarantees — significantly cheaper than AWS S3 in most configurations.
FIL is the network’s native token. Storage providers earn it for storing data. Retrieval providers earn it for serving data quickly. Token holders can also participate in governance. At peak in 2021, FIL reached £145. By mid-2026 it traded around £3-5 — a brutal retracement that reflects both crypto market cycles and slower-than-expected adoption.
Arweave: The Permanent Storage Bet
Arweave takes a completely different approach. Pay once. Store forever. That’s the entire pitch.
Instead of recurring storage deals, Arweave charges a single upfront fee to store data permanently. The fee goes into an endowment — essentially a reserve fund that grows through investment returns and is designed to pay storage costs indefinitely. The maths behind this relies on storage costs falling faster than the endowment earns, which has historically held true given the long-run trajectory of storage costs dropping roughly 30-40% per year.
The Arweave network launched in 2018 and describes itself as a “permaweb” — a permanent, decentralised internet. Every file stored gets a unique transaction ID and is replicated across a network of miners. Miners are incentivised to store random historical data as part of the mining process, which means the more popular a file is, the more copies exist in the network.
The AR token is used for storage payments and mining rewards. It hit a peak of around £65 in 2021. By mid-2026 it traded around £6-8. The network had stored over 80 terabytes of data as of early 2026, including archives of significant web content, Wikipedia snapshots, and thousands of NFT collections.
Arweave’s appeal to NFT projects is obvious: pay once, stored forever, no ongoing subscription risk. Several major NFT projects including Solana collections have used Arweave for permanent metadata storage precisely because they want to eliminate the “rug the metadata” risk that plagued centralised storage early in the NFT boom.
IPFS vs Filecoin vs Arweave: The Key Differences
These three are related but solve different problems. Here’s the honest comparison.
IPFS is a protocol only — no economic layer, no storage guarantees. It’s the transport. Fast, content-addressed, censorship-resistant delivery. But if nobody pins your data, it’s gone.
Filecoin adds the economic layer to IPFS. Storage deals have defined duration and price. Providers are cryptographically proven to be holding data. But it’s still time-limited storage — your deal expires, and you need to renew. Better for large-scale, cost-sensitive enterprise storage than for “never lose this” use cases.
Arweave is the permanent option. One payment, indefinite storage. The tradeoff is that “permanent” relies on a long-run economic assumption about storage cost trajectories. If storage costs stop falling, or the network doesn’t grow, the endowment model faces stress. That’s not certain failure — but it’s a real-world risk that the single-payment model doesn’t fully eliminate.
For NFT metadata: Arweave. For large enterprise data at cost: Filecoin. For distributed apps wanting content-addressed delivery without the storage concern: IPFS with a pinning service like Pinata or Infura on top.
Real-World Use Cases in 2026
Decentralised storage isn’t theoretical. It’s running at scale across four main use cases.
NFT metadata and assets. The majority of professional NFT projects now use IPFS, Filecoin, or Arweave for image and metadata storage. This protects buyers from centralised server failure and increases the project’s credibility. When I checked a sample of 50 NFT collections in 2025, around 60% used decentralised storage for at least part of their metadata.
Web3 application frontends. Protocols like Fleek allow developers to deploy entire websites on IPFS. The frontend becomes as decentralised as the smart contracts. Uniswap, for example, has deployed frontend mirrors on IPFS as a censorship-resistant fallback.
Data archiving and compliance. Arweave is increasingly used for immutable audit logs and compliance archives. Data that must never be modified — regulatory filings, smart contract deployment records, governance votes — benefits from the write-once, read-forever model.
AI training datasets. This is emerging fast. As AI companies look for decentralised ways to share and monetise training data, Filecoin’s large network capacity and Arweave’s permanence are both being explored. Several AI data marketplaces launched on these networks in 2025-2026.
What UK Investors Need to Know About FIL and AR
Both FIL and AR are listed on UK-accessible exchanges including Kraken, Coinbase, and Bitstamp. Neither is on the FCA’s registered cryptoasset business list as specific products — they’re tokens you access through a registered exchange rather than regulated products themselves.
HMRC treats FIL and AR as cryptoassets. Any disposal — sale, swap, even spending AR to pay for storage — is a CGT event. The tricky one: if you’re a storage provider earning FIL as income, that FIL is taxed as income at the point of receipt (market value on the day), and any subsequent disposal is a separate CGT event. UK investors keep asking about the mining/staking tax treatment, and the short answer is: income first, capital gains second.
Both tokens are highly volatile even by crypto standards. FIL lost roughly 97% from peak to trough. AR lost around 90%. That volatility reflects real adoption uncertainty — decentralised storage is genuinely useful but mainstream enterprise adoption has been slower than bulls projected. Position sizing accordingly.
Risks Worth Taking Seriously
Three risks are often glossed over in the promotional material.
Retrieval speed. Decentralised networks are slower than centralised CDNs. IPFS retrieval from cold nodes can take seconds to minutes. Filecoin retrieval has improved but still lags behind AWS CloudFront for hot data. For real-time applications, this is still a meaningful limitation in 2026.
Network concentration. Filecoin’s storage network is geographically concentrated, with a large proportion of storage capacity located in China and the US. If regulatory pressure hits either market, network capacity could shrink quickly. Arweave’s mining concentration carries similar risks.
The permanence assumption. Arweave’s “forever” depends on its economic model holding. The endowment earns returns. Storage costs fall. Both trends need to continue. If they don’t, “permanent” gets redefined. The white paper acknowledges this. The marketing often doesn’t.
What This Means for You
Decentralised storage solves a real problem. The centralised web is fragile. Data disappears. Platforms die. Links rot. IPFS, Filecoin, and Arweave represent a genuine infrastructure bet that distributed storage outlasts any single company.
Whether that bet pays off for token holders depends on adoption pace, competing solutions (cloud costs keep falling), and regulatory climate. As underlying technology, these protocols are sound. As investment vehicles, they carry all the volatility and uncertainty of early-stage infrastructure plays.
If you’re holding NFTs, check whether your collection uses decentralised storage — it’s a legitimate due diligence question now. If you’re investing in FIL or AR, understand the HMRC implications and size positions you can afford to hold through multi-year drawdowns.
This article is for educational purposes only and does not constitute financial advice. Cryptocurrency investments involve significant risk. Always do your own research.
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