Decentralized file hosting networks lack a well-aligned incentive system. Currently, paid file hosting servers often underestimate their operating costs when charging a monthly payment for storing a user's data. Users can split their payment into daily or weekly increments if they don't trust the servers, but this strategy doesn't resolve the economic challenges servers face. Users are paying to upload their data, so servers are not paid per download. If a server fulfills too many download requests from various users, then the server can become overwhelmed from the bandwidth costs outweighing their earnings.

 

In the context of video hosting on platforms like Nostr, where the traditional revenue model may falter, BitStream's protocol presents a sustainable alternative. For instance, a single user might upload a video once, incurring a one-time cost, but if that video becomes popular and is downloaded 100,000 times, the server's bandwidth costs could skyrocket beyond the initial upload revenue. BitStream's pay-to-download approach offers a solution: it allows the server to charge for each download, ensuring that the revenue scales with the popularity and demand for the media, creating a balanced and profitable ecosystem.

 

BitStream offers an alternative model to resolve this problem by introducing pay-to-download, where users pay for data as they download it bit by bit. Servers can set a price for serving file chunks, ensuring users pay a specific amount of satoshis per chunk (sats per chunk). As a result, servers may be incentivized to store popular content for free, because users can pay to download that popular content later on. BitStream's pay-to-download model enables servers to better match their income with their bandwidth expenditures, as opposed to only relying on pay-to-upload charges that may not reflect the server's actual operating costs.

 

This protocol enables an instant atomic swap of files for coins, ensuring a fast and trust-minimized experience for both parties. By ensuring files are atomically exchanged for coins, both the server and user are protected from each other. If a server delivers a file chunk that fails to match the file requested by the user, then the user can punish the server with a fraud proof that burns the server's frozen funds. Funds from the server are frozen on-chain as a form of bonded collateral before the user approaches the server, so the exchange of files for coins is instantaneous.