BitTorrent’s cloud solution? Bypass it altogether by Clay Dillow @FortuneMagazine April 4, 2014, 11:30 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE — Last year’s revelations of the National Security Agency’s sweeping data collection programs were not particularly good for U.S. technology companies. Following the Edward Snowden leak, the Washington, D.C.-based think tank Information Technology and Innovation Foundation predicted that U.S. cloud computing companies could lose as much as $35 billion in worldwide sales over the next few years. Analysts at Forrester projected losses for Internet service providers as high as $180 billion by 2016 in the wake of the scandal. For most cloud storage and data sharing companies, that suggests rough sailing ahead. For BitTorrent, it suggests opportunity. BitTorrent — the same company behind the eponymous and somewhat infamous peer-to-peer file sharing protocol — has developed a solution for file-sharing between systems and devices that solves a lot of the problems inherent in cloud-based file sharing systems like Dropbox or Box. Sync updates shared files and folders across devices just like those services — but it does so without ever storing that data on remote servers. Still in Beta, BitTorrent Sync has rapidly exploded to 2 million users (half signed up between November and the end of last year), and while it’s impossible to say if the Snowden affair is behind the rapid uptick in BitTorrent Sync’s user base, its growth does track alongside the unfolding of the scandal. (A marketing push by BitTorrent touting its secure, non-cloud-based approach certainly didn’t hurt.) MORE: Ceros raises $6.2 million to take on Adobe’s creative cloud “The syncing space was a natural place for us to apply technology we already had and deliver an application that didn’t yet exist,” BitTorrent CEO Eric Klinker says. “We just happened to be at the right place at the right time when the whole world suddenly realized, ‘Wait a minute, there might be a downside to all of these servers.’” The Internet as originally conceived was built around the idea of distributed systems, Klinker says, and only recently have we moved toward a more centralized means of storing and accessing data. “The great irony is that as we’ve built all of these applications on top of this great platform, they’ve tended to look more like the phone network the Internet replaced,” he says. “They’re very centralized, they’re controlled by entities, and in those environments users have less and less control each and every day,” a point underscored not only by the NSA revelations but also by the other breaches of sensitive networks that now regularly punctuate the news. BitTorrent Sync’s cloud solution is to eschew the cloud — at least as it’s currently defined — altogether. Whereas cloud-based services like Dropbox collect and store users’ files on their own servers so customers can access them from anywhere and from various devices, BitTorrent Sync instead encrypts that information and beams it directly between devices, syncing files and folders without ever parking that data on a third-party server. If the devices sharing that data are on a local area network, the data never have to touch the public Internet. And even if that information is transmitted over the public web, it remains encrypted and can only be compromised by a malicious third party during that short period in transit. MORE: Handshake raises $8 million to become the Salesforce of wholesale There are potential drawbacks to BitTorrent Sync, of course. The most glaring: All devices syncing need to be online at the same time in order to synchronize their data via Sync’s platform, an issue that runs counter to the notion that the cloud is an “anything, anywhere, anytime” environment. But while some enterprises may demand that kind of uptime, most individual users or small businesses don’t require it, Klinker says. And connectivity continues to expand with each passing day. BitTorrent sees those latter two points as key strengths for its product, alongside what might be its most appealing quality to consumers: It’s free. “There will always be a free version of Sync, and we think that’s our great power in this market,” Klinker says. “We are unconstrained by the cost of the public cloud, and we’re also unconstrained by the poor performance of the public cloud, and we’re also unconstrained by the insecurity of the public cloud. These are all advantages that we want to exploit, and the economic component of it is important to a lot of users.” But not so important that users are abandoning the cloud. Eighty percent of attacks investigated by Verizon in 2012 were perpetrated on internal systems, according to a company report. The remaining 20% were aimed at data in the cloud — a point that somewhat dilutes Sync’s value proposition. And in spite of all the heightened public awareness surrounding threats to data security, companies are still turning to the cloud to host their data. MORE: IT security is heating up. Are universities prepared for it? “Even with the awareness of the potential for monitoring, whether by government or malicious outsiders or others in industry, we’re still seeing an expansion of the cloud,” says Shane Shook, chief knowledge officer and global vice president of consulting at cybersecurity firm Cylance. “That’s partly because it’s economical, and partly because it’s simpler for companies — you don’t need all the IT support.” But the momentum of the BitTorrent Sync user-base is nonetheless amazing, says Shook, who himself uses the service. “I don’t think it’s a significant threat business-wise to Box or Amazon yet, but as a utility its simplicity is why it’s such a useful app that people on a per-user basis are adopting. It’s easier to use than other solutions like Box. I use Box, but oftentimes it’s difficult to do things that BitTorrent Sync does simply.” BitTorrent is exploring the possibility of developing enterprise versions of its platform, or premium versions aimed at small businesses or professional users that will generate revenue for BitTorrent. (There will always be a free version of Sync, Klinker insists.) Once the product is further polished and out of beta, Klinker thinks BitTorrent can appeal to businesses large and small with monetized offerings of Sync that ensure both quick access to data and the kind of security the cloud simply cannot guarantee. “Can we make distributed solutions as good as the cloud?” Klinker says. “If we can, there’s great demand for this.” Correction: An earlier version of this post misidentified Shane Shook’s cybersecurity firm. It is Cylance, not Cyclance.