Keep in mind that while the two are connected over the network, any host storing a bit of an illegal file cannot be held liable for the file. There is absolutely no way they can know what is being stored as the data is encrypted before being stored. This way, the only person who can be held liable is the person with the private keys (i.e. the person storing the file).
That seems to me to not be correct. The host expects that the files are encrypted, but has no way of actually knowing that they are. And if someone wants to use the network for cheap bulk distribution of files, they likely will be skipping the encryption.
Does your comment "storing a bit" mean that files are chunked accross multiple hosts, with none having the full file?
The incentive for a host to store data is that there is a recurring fee, though exponentially smaller than a traditional cloud storage provider as one might think. If the network checks a file and something seems to be out of place (as in the host has stopped storing the file), the host stops getting paid for the file.
I didn't see anything about that on the website. Is this an additional fee to the bandwith cost, or is it a slow distribution of the upload fee?
1.) Correct, we shred the entire file and therefore no one other then the uploader has the ability to have the entire file at once.
2.) You will only have to pay for the amount of space you want, the upload speeds will be as fast as your download speed is. The reason behind this is that while one node may have a slow upload speed the others will make up for it, much like the torrent networks, but it will be even faster because our network has no constraints. So no, there will be no additional fees.