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My first advice would be to not bother with an image hosting site. You would be wasting your time. The space is seriously saturated, and do we really need another image hosting service?
Think of a need that is under served.
If you still want to do an image hosting site, I suggest using the Amazon S3 service for storage. The service will scale to whatever needs you would have and you pay for what you use. I would say the service would be the only chance you have unless you have alot of funding for your application.
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