After discussing the concept of decentralized internet i.e ICP Coin, it is imperative to dig into Filecoin. The project is making waves in the world of decentralization by allowing users to store files independent of centralized governing authority. Filecoin calls itself a decentralized network designed to store humanity’s most important information.
It has emerged as a promising project with a proven real-world use case. It is here to challenge the status quo in the cloud storage space by challenging the top giants like Google and Amazon.
Can it be the future of digital storage? Does Filecoin hold enough value to bring in long term gains for the investors? Find out everything you need to know about this emerging project by Protocol Labs –
What is FileCoin?
Filecoin is an open-source, decentralized, peer to peer network that stores files using IPFS (InterPlanetary File System). It is basically an incentive layer of IPFS that rewards the storage miners for providing the necessary space to store the files. The storage miners are the computers that store the files on the network and submit proof of storage every time verification is requested by the protocol.
Filecoin Mainnet went live on October 15, 2020
Project Background & Founder:
Filecoin is a project developed by Protocol Labs and founded by Juan Benet in 2014. Juan is a computer scientist and a degree holder from Stanford University. He developed IPFS prior to developing Filecoin. The team has the vision to decentralize the cloud storage space and become the top storage provider of all web3.0 applications, starting with those built on the Ethereum blockchain.
The team wants to integrate blockchain technology into the digital storage space and disrupt the industry that is ruled by centralized players i.e Google and Amazon holding the data of the majority of internet users across the globe. Protocol Labs wants to give the control of data back to the users at a much cheaper rate without compromising data privacy and security. To understand more about Filecoin, it is important to understand the IPFS protocol.
InterPlanetary File System (IPFS) is a decentralized peer-to-peer protocol that allows users to store and receive data in a distributed storage system that isn’t controlled by any centralized authority. It works on similar grounds that of BitTorrent. Any user can become the storage miner in the network and peers can request the file from the storage miners who have it using a distributed hash table.
IPFS vision is to create a single global sharing and hosting network that is secured and incentivized by Filecoin FIL token. It provides the necessary storage infrastructure for Filecoin. If IPFS is your ATM machine then Filecoin is your money.
Filecoin is the AirBnB of Cloud Storage
What is Filecoin FIL token?
FIlecoin FIL token is the native currency of the Filecoin network. Storage miners earn FIL tokens by storing files of the users on the network. The blockchain maintains the ledger of FIL token distribution (send and receive) and records the proof of storage that keeps the miners in check i.e whether or not they are storing the files on their drives.
Anyone who provides data storage and data retrieval services on the network is eligible to receive FIL tokens as a reward for their service. If you’re holding hard drives with space to lend, you can become a storage miner and earn Filecoin by becoming a trusted miner.
In 2017, Filecoin launched its ICO and raised a total of $257 million, one of the highest by any coin in an ICO. I will talk more about this later in the post. Of the total supply, the majority is reserved for miners as reward for maintaining the blockchain, providing the data storage services, running contracts and much more.
The total supply of FIL coin is capped at 2 billion
How does Filecoin Work?
Filecoin is a peer to peer network and a lot is dependent on storage miners and retrievers for the proper functioning of the network. In order to manage and monitor the storage miners and related parties on the network, it has two specific protocols in place, Proof of Replication (PoRep) and Proof of Spacetime (PoSt). Before discussing the protocols, it is important to understand the following terms –
Filecoin nodes are the peers that sync the network and validate the messages in each block on the network on a global scale. It can manage and receive FIL coins in the respective FIL wallets. Filecoins can propose the storage and retrieval deals to the miners on the network and reward them once the process is finished. This brings me to the next point of discussion i.e Deals.
As mentioned above, there’re two types of deals in the network –
- Storage Deals
- Retrieval Deals
Storage deal is the agreement between the client (network user) and the storage miner. According to the deal, the storage miner will store the data as per the contract/agreement. The deal is initiated once the client sends its data to the miner. After the receipt of confirmation of data by the miner, it has to repeatedly prove to the chain that it is still storing the same data as per the agreement.
If everything goes according to the plan, the miner will be rewarded with FIL tokens as an incentive for holding the data else it will be penalized and the amount will be slashed.
Retrieval deal is the agreement between the network user and the retrieval miner to fetch the data that is stored in the network and provide it to the network user. These deals are finalized off-chain using payment channels.
The user has to pay a fraction of fee to retrieve the data stored. Also, retrieval miners may or may not be storage miners. The protocol will also reward the retrieval miners once the task is executed successfully.
The minimum deal duration is 180 days and the maximum deal duration is 540 days.
LOTUS is the most advanced feature to perform proposal deals on the network
Gas is a unit or a measure of the resources consumed during the process execution like transactions. In every blockchain, the Gas fee is paid to secure the network and pay the block producing miners to include the transaction in the new block.
Gas fee is paid in the native currency i.e FIL. But in Filecoin, part of it is burnt permanently to compensate for the network expenditure making FIL a deflationary currency.
Finally, it’s time to discuss the two main protocols running the whole show –
- Proof of Replication (PoRep)
- Proof of Spacetime (PoSt)
Proof of Replication (PoRep):
In Proof of Replication, miners have to demonstrate that they have stored and encoded the data assigned by the network user as per the terms of the deal. The data must be encoded so that it cannot be replicated by any other miner on the network. Once the protocol verifies the complete process, it moves to the next verification.
Proof of Spacetime (PoSt):
Once the deal is active, the miners have to repeatedly prove that it is still storing the data associated with the deal. The miners will be communicated time and again to prove if the deal is being honoured and will be rewarded accordingly.
In any case, if any miner failed to provide proof of storage of the data as per the deal, the miner will be slashed and will be penalized or banned from the network.
Remember, the cost of slashing is greater than the earning rewards
According to the Whitepaper, Filecoin proposed a useful work consensus mechanism. It will select a miner to create a new block based on the amount of storage it has compared to the total storage provided by the miners on the network.
This is done to encourage miners to focus on storage rather than the computation power of the system. To attain consensus and select a miner, the process is divided into epochs (explained in Cardano ADA coin) and each epoch will have one leader selected based on the amount of storage space it has with respect to other miners in the epoch (Expected consensus). Once the block is produced, the reward will be distributed to the network participants.
Miners are rewarded based on the storage power & not on the computation power
After the mainnet went live in October 2020, Miners can mine FIL tokens by increasing their storage power on the network. This is done by storing more data on the network. Miners are given the free option to choose, they can participate in storage mining, retrieval mining, storage power consensus or in all three.
As explained above, storage power is the primary factor in earning higher rewards. Filecoin doesn’t work on the Proof-of-Work consensus mechanism where GPU power is the key. GPU power is only required by the miner during PoSt protocol. It’s the ability to store more data that will attract higher rewards.
Filecoin ICO is one of the most successful and record-breaking events in the history of cryptocurrency. The team raised a whopping $257 million in the sale event organized in 2017.
The only problem with the ICO, it wasn’t open for everyone to participate. The ICO was only open to the top US investors with net worth of millions of dollars. The explanation given was, meeting the US regulatory requirement to make the sale available in the US.
Even the pre-sale was not offered to the community members and went straight to top hedge funds and VCs including Sequoia Capital and more. Filecoin organized the sale under SAFT ( Simple Agreement for Future Token) which means the tokens will be issued later to the investors but they have the right to claim the share by participating in the token sale.
The tokens have been distributed to the investors post the mainnet launch in October 2020. The following charts highlights the overall holdings of FIL tokens –
Unlike traditional players, Fliecoin is decentralized by harnessing the power of blockchain technology. In a way, it gives the control of data to the users. Users don’t have to worry about being locked out or banned by a centralized system.
Better Privacy and Security:
Blockchain means security and Filecoin is no different. Its unique protocols with top-level encryption make sure the user data is safe and retrievable anytime. The code works in a way that the storage miners won’t be able to access the data stored in its storage disk, since it’s encoded and each storage miner contains a fraction of the overall data, making it impossible to decipher by anyone but the user who’s holding the private keys.
Dropbox was hacked in 2012 leading to the exposure of the users IDs
I personally believe the project is environment friendly. Every year tons of gadgets and devices are dumped, resulting in the rise in electronic waste. Filecoin will help reduce electronic wastage to some extent by allowing users to actually utilize their storage space in exchange for FIL tokens.
Web 3.0 Friendly:
Web 3.0 is the future of the internet. Imagine the internet being powered by blockchain technology where the network of DAPPS runs every day. DAPPS and smart contracts require storage space to function. Fortunately, Filecoin is here to the rescue. It will become the storage hub for all the web 3.0 applications in the coming future, honouring decentralization.
Checkout Arweave, FileCoin Killer in the making
Competition with Traditional Players:
Amazon, Google, Microsoft are the leading players in this space. It’s a fairly crowded yet highly competitive arena. The traditional players will do anything to retain the top spot, not to forget their big cash pockets.
Days after the mainnet went live in October, it was reported that a large percentage of miners went on strike to oppose the low rewards against the resources provided by them to run the network. True or not, this is a concerning situation, since it can paralyse the complete network in one go.
Long Vesting Period:
In crypto, vesting is defined as a process of locking and releasing coins after a given time. Filecoin is said to have the longest vesting period which irate the miners because they cannot really get what they deserve, on time. It has a linear vesting period of 180 days.
Please check the latest Filecoin price $FIL, shared below –
Filecoin Price Prediction:
Blockchain is a decade old technology that was introduced with the launch of Bitcoin. Many projects replicated and modified it to create better projects but none of them was successful in addressing the technology in the storage space.
Filecoin is the first project that is able to integrate a crypto-based protocol governance in the cloud storage space. It was successful in establishing an incentivized system that rewards the miners with FIL tokens for safely storing and retrieving the data on the network.
The project is cash-rich and has a big playground field to experiment and expand in the decentralized storage space. The 2021 bull run has already skyrocketed its value to over $200 per token, followed by a steep fall in the market crash. At the time of writing, it is ranging between $60 -$80 per token.
I believe it has the potential to hit the price level of $500 in the upcoming bull run. It’s a cryptocurrency worth watching.
Where to Buy Filecoin FIL tokens?
Filecoin is available on the majority of trading exchanges. It can be purchased on Binance, Crypto.com exchange and many other exchange platforms. Wazirx exchange (a subsidiary of Binance India) also offer FIL tokens in exchange of INR.
Is Filecoin a Good Investment?
Backed by a strong team of VCs, Filecoin is one of the top projects to watch for in the crypto space. The growth in the adoption rate of Filecoin reflects the penetration of decentralized ecosystem in the mainstream platforms.
Filecoin is a well-funded underdog that is ready to challenge the tech giants in the storage space. It has a direct competition with Google Drive and Dropbox. Of course, new technology brings its own set of challenges but Filecoin is unfazed by the setbacks or delays and growing at a substantial rate.
It is in the process of onboarding more projects (Wings, AdEx) and users to experience and use its storage space offered at a fraction of the price compared to the competitors. With a superhit ICO under its belt, the project has the potential to surpass every barrier that comes along the way.
I am positive about project technicals and sentiments. If you’re an advocate of a free decentralized world, especially in the cloud storage space, then you should consider Filecoin after due diligence.
Filecoin Video Review | The AirBnB of Cloud Storage –
This completes my review of Filecoin with price prediction. In my next post, I will take about Audius coin and Decentraland MANA coin. If you’re a fan of blockchain technology then please do share this post on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.