Filecoin (FIL), the Blockchain Serving Decentralized Storage and Web 3.0

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Filecoin (FIL), the Blockchain Serving Decentralized Storage and Web 3.0
Filecoin (FIL), the Blockchain Serving Decentralized Storage and Web 3.0

Created by the developers of the Web 3.0 InterPlanetary File System (IPFS) protocol, Filecoin (FIL) is a blockchain dedicated to decentralized data storage. Its competitive prices, its high-performance architecture in terms of security, and its desire to safeguard humanity’s data make it a reference for decentralized storage—zoom on what Filecoin offers and the roles of its FIL token.Created by the developers of the Web 3.0 InterPlanetary File System (IPFS) protocol, Filecoin (FIL) is a blockchain dedicated to decentralized data storage. Its competitive prices, its high-performance architecture in terms of security, and its desire to safeguard humanity’s data make it a reference for decentralized storage—zoom on what Filecoin offers and the roles of its FIL token.

What is Filecoin (FIL)?

The Filecoin project was born in 2017 in the United States. The idea behind this project is to create an open-source decentralized storage network, allowing its users to store files in the cloud using blockchain technology.

Filecoin arises as a competitor to cloud storage service players such as Google Drive, Dropbox, and OneDrive. These are obviously centralized.

Decentralized cloud storage with Filecoin could be compared to the real estate rental market with Airbnb. Anyone can rent an apartment belonging to him. The concept is similar to Filecoin. Here, a person with available storage space can rent it on the Filecoin network, with the difference that no centralized entity manages this infrastructure. Filecoin is not the only player in this environment. Other protocols such as Storj, Sia or Arweave also operate in this sector. However, as of this writing, Filecoin is the most advanced in the industry in terms of the number of users and the amount of data stored.

Filecoin is based on the InterPlanetary File System (IPFS) protocol. It allows storing and sharing of data on a decentralized network. This Web 3.0 protocol is also created by Protocol Labs, the company behind Filecoin.

On the cusp of intense competition for cloud storage market share, an exponentially growing market valued at $137 billion by 2025 ($50 billion in 2020), what does Filecoin have to offer?

With its business model, Filecoin allows users to rent storage space in exchange for FIL tokens, the native cryptocurrency of the Filecoin network. The data is end-to-end encrypted in order to secure the protocol, avoiding its censorship and its alteration. Thus, each file is stored properly and reliably, so users do not have to worry about possible data loss.

Any type of data can be stored there. Database, websites, personal and professional data, contracts and many more. All at competitive prices, personalized according to use, time and type of data stored.

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Filecoin (FIL) logo

The Filecoin Ecosystem

Filecoin is therefore developed on the IPFS protocol. Miners, in this case, participants providing storage on the network, must prove that they are storing data properly for the defined duration. Cryptographic proofs guarantee the availability and immutability of data.

Proof of Spacetime and Proof of Replication

Thus, the Filecoin protocol is based on the  Proof of Spacetime (PoSt) consensus.  It allows the verification of all or part of a file in order to confirm its storage without alteration over the predefined period. Miners are randomly selected to verify the data stored by them. This is to ensure that they participate honestly in the network. Financial compensation in the form of FIL tokens also incentivizes this behaviour.

In parallel, the  Proof of Replication (PoRep) makes it possible to verify that the number of copies of a file is indeed stored as predefined in a unique way. Concretely, the miner proves that he is indeed storing part of a piece of data and that the data cannot be replicated by another miner. This ensures its availability.

Because of this, the Filecoin blockchain verifies the proofs and the data is therefore stored correctly and securely.

A varied Ecosystem

With Filecoin, it is also possible to store smart contracts (escrows, insurance, auctions, games, etc.), metaverse assets or the metadata of non-fungible tokens (NFTs), for example. The Filecoin network offers many possibilities when it comes to storage. 

Filecoin also aims to preserve public data.  The entire Wikipedia database has been stored on its network, as well as that of Project Gutenberg (more than 60,000 e-books in free access).

Additionally, the Filecoin Virtual Machine (FVM) was introduced in October 2021, a tool that could become one of the mainstays of decentralized storage.

The Filecoin Virtual Machine allows, among other things, to make calculations directly on the space where the data is stored (which gives the Filecoin network computing power via the FVM). All without transferring them elsewhere. It will also facilitate an economic model for tokenizing data, a very promising innovation for this market.

The FVM  also supports interoperability by allowing the integration of decentralized applications (dApps) from other blockchains such as Ethereum or Solana and Filecoin, therefore, providing the storage function to these dApps.

It is also compatible with the Ethereum Virtual Machine (EVM), offering many possibilities for developers.

In order to participate in the Filecoin network, i.e. make your storage space available, store your data or buy data, you should ideally use Slate or Lotus. Slate allows using the Filecoin network with a more accessible interface for the less tech-savvy. Lotus is the official client to use for people who want to make their storage space available.

What is the FIL Token Used for?

The FIL token is used to pay for the rental of storage space. Thus, miners are paid in FIL. The particularity of the Filecoin blockchain at this level is to be able to offer these services at extremely competitive prices compared to centralized solutions. The price is determined on the principle of supply and demand (free market). Competition is therefore highly encouraged.

Filecoin thus reduces the barriers to entry to participate in the network as a miner. It makes cloud storage a commodity (commodity). This allows new entrants to easily compete with established players.

These are in competition to store the data and offer flexible options at the best prices, which is in complete transparency.

The other particularity for Filecoin users is to be able to adapt to specific needs, whether in terms of redundancy, recovery speed, storage duration or costs. This makes the rates very customizable.

As we have seen, Filecoin allows anyone to monetize their storage space. Storing data directly allows you to earn FILs. It should be noted that in order to be able to store data, it is necessary beforehand to allocate FIL as collateral; it is, therefore, necessary to have some. This is additional security to ensure that miners participate honestly in the operation of the network.

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Relationship between FIL rewards and amount of storage

The probability of earning a block’s FIL reward and transaction fees is proportional to the amount of data the miner allocates to the Filecoin network.

They are also rewarded for the speed with which they deliver the content they have stored. The data mining market is attractive for miners who have low latency connections and high bandwidth close to users. These well-placed storage providers are paid in FIL by delivering files and data at the highest speeds.

Finally, the quality of the data (value, popularity) is taken into account when establishing the price.

The fundraising of Filecoin and particularities of the FIL

Filecoin fundraiser

Filecoin’s Initial Coin Offering (ICO) took place in October 2017 with an initial price of $1.30 per FIL token. With $257 million raised, it is still one of the most successful fundraising projects in the ecosystem. Note that the ICO was only open to accredited investors and not to the public.

Particularities of the FIL

There will be a maximum of 2 billion (cap) FIL. The market capitalization amounts at the time of writing these lines to 6.5 billion dollars. There are also penalties for network participants who are not honest (e.g. if data is lost). Their FIL tokens placed as collateral can simply be burned. The other burn mechanism on the network concerns transactions. A small portion of each transaction’s fee is burned to compensate for the expense of network resources.

In terms of token distribution, 10% was sold during the ICO, 15% was attributed to the development team and 5% to the Filecoin Foundation.

The rest is distributed over 16 years to miners as block rewards.

Team and Partners

Filecoin Team

Filecoin is a project carried out by Protocol Labs, an open-source research and development laboratory. It is the company behind the IPFS protocol or even libp2p. They have a team of over 100 employees.

There is also the Filecoin Foundation (FF), an independent organization that facilitates governance of the Filecoin network, funds project development, support the growth of the Filecoin ecosystem, and promotes the decentralized web. The board of directors of this foundation is made up of figures such as:

  • Sandra Ro, CEO of Global Blockchain Business Council;
  • Brewster Kahle, co-founder of Internet Archive;
  • Marta Belcher, General Counsel of Protocol Labs and President of the Filecoin Foundation. She was previously a lawyer specializing in blockchain and emerging technologies;
  • Juan Benet is the CEO of Protocol Labs, a graduate of Stanford University. He is the founder of the Web 3.0 InterPlanetary File System (IPFS) protocol in 2014 ;
  • Molly Mackinlay, also a Stanford graduate, is responsible for the design of the Filecoin protocol as well as project manager on the IPFS, after 5 years of experience at Google.

Filecoin Partners

Filecoin is in collaboration with many strong partners in the cryptocurrency ecosystem.

Hedera Hashgraph is approaching Filecoin in July 2021 to advance Web 3.0 interoperability. In August 2021, Filecoin and Polygon announced a cross-chain bridge between the two projects to also accelerate Web 3.0 interoperability.

In September 2021, the Ethereum Foundation, a non-profit organization dedicated to the development of the Ethereum network, Filecoin and Zcash, signed an agreement to improve interoperability between the three blockchains. Indeed, this agreement allows the storage of smart contracts on Ethereum on the Filecoin blockchain while protecting them, thanks to Zcash’s Halo 2 protocol. This protocol will ensure the confidentiality of transactions.

In October 2021, Filecoin became the official storage partner of the Flow blockchain. Flow users can thus store the metadata of their NFTs via the IPFS protocol on Filecoin.

Finally, in November 2021, Filecoin and NEAR Protocol announced a $300,000 program to strengthen cooperation between the two ecosystems.

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Filecoin Partners

How to Buy FIL tokens?

The FIL is available on almost all trading platforms on several pairs. You can get it by going to Binance, Huobi Global, Kraken, Coinbase, KuCoin or Gate.io.

Explanations for Buying FIL on Binance

  • Register on Binance;
  • You will receive an email and need to click on a link to verify your account;
  • Deposit funds on the platform;
  • Click on the Market menu and search for the pair BTC/FIL;
  • All you have to do is buy FIL for the amount of your choice;
  • Congratulations, you are now in possession of FIL tokens.

Filecoin Ratings and Reviews

Filecoin is a solid project supported by a company (Protocol Labs) that has already proven itself with IPFS in particular. What sets it apart is its decentralized network, ensuring confidentiality and protecting data from censorship or hacks. Its blockchain correctly rewards network participants thanks to its unique business model based on customizable rates and the free market.

This makes it an attractive option in the cloud storage market since user costs are very low.

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Data stored on Filecoin

As of this writing, the Filecoin network produces 33 petabytes of storage capacity and over 3500 storage providers (miners). The use of the network is growing and therefore succeeds in convincing.

Filecoin stores about 8 million NFTs on its blockchain; that’s almost 1 NFT per second. Filecoin has a very important place in this growing sector and, by extension, will benefit from the growth of metaverses. Indeed, NFTs are key assets in metaverses. Filecoin is, therefore, in the process of being at the forefront of taking advantage of the evolution of these technologies through its decentralized cloud storage function.

However, keep in mind that Filecoin is in competition with well-known projects such as Storj, Sia, Arweave or even more recent projects like Cere Network. This juicy, growing market attracts and will continue to attract new competitors. Filecoin is currently not very user-friendly, even if there are solutions like Slate, but the team is working particularly on this aspect.

This in no way takes away from the advantages of Filecoin; the network is not the market leader in decentralized cloud storage for nothing. The network has good arguments, a solid development team and its foundation support its growth while its infrastructure is very robust.

The Filecoin Virtual Machine, currently in phase 0, multiplies the possibilities offered by the network. Finally, the Filecoin network benefits from first-class partners with Ethereum, Near Protocol, Polygon and Opensea.