What is Filecoin (FIL): A Complete Beginners Guide
Managing to raise a whopping $257 million from crowd sale in September 2017, Filecoin has been building its products for the past three years and finally launched its Mainnet. The Filecoin team is working on creating a decentralized cloud storage and retrieval market, where anyone with free disk space could rent out to clients on the internet and, in return, receive rewards in the FIL token. Find out how Filecoin will revolutionize how data is stored and accessed in the coming years.
What is Filecoin
Filecoin is a peer-to-peer, decentralized file storage and sharing network that uses the blockchain to enable users to rent out their unused storage space in a transparent and reliable marketplace. The Filecoin protocol incentivizes miners to help clients store and retrieve data in a secure fashion.
Clients must pay using the FIL protocol token for data storage while the storage miners and retrieval miners earn FIL for offering store and serving data, respectively. All these integrated processes are executed without any central body’s involvement, which is contrary to that of the legacy file storage platforms.
Filecoin was developed on top of the InterPlanetary File System (IPFS) by Planet Labs in 2017. The IPFS protocol is a peer-to-peer storage network that allows users to host and receive data via a distributed file system without any reward scheme.
Filecoin secured around $257 million in 2017 from its Initial Coin Offering (ICO) plus venture funding making it one of the largest token sales in the history of cryptocurrencies. This drew a lot of attention from the mainstream media and hype around the project.
The project had gone through several stages of development until September 2020 where it launched its Mainnet. In less than a month after a successful Mainnet launch, Filecoin achieved a significant milestone. The network passed 1.1 million TB (terabytes) of storage capacity. According to reports, the network could store 4,500 Wikipedias, 290 million movies at 1080p quality, and 19 copies of the entire Internet Archive.
Filecoin Technology & Advantages
Filecoin finds itself in a competitive environment and, as such, needs to bring something of value to the table. With giants in the business like Google, Amazon, and Microsoft, Juan Benet, creator of Filecoin, had the vision to build from scratch a sophisticated marketplace for data storage and retrieval using the blockchain.
Centralized data storage solutions are prone to attacks due to their architecture, thus influencing Filecoin to adopt the blockchain to render a more secure and efficient storage service to consumers. The Filecoin protocol relies on four components to operate as intended. Some of the notable innovations and technologies being used by the Filecoin protocol are as follows:
Decentralized Storage Network (DSN)
The DSN scheme is one of the concepts introduced by Filecoin to enable independent storage providers to offer storage space and retrieval services with an incentive model. The Filecoin storage network uses verifiable markets (Storage & Retrieval Markets) to ensure storage providers receive their payment for rendering a storage or retrieval service for a client.
The DNS gathers storage offered by several independent providers and coordinates without assistance from external entities to provide data storage and retrieval to clients.
Filecoin combines two unique consensus mechanisms to achieve its goal of creating a decentralized storage and retrieval network. Filecoin implements the Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoSt) algorithms.
The PoRep deals with storage providers convincing their respective clients that they have stored replicas of the underlying data paid for their (data provider) physical storage. PoRep is a buildup of previous schemes that were likely to be exploited by malicious miners. PoRep is strategically designed to prevent Sybil, Outsourcing, and Generation attacks.
On the other hand, the Proof-of-Spacetime enables a user to confirm if the agreed term’s storage provider is storing the outsourced data. This mechanism was introduced because the Proof-of-Storage wasn’t effective in keeping track of how storage providers store long data.
Storage and Retrieval Markets
These are verifiable markets used to match and settle orders between clients and miners on the Filecoin network. The storage market allows clients to pay storage miners to store data, whereas the retrieval market allows clients to request data by paying retrieval miners to deliver it. Parties involved in a deal are free to set their price and accept offers they deem fit. Filecoin employs a network of full nodes to oversee exchange operations, and guarantees miners get rewarded for the services they render to clients.
Smart contracts on Filecoin enable users to code stateful programs to perform user-defined operations when certain conditions are met. The smart contract can perform market operations, proof verification, spend tokens, etc.
This has opened an opportunity for complex operations to be executed on the network without supervision. For example, a client could write a contract to reward a miner in a particular fashion. They can also create contracts to update data and several others.
Mining on Filecoin
When used in the Filecoin ecosystem, the term mining is different from what is prevalent in other blockchains. Usually, miners on a Proof-of-Work blockchain will be in charge of verifying transactions and securing the network. On the contrary, miners on the Filecoin network are responsible for storing, providing content, and issuing new blocks. FIlecoin miners will have to provide storage capacity to clients in need of disk space to store their data.
There will be multiple types of miners on the Filecoin network, with each performing a specific function. Currently, the ones playing critical roles in the network are the storage miners and retrieval miners. The team also plans to implement repair miners in due course.
Storage miners are the heart of the network. They are responsible for two primary duties, i.e., storing data for clients while earning file coin (FIL) and computing cryptographic proofs to verify storage across time. Unlike other blockchains where earnings depend on hashing power, Filecoin miners receive block rewards and transaction fees proportional to the storage space they contribute to the network.
The role of the retrieval miners is to provide pipes for fast data retrieval by clients. Retrieval miners on the FIlecoin network receive rewards when they bid and win a particular file in addition to mining fees. They usually secure a deal with prospect clients based on their bandwidth, latency, and how close they are to the client. A retrieval miner will be able to make deals so long as it has enough capacity. The number of deals they can make depends on their maximum bandwidth.
Power and Rewards
Every miner on the Filecoin network has a power value ascribed to it, and it is proportional to the storage capacity a miner contributes to the network. A better power value increases the chances of a miner being selected to mine a block in every epoch. And for mining blocks, miners earn block rewards and transaction fees for messages included in an underlying block.
How does Filecoin work
Filecoin works similarly to the IPFS network, allowing users to share and store data with no incentive model. Clients pay miners to store their file, both miner and client reach a deal, and then the miner pledges to store the file and makes it public on the blockchain.
Filecoin then encrypts the data, chop them into chunks, and hosts them on the network. There is a perpetual verification mechanism to check if miners are doing what is expected of them. Filecoin verifies data being stored for the stipulated period using the Proof of Replication (PoRep) and Proof of Spacetime” (PoST) mechanism. Random miners are chosen to prove random data are still being stored.
In retrieving a file, clients will have to pay retrieval miners to get their request fulfilled.
Why use Filecoin Storage Network
A user will opt for a cloud storage provider based on personal preference and factors, including reliability, cost, and speed. On the Filecoin network, users have more bargaining power as they can bargain with any miner. Clients have various parameters such as cost and speed to consider when choosing a miner to store their data. This makes pricing on the network very competitive. Users can continuously verify if their files are being adequately stored by miners they have struck a deal with.
On the side of storage providers, they have a way to monetize their free disk space by making deals, storing data, and in return receive rewards in FIL token. The system has been designed to reward miners proportional to their storage capacity. The more storage you add to the network, the more Filecoin you will earn.
Perspectives and Takeaways
Filecoin is widely known for its decentralized cloud storage market and has been working hard, which could be seen on their GitHub page. With a significant increase in miners at various levels, from large-scale data centers to individuals with spare disk space, Filecoin is poised to democratize and decentralize how data is being stored on the web, thanks to its miners.
The launch of its Mainnet onboarded some web 2.0 based applications, which are now functioning as web 3.0 applications. Starling is one of the few projects currently in the development stage and working on using the Filecoin network to store information for long-term preservation. A wide range of applications will utilize the Filecoin network for their cloud storage needs as time goes on. Another example is the Livepeer decentralized video hosting platform that anyone can use to upload and share videos.
Filecoin is also working on using bridges to establish connections with other blockchains. The cross-chain interaction will allow applications on other blockchains to use Filecoin’s storage as most of these blockchains provide less storage capacity and are also costly. With bridges, Filecoin will bring storage and retrieval support to these platforms. On the other hand, Filecoin will also access some of the features and functionalities of other blockchains.
The last quarter of 2020 saw many projects tap into DeFi and Filecoin was no exception. In November 2020, Anchorage and Tokensoft teamed up to create a wrapped version of the FIL token to be used in popular DeFi applications like Compound, Maker, and Uniswap. This development will open doors for creative DeFi applications and create opportunities for members (Miners and clients) in the Filecoin ecosystem.
In December 2020, it was announced that Fenbushi Capital pledged an investment worth over $15 million to support development in the IPFS and Filecoin ecosystem. Fenbushi was one of the early investors and invested a significant amount in Filecoin’s public sale in 2017. Since then, it has been actively supporting many Chinese miners to partake in mining on the FIlecoin network by providing them with FIL tokens to stake. Fenbushi’s collaboration with Filecoin can be viewed as a long term strategic partnership to help the FIlecoin ecosystem with its Ecosystem Fund.
For the ultimate source of information, visit https://filecoin.io/.
Filecoin Blockchain Explorer
Track your Filecoin transactions with Filecoin Block Explorer https://filscan.io/#/tipset/chain
Join Filecoin’s forum https://discuss.filecoin.io/ to discuss the currency and development with the rest of the community.
Follow @Filecoin on Twitter to keep up with the latest updates.
How to store and manage FIL
Because Filecoin launched its Mainnet not long ago, it has just a few wallets that support the native FIL token. It is also possible to store your FIL token on exchange platforms, but it is not recommended because you won’t have full control of your funds.
We made mention of the wrapped Filecoin (WFIL) earlier in this post. The Wrapped Filecoin is a 1:1 equivalent of Filecoin represented as an ERC-20 on the Ethereum network. It is compatible with any ERC-20 wallet. Atomic Wallet is one of the user-friendly wallets you can use to store and manage WFIL. Atomic is a non-custodial cryptocurrency wallet and, as such, grants users access to their private keys. This allows users to recover their wallets quickly. WalletConnect is an open-source protocol that enables mobile wallets to connect to decentralized applications (dApps). Atomic Wallet has this feature embedded and allows users to connect to the most popular DeFi applications seamlessly.