What is Filecoin
Filecoin is a blockchain project focused entirely on creating a global decentralized data storage network. Its creators do not hide their ambitions to change the world for the better, claiming that Filecoin is intended to preserve humanity’s most valuable information. The main idea behind Filecoin is to create an efficient and secure global data storage marketplace that is free from corporate control. Filecoin is doing so by encouraging participants to lend their excessive storage to other users on the network.
Filecoin started in 2013 and has been in development alongside a peer-to-peer distributed network protocol called IPFS which stands for InterPlanetary File System. Both Filecoin and IPFS are the creations of Stanford alumni Juan Benet who is the founder of Protocol Labs. In 2014, both projects were brought to life with the help of Y Combinator - a startup incubator.
In 2017, Filecoin held a successful initial coin offering round, raising over $200 million. The project’s testnet was launched in December 2019 quickly growing to 5 PB of proven storage. The mainnet went live in October 2020, surpassing 1 EiB of storage capacity within its first month. As of September 2021, Filecoin has reached 10 exbibytes (EiB) of storage capacity.
Filecoin is governed by the Filecoin Foundation which supports and encourages “transparent, community-driven” governance, based on proposals (FIPs) from the Filecoin native token FIL holders.
How does Filecoin work
The idea of Filecoin is that anyone can put their excessive storage space to use by joining the Filecoin network. The participants on the network earn FIL tokens for storing data and computing cryptographic proofs to protect the information. At its core, Filecoin is based on a peer-to-peer architecture of a distributed network protocol InterPlanetary File System (IPFS). Under IPFS each node holds a portion of overall data provided to the network that helps to protect information from third-side intrusion and censorship. The protocol uses a distributed hash table (DHT) to determine which node stores the data requested.
Filecoin is a distributed ‘Proof of Useful Work’ network consisting of peers, or in other words - network participants who communicate, or ‘gossip’, over secure channels to transfer data and discover other peers. Here, information like blocks and messages is transmitted through this peer-to-peer network. To participate, Filecoin peers need to have a special, though claimed as a ‘low-level’, software that is required to be in an active state 24/7 and is called Filecoin Nodes or Filecoin clients.
The nodes can publish several types of messages onto the network, such as a message to send FIL from one address to another, or proposing storage and retrieval deals to Filecoin storage providers.
Storage providers are people who choose to share their excess storage with others. Every 30 seconds, Filecoin storage providers add new blocks to the blockchain and are rewarded with FIL tokens. Unlike the previous task, this task is regarded as highly technical with serious hardware requirements, as the machines performing this task need to complete cryptographic proofs that they store all the data provided. For that, the protocol uses cryptographic proofing methods like Proof of Replication (PoRep) and Proof of Spacetime (PoSt).
Proof of Replication demonstrates that storage providers have received all the data from the client and encoded it in a unique way using their physical storage. PoRep is provided to the client at the very beginning of their deal along with the ‘sealing’ process of the deal. After that and throughout the whole time of the deal, storage providers will have to randomly check parts of the provided data and prove to the client that it is still being stored on the network using PoSt cryptographic proof. Those proofs are included in every block on the Filecoin chain and are verified by the storage providers, who meet a requirement of available storage space greater than 10 PiB, for validity. As on almost every other chain, Filecoin fees, or gas fees are required to include data in the chain blocks.
A storage provider makes a deal with a client, which requires them to agree to store the client’s data on the network. After agreeing to do so and receiving the data from the client, the storage provider is obliged to repeatedly prove to the Filecoin network that their agreement is in fact in effect and the data is still being stored. Once proven, the storage provider can collect their rewards. In case proven otherwise - the provider gets slashed and loses their bonded FIL. This type of deal on the Filecoin network is called a storage deal, and there are also retrieval deals. Those are agreements between clients and retrieval providers to extract data from the network. Retrieval providers may be the same people as storage providers, or they may be engaged in just that one role. Retrieval deals are fulfilled off-chain using payment channels to pay for the received data.
How to use Filecoin
Filecoin can be used by various applications, wishing to store their large amounts of data on a blockchain, rather than using cloud services. Apps that decide to opt for Filecoin may choose any storage provider (or several) for their data, using the same API, which makes it easier for them to migrate from one provider to another if needed.
To store data on the platform, users can download one of the applications advised by the Filecoin team that does not require any technical setup. The list of such applications includes ChainSafe Files, Estuary, Space Storage, and Web3.Storage. Some of the applications are accessible directly through the user’s browsers, some offer an API option. File.video and Voodfy apps are designed specifically for storing video files and use the Ethereum-powered LivePeer network to transcode.
In case one wishes to use the network as a storage provider, the necessary hardware, of which Lotus is recommended by the Filecoin team, should be obtained. The minimum hardware requirements for providing storage on Filecoin can be found here.
The FIL token
The FIL token is used as a utility and governance token on Filecoin’s network. It is used as an incentive for data providers who compete with each other to store data and compute proofs.
Users or clients pay storage providers in FIL for taking care of their data, whereas to run a node on Filecoin, miners need to lock some amount of FIL tokens in the protocol that will be slashed for possible misbehavior or inactivity on the network. The maximum supply of FIL was initially set to 2 billion but due to burning events currently stands at 1,970,258,495 tokens. Out of the genesis block, 10% were allocated for fundraising - 7.5% of them were sold in a 2017 token sale and the remaining 2.5% were set aside for ecosystem development or potential future fundraising. 15% of the total supply was allocated to Protocol Labs, 4.5% of them went to the core team, and another 5% of the total amount of FIL tokens was given to the Filecoin Foundation. The remaining 70% are saved for distribution to miners as mining rewards.
Filecoin operates in line with EIP-1559, the proposal which introduces a fee-burning mechanism permanently removing coins from the total circulating supply of the asset. Like Ethereum, the network burns a varying percentage of each fee depending on factors such as network congestion through an automatic mechanism. The burned tokens are sent to an irrecoverable wallet address that can be found here.
Filecoin wallet preferences to store the FIL token include Glif Web Wallet and Fox Wallet. Filecoin audits are available on the project’s dashboard on our website.
How to buy Filecoin FIL token
Filecoin FIL token can be purchased on centralized exchanges like HitBTC, Digifinance, Binance, Gemini, Kraken, and many more.
Disclaimer:
To understand if Filecoin is a good investment and try to make a FIL price prediction, you need to do your own research on the project.
All the data for research is available on the project page on our website: check out the technical features of the project in this review, try to use the app, see if the information about the team is available and the team is open for communication, and using the project dashboard and the FIL price chart, assess the project usage rates as well as the token price movement and the number of its holders.
Is Filecoin safe
Both Filecoin and IPFS are the creations of American computer scientist Juan Benet. Benet is an alumnus of Stanford University who created Protocol Labs in 2014. The Filecoin team has over a hundred employees working remotely from all parts of the world.
On the governance layer, Filecoin is overseen by the Filecoin Foundation and its sister organization Filecoin Foundation for the Decentralized Web (FFDW), which offer developers and community grants and are responsible for the growth of the Filecoin ecosystem.
In August 2020, there presumably were hacking attempts on one of the nodes of the Filecoin network, when a hacker sent a large number of messages through the filtered whitelist to make the node lose its computing power, and succeeded. The Filecoin hack was briefly reported by the blockchain security firm Slowmist, however, there was no confirmation on the incident from the Filecoin side.
File coin was audited by Sigma Prime in October 2020, Consensys Diligence in October 2020, NCC Group in October 2020, Sigma Prime in July 2020, Dr. Jean-Philippe Aumasson and Antony Vennard in July 2020, Least Authority in June 2020, ResNetLab @ Protocol Labs, April 2020 and Sigma Prime in August 2020.
Partners
Under its sponsored data program, Filecoin is partnering with some prominent social, educational, and scientific web projects, such as Wikipedia, OpenStreetMap, Genome Aggregation Database, and Project Gutenberg, which all have entrusted their archives to Filecoin.
Among decentralized partners, Polygon Studios can be mentioned as one of the partnerships intended to incentivize NFT-projects on Polygon to integrate with IPFS and Filecoin.
Currently, Filecoin is growing its popularity among other blockchain projects and dApps increasing its presence over multiple ecosystems. The most notable use for Filecoin at the moment is storing NFT data, on this point, the project collaborates with Dapper Labs, OpenSea, and Polygon Network among others.
The partnership with the Textile team which is building bridges to connect Filecoin to Ethereum, Polygon, and Near helps to ensure interoperability for the project. Filecoin is also partnering with oracle solution Chainlink to launch a joint grant program for developers.
There are now over 230 organizations working in the Filecoin ecosystem, according to the Filecoin Foundation.
What's next?
Filecoin is heavily focused on developing its native ecosystem. The current most important milestone for the team is creating a Filecoin Virtual Machine or FVM, which will bring smart-contract capability and data-centric DAOs onto the network, and thus the opportunity to significantly broaden the network. With it, the company will introduce a new gas fee model to better account for execution costs. The bug bounty program associated with this step is among the moves currently made by the company.
The other clear priority for Filecoin is the further development of its data storage marketplace which has increased its capacity exponentially since the project’s launch.
For the further future, the company has planned to make the FVM user-programmable, allowing developers to deploy custom code to the Filecoin mainnet through EVMs and SDKs.
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