What is Filecoin
Filecoin emerged as one of the stars of the 2021 cryptocurrency bull run, but the network’s great potential means that the project can become much more than an investment option for traders.
Arriving in 2020, Filecoin is a leading decentralized file-sharing platform. But how does Filecoin work, and what is its potential in Web3? Let’s take a deeper look at Filecoin’s longer-term prospects.
Filecoin is a cryptocurrency that aims to incentivize a global network of computer operators to provide a file sharing and storage service.
Project founders claim that if enough people adopt it, it could become the fastest and cheapest way to store data on the internet. What’s more, it would not rely on a central authority, meaning the exchange of its files could not be censored by governments or other actors.
This is because Filecoin is maintained by miners who dedicate computing power to providing the computation that makes it work. Filecoin miners get paid for making storage space available to users. Filecoin users, in turn, must pay miners for storage, retrieval or distribution of this data.
The Filecoin network operates atop another protocol for decentralized file handling called the Interplanetary File System (IPFS). The two systems share many similarities, though the main difference is that while IPFS is free to use, it won’t earn miners any money. Filecoin costs money to use, but could also generate revenue.
Still, investors and traders should note Filecoin is not the only protocol that claims to offer a decentralized storage and file sharing system powered by cryptocurrency.
Competing protocols include Storj and Siacoin. Storj claims to have reached a network capacity of over 100 petabytes, while Siacoin reports a 2 petabyte network capacity, as of 2020.
However, Filecoin may be the most widely anticipated of these cryptocurrencies, having raised $205.8 million in an initial coin offering in 2017, one of the industry’s largest funding rounds.
As of July 2020, Filecoin is in testing, with a formal launch expected by the end of August 2020.
How Filecoin Works?
The Filecoin infrastructure is a distributed, peer-to-peer network whose main purpose is to provide a new way for organizations and individuals to store data around the world. When people have free storage available, they can become storage miners, who are essentially responsible for storing data on the Filecoin network. Clients pay FIL tokens both to store and retrieve data.
Retrieval miners are another class of participants. As you’d expect, they facilitate the data retrieval process between clients and storage miners and also receive a small amount of FIL for their services. Filecoin uses end-to-end encryption, and storage providers don’t have access to the decryption keys. Since it’s a distributed system, files are kept safe across multiple storage locations.
So, what makes Filecoin potentially better than its centralized competitors? Well, it offers a peer-to-peer cloud storage solution for businesses and consumers. Because the same item (storage) is offered by different sellers potentially at different prices, the consumer may benefit in the end. While at times you might not have enough storage for all your data, sometimes you’ll have excess, and you can sell it. That’s the promise of Filecoin.
Recent Developments of Filecoin
The Filecoin mainnet launched in October 2020 and since then, the amount of storage available on the platform has grown exponentially — recently passing the 2.5 billion gigabytes (2.5EiB) threshold — enough space to hold more than 10,000 copies of Wikipedia.
The FIL token has also seen trading volume gradually climb since launch, as a result of major exchange listings and increasing integration into the Ethereum DeFi landscape via a Wrapped Filecoin token.
In early February 2021, the Filecoin Frontier Accelerator — an initiative created by LongHash Ventures and backed by Filecoin — unveiled 11 startups that will take part in a 12-week accelerator program and receive $20,000 in grant funding. They include:
- OPgames — a set of tools for multiplayer competitions in single-player video games.
- Sinso Technology — a medical imaging data aggregator for telemedicine and AI diagnosis.
- Huddle101 — an online remote classroom platform.
- Filbox — a platform that helps users monetize their data.
- Vera AI — an AI-powered background check service.
Pricing for Filecoin’s storage services is set based on free competition, and changes in supply and demand, but is generally considered to be competitive with centralized cloud storage offerings.
The Future of the World’s Storage
Decentralizing the world’s storage has a direct impact on all of us. Currently, providers like Google Drive have a lot of the world’s data stored on their servers. Any change in their terms causes a ripple effect on the livelihood of other businesses and the economy as a whole.
However, if you participate in decentralized storage networks, you can potentially save a lot of money. And with incentives for participating in the system and complete control of your data, what’s not to like?
As the internet and data grow, decentralization will no longer be an option — it’ll be a necessity. And judging by the growth of projects like Filecoin, we’re not far from that reality.