Filecoin is an open-source, decentralized storage protocol built on top of IPFS, a distributed system for accessing files, websites, and applications.
The main idea of the Filecoin project
The Filecoin network was launched in October 2020 by the Protocol Labs development team. This lab has been protecting and supporting P2P networks and Web 3.0 platforms on the Internet for 8 years. The company is registered in the USA and has several patents for decentralized networks copyright protocols.
Filecoin allows users to store data of any size across multiple hack-resistant providers or devices. It is an excellent alternative to existing cloud storage giants like Dropbox, Google Drive, and Amazon. After all, they are centralized and, therefore, more vulnerable to hacking.
The Filecoin blockchain combines a network of peer-to-peer nodes, each storing a set of encrypted database fragments. The project's main idea is to allow miners to rent out free space on their hard drives and receive a reward.
Two types of nodes have been created for these tasks:
1. Storage nodes. The project encourages the creation of small repositories to avoid centralization. But small operators face problems due to slow connection and lack of free space on their devices.
2. Retrieval nodes. Their owners require high bandwidth and low latency. They get paid when they are the fastest to find and retrieve a file for the user.
The network is backed by a new blockchain that records operators' storage, retrieval, and distribution commitments.
The uniqueness of the Filecoin blockchain is that it uses unusual versions of PoW consensus:
- Proof of Replication (PoRep). Miners show that they have created an exact copy of a piece of data on the network's behalf. The reward is paid for validators renting out the storage space.
- Proof of space-time (PoSt). This is the process used to verify the integrity of a remote file. It is used to determine the efficiency of a cloud storage server.
What is the FIL token used for?
FIL is the native cryptocurrency of the Filecoin blockchain. The FIL token was launched as part of an ICO ($258 million) in 2017. It was backed by Digital Currency Group (the parent company of CoinDesk), Winklevoss Capital, and Union Square Ventures. They received 10% of the tokens through a private sale.
After the network launch, the tokens that went on sale were sold out within an hour, and Protocol Labs received another $200 million in direct investment.
The Filecoin protocol is designed with the internal cryptocurrency's deflationary component in mind:
- There was a one-time 2 billion coins issue.
- Developers received 15% of all released FIL.
- At launch, only 60 million FIL were put into circulation. The rest will be gradually distributed over 15 years.
- Now the total supply on the market is about 360 million coins.
FIL is issued as a reward for mining and payment to independent network operators for renting out memory space.
Users of the project pay validators to store and distribute content. The amount of remuneration is not fixed – it depends on the selected download speed, and the data demand replicated on the node (most often, video and audio content).
In addition, before accepting a contract, storage miners must also provide a deposit in FIL – coins are used to automatically refund the client if the operator does not fulfill his obligations to the client.
It is profitable to be a miner in the Filecoin network if the device is located in a densely populated area and is connected to high-speed Internet.
FIL is listed on many crypto exchanges, including Binance, Coinbase, OKX, Bybit, Gate.io, and FMFW.io.
