If you’ve become immersed in the world of cryptocurrency, chances are you’ve heard the term Filecoin floating around.
Well, we’re here to fill you in on everything you need to know about it to help you become a bit more acquainted with this exciting solution. Filcoin is a type of cryptocurrency used to purchase IPFS storage space, which is a globally-used file system allowing huge amounts of data to be stored.
In 2017, Filecoin’s first coin offering became the biggest cryptocurrency token sale in history, in which Filecoin collected $257 million worth of contributions. The Filecoin project is still being developed and the developers have not yet released the alpha version of the storage solution. However, there are a few miners testing the network out as we speak.
The Filecoin team, Protocol Labs, is extremely well-respected in the crypto industry and are known for a few impressive projects they’ve done in the past. Some of these open source projects include IPFS, Multiformats and IPLD. We’re only scratching the surface of what Filecoin offers users, miners and the industry at large.
Let’s get into the bulk of it.
How Filecoin Works
If you’re a Filecoin user, you’ll be able to choose the specific file you wish to upload and then pay a small fee, allowing your request to reach the Filecoin exchange.
Once it reaches this area, the storage nodes will place bids on rights to store your uploaded file. This process allows for the uploader to receive the lowest price available. The Filecoin exchange is decentralized while its orderbook lives on the Filecoin blockchain entirely. Once at this stage, Filecoin encrypts your chosen file and divvies it up into multiple segments. These sections are then sent to network points which all begin the bidding process in hopes to store your file. The location of your file segments is recorded onto the Filecoin blockchain through an allocation table. To recollect all the file pieces, you need to know the file’s key. Only you, as the file owner, will have knowledge of the private code, giving you full, secure access and management.
Filecoin: Why the Hype?
In addition to the record-breaking ICO, Filecoin has also gained investment from some of the top venture capitalists of Silicon Valley such as Naval, Y Combinator, Andreessen Horowitz and many more.
This huge amount of combined funding, paired with Filecoin’s team experience provides a superior level of validity that is hardly seen in this industry. This is one of the main reasons for Filecoin’s success and surge in popularity over the past couple years.
The Problem with Data Usage and File Storage
Commonly used data storage solutions such as Google and Amazon are based around a centralized system and therefore are more vulnerable to cyber-attacks.
This has been proven by witnessing high-profile data breaches in recent years — The most famous one being the Equifax hack. Despite the flimsy storage solutions, as a species we’re creating insurmountable amounts of data every year. In fact, this year, society at large will create more data compared to the past 5,000 years in total. And this huge data demand doesn’t show signs of slowing.
Filecoin was created to capitalize on this growing need for storage by using blockchain technology in order to organize peer-to-peer storage nodes networks. While this sounds ground-breaking, Filecoin isn’t alone in the race to become the most sought-after storage solution. There are already existing platforms such as Sia and Stor which have launched and are beginning to build a solid user base. Filecoin specifically focuses on and thrives with decentralized storage user control. While other storage solution platforms control pricing, Filecoin creates a marketplace for bids between hosts and uploaders.
This makes storage cheaper over a period of time. Filecoin also allows users to prioritize redundancy, speed and cost whenever they’re plugging in their orders.
Pushing HTTP Aside
The HTTP (Hypertext Transfer Protocol) in which most of the internet runs on today is considered a location-based routing protocol.
What does this mean?
It means that when users access their web browser and key in a certain domain, the domain name will switch to an IP address which represents the specific location of physical servers which are hosting the content for the domain name. This HTTP service has served the internet at large incredibly. And for an incredibly long time as well.
Cue in: IPFS.
IPFS is a new protocol that strives to improve some HTTP shortcomings, such as offline abilities, speed, efficiency and content permanence. This new protocol uses content-focused addressing and works in a decentralized manner, similar to BitTorrent. Instead of having to skim through a possible distant and centralized server, IPFS provides files almost instantly, derived from the nearest Filecoin node containing the content you’re searching for.
The goal of Filecoin is to offer more efficient storage opportunities by allowing its users to acquire native currency by hosting files in Filecoin’s decentralized network. You can think of Filecoin as a bonus economic layer in addition to the IPFS network, encouraging miners currently storing and duplicating data to swap Filecoin for other types of crypto tokens such as Ethereum and Bitcoin. Alternatively, they can hold onto their newly-earned Filecoin tokens with fingers crossed, in hopes they’ll appreciate in value as adoption and usage increases.
Dropbox vs Filecoin
Shortlisted as one of the most anticipated public offerings available is the incredible cloud storage service, Dropbox. At 10-years-old, this San Francisco company has hit a valuation of $10 billion and is expected to raise millions.
While both Filecoin and Dropbox are Silicon Valley-based Y Combinator graduates and are both storage providers, the similarities between the two ends there. Filecoin’s token economy is decentralized, offering economic incentives to network users while Dropbox is centralized, selling premium plans to businesses and individuals.
Filecoin chooses to stand as a fluid marketplace where space paid with Filecoin tokens is determined by the overall decentralized market. Filecoin will also provide their storage network users with a continual economic incentive (tokens) to participate in the network. When it comes to Dropbox, the only incentive they offer is their “new user referral bonus” which is awarded to users only once.
Filecoin vs Amazon
Amazon has led the way for publicly traded companies over the past 10 years. A portion of Amazon’s incredible growth can be attributed to its AWS business since its $12 billion revenue year. AWS is so, intensely powerful that if placed alone, it could be worth way over $150 billion.
Amazon has been the cloud storage king for years and has therefore learned to lower its storage prices and build extra features to encourage customers to continually renew their membership. While it’s quite unlikely that Filecoin will compete with AWS, it does offer some features and ideas that may help them build the ability to go after AWS down the line.
Many believe that token protocols like Filecoin will build an entirely new species of digital entrepreneurs which will rely on Filecoin, or alternatives, as their main source of income. As the amount of network participants rise, the decentralized storage network will as well, creeping closer to a type of network much more powerful and capable than the systems we have today.
What We Think About Filecoin & Where to Buy it
Filecoin is probably one of the most exciting and respected crypto systems currently in the industry today. While there are still other storage space protocols that are greatly admired and widely used by internet users, Filecoin stands as the future of storage space.
As seen from its two biggest competitors, yes there are some pros and cons, but there’s also no service currently and truly like it. It stands out as being a forward-thinker, taking into consideration where the internet and data are headed, then matching that knowledge with an innovative platform. In terms of where to buy it, Filecoin often holds ICO or Initial Coin Offerings. You can find these events on CoinList. Due to government regulations, the Filecoin ICO won’t be available to non-accredited investors. However, as the founder of Protocol Labs, Juan Benet says, people who care genuinely about the network can earn Filecoin tokens by helping mine or build it. Given the background of the founding company, expected potential and incredible success it’s received already, we say Filecoin will offer more benefits down the line than just tokens.