*obligatory not financial advice*
What is Filecoin?
Filecoin is blockchain that lets users rent out their unused hard drive space so that it can be used as a decentralized alternative for Dropbox or Google Drive.
The main advantage of not depending on a single central entity for storing data is, that it’s censorship resistant because nobody has control over your data and nobody can delete it or withhold service. In our modern world we are increasingly more connected with each other and our computers are becoming even more important for our daily life, so a monopoly that controls all your data could easily become a serious threat. That’s why decentralized data storing and sharing is as revolutionary as DeFi and is also a part of the Web 3 architecture that aims to be a trust less infrastructure and remove the middle-man by returning the control over their data to the users.
The way it works is fairly easy. Storage miners offer their unused and available hard drive space to the Filecoin network. Users can then pay a fee to the miners for storing their data in an encrypted way. The user can always access it again in exchange for a fee. In the meantime the network is constantly checking if the miners are storing the data correctly and if they stay online all the time. If a miner doesn’t behave like he should he will be kicked out the network immediately and will not earn any more rewards. The prices are directly set by supply and demand by miners that compete based on their available storage and not by corporate marketing that could aim to lock users in.
Filecoin also uses a unique consensus mechanism. Miners don't compete with each other based on how good their computers are like with proof of work, or on how many coins they hold like with proof of stake. Instead they are more likely to be chosen to mine the next block based on how much storage space they provide. That way miners can also earn additional block rewards on top of the storage and revival fees and have another incentive to provide more space to the network.
The entry of becoming a storage provider is very low, you only need a computer with a hard drive and an internet connection, however the most commonly used application for becoming a storage provider only supports Linux and macOS, Windows isn't yet supported.
The Filecoin blockchain is especially useful for other blockchains or dApps because they can store their data while still remaining decentralized. Decentraland for example is a game where players can buy virtual real estate and launch games and apps there by letting Decentraland reference the necessary files that are in a decentralized storage like Filecoin.
The FIL Coin
FIL is the native cryptocurrency of the Filecoin blockchain. It has a max supply of 2,000,000,000 but a circulating supply of roughly 131,000,000. It is used to pay for network fees.
New coins are constantly minted by miners until the max supply is reached. Like Bitcoin that number of new coins constantly decreases. Filecoin is lowering the block rewards monthly so that every six years the number of new coins is halved. The miners will have received 70% of the total supply once the last FIL is mined.
Protocol Labs and the Filecoin Foundation, the developers of Filecoin, received 20% of the total supply at the genesis. And the remaining 10% of the total supply were sold in the ICO in 2017. All their coins have a linear vesting schedule for the first 6 years after the launch of Filecoin in 2020. This means that there will be a constant selling pressure from devs and early investors for the first few years and that the coin supply is very centralised in the beginning, but with time most of the supply will go to miners as reward.
The price of the FIL coin will depend on how much demand there is for decentralized data storage. Since other blockchains will need a way to store their data while still staying decentralized there could be a huge demand for Filecoin if the crypto market becomes mainstream.
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