Raising $257 million during the ICO in September 2017, Filecoin’s mainnet is now launched. The project is aimed to become a new decentralized form of iCloud and Dropbox. The main idea behind Filecoin is the creation of the next-generation data storage platform. In this article, we’ve dived into the world of data storage on blockchain and got a comprehensive review of Filecoin cryptocurrency and the project itself.
How Does Filecoin Work
As we already said, Filecoin is a project aimed to create a decentralized storage platform with native cryptocurrency, Filecoin, (with FIL ticker), which was implemented in 2014 by the California blockchain startup Protocol Labs, a developer of the IPFS system.
There is an opinion that Filecoin and IPFS systems will be improving at the same time in the Protocol Labs. The project’s goal is to reach the interoperability of those two features. IPFS is suitable for those who are ready to purchase the hardware and support nodes. On the contrary, Filecoin is a service for those ready to spend some money on data storage miners’ work.
The platform uses some of the IPFS components (IPLD, libp2p, libp2p pubsub) and works on Proof-of-Spacetime (PoST) and Proof-of-Replication (PoRep) protocols. The first one allows network participants to prove that they will have enough space to store information during a certain period, and the second is designed to eliminate problems with storing multiple copies of the same data.
The Filecoin project’s idea is to give one computer user, or miner, the opportunity to earn FIL coins for other users using the excess capacity of their hard drives for data storage. Obviously, Filecoin was not the first who offered such an idea in a blockchain sphere. Siacoin project already has more than 500 storage providers, and Storj offers to store data at an affordable price.
There are three parties involved in the Filecoin system: clients, storage miners, and retrieval miners. Customers place a storage claim at a specified price with a specific replication factor in the Storage Market. They make a deal with the miners-custodians and provide them with their hashed data for a reward.
How does the Filecoin network work? Source: filecoin.io
The miners-custodians allocate files in free sectors of the hard disk, which is fixed in the blockchain (allocation table) with the client’s fee with private keys to the files. Miners put a deposit into the system, which they can lose if the Internet connection is lost if they cannot confirm the storage of data.
Seems like a great idea, huh? In fact, users will be able to rent spare storage space on someone’s computer. You may ask about security. How can anybody give his/her information to a storage miner if he really can look at everything on his/her computer? That’s where Filecoin’s encryption enters. When the information gets into someone’s computer, Filecoin splits data so nobody can decrypt it. The host cannot simply hack strangers’ files.
There are definitely some more advantages of the Filecoin project. The first and foremost is safety. Remember how Dropbox was hacked in 2012? Back then, almost 70 million users’ passwords were leaked. Filecoin does not keep all the information in one place because of decentralization. So, it’s hard to find a single point to hack.
One more advantage is scalability. In fact, there isn’t one place as in the file storage marketplace as in Amazon, Microsoft, Cloudflare, etc. In the case of Filecoin, millions of computers around the world are connected together. However, speed can be considered as a disadvantage. Since Filecoin needs to connect to multiple services, this process requires quite a lot of time.
Filecoin vs. Competitors. Source: filecoin.io
In 2017, at the Filecoin ICO, the project attracted $52 million from investors. Then at the SAFT (Simple Agreement for Future Tokens) crowdsale Filecoin got another $205.8 million from accredited investors. In 2017, Filecoin set a record for the highest collection among ICOs. By the way, investors could receive tokens only after the launch of Filecoin’s main network.
Developers put the mainnet launch off till the last moment. Finally, on the 15th of October 2020, the mainnet was live on 148,888th block.
Immediately after, Binance, Gemini, Huobi, and OKEx announced the listing of Filecoin. Now, let’s figure out where users can store and trade the Filecoin cryptocurrency.
Where to Store and Trade FIL Coin
As we already mentioned, a lot of popular cryptocurrency trading platforms announced the listing of Filecoin. The pairs are quite standard: FIL coin can now be exchanged with BTC, ETH, USDT, and some fiat (USD, EUR). Let’s take a closer look.
BTC ETH USDT USD EUR Binance • • Bittrex • • • Kraken • • • Gemini • Gate.io •
You can actually store Filecoin cryptocurrency on the trading platform account. However, it’s not the best choice, although you are going to trade FIL. There are two wallets to consider.
The first one is imToken wallet. The imToken wallet developers claim this storage to be easy and secure. The wallet is compatible with iOS and Android mobile phones. The latest version (2.7.0) started to support Filecoin cryptocurrency. On the whole, it lists ten cryptocurrencies such as BTC, ETH, EOS, TRX, and more. Despite the mobile app, the wallet has its own hardware device called imKey Pro. It has a small screen and four buttons to navigate. The wallet is affordable and costs only $99.
Another wallet is Mathwallet. This is a multi-platform wallet with a mobile app, Chrome extension, web, and hardware wallets. The wallet also embeds instant secure token exchange. There are two types of hardware storages available: Ledger Nano, compatible with Chrome extension of Mathwallet, and Wookong Bio, compatible with the mobile app.
Filecoin Mining Explained
Miners in the Filecoin network are in charge of storing, providing content, and issuing new blocks. According to the white paper, there are three types of miners on the Filecoin network:
- Storage miners, who are storing data on the Filecoin network. They earn Filecoin crypto by storing and providing Proof of Storage processes over time.
- Retrieval miners, who are responsible for retrieving data. They earn Filecoin cryptocurrency by bidding and mining fees for a particular file.
- Repair miners, yet to be implemented.
The core function of the Filecoin network is Deal. Deal is an argument made between client and miner. First, the client chooses capacity, duration, and desired price for the data storage. Then he/she locks up a sufficient sum to cover the cost of the deal. The deal is published once the miner has accepted the storage agreement. After that, the client transfers data to the miner. The miner packs data into a sector, scales it, submitting proofs to the chain. After the first confirmation, the deal has begun.
The so-called power depends on the amount of space contributed, so it’s proportional to the chance to win the right to mine a block every epoch. Protocol Labs created the Lotus Miner for mining FIL. As for hardware, you can use both CPU and GPU.
Speaking about Filecoin price prediction, there are not any definite forecasts. Filecoin ICO became one of the biggest crowdsales of 2017. Now we see the three years of hard work result. Filecoin became one more project in Web 3.0 and an ultimate project in data storage. However, people find it hard to move towards decentralized projects. If Filecoin improves UI/UX, it may boom very soon.
By the way, if you want to diversify your cryptocurrency portfolio, check out the rates in our widget below.