Companies like Google, Amazon, and Microsoft have dominated online storage services. But each of these companies has recently suffered from outages and hacks.
Filecoin is a decentralised storage solution. It uses the blockchain and a network of nodes to provide storage to internet users to overcome issues that potentially affect centralised storage solutions.
Traders and bitcoin users usually use the blockchain for crypto gambling on the best crypto casino or financial services. Now they can also use the technology to disrupt the online storage market.
What Is Filecoin?
Filecoin is a decentralised space storage solution that uses blockchain. It differs from centralised storage solutions because it does not rely on a singular node to store and retrieve client data. Instead, it uses the blockchain to verify and retrieve data through different mining protocols.
The ICO (Initial Coin Offering) launched in August 2017. It sold Simple Agreements for Future Tokens (SAFTs) that holders could claim for filecoin tokens (FIL) once the project went live. Through its ICO, the project succeeded in raising over $257 million.
These FIL tokens are capped at two billion, and new tokens will be awarded through block rewards over the next 16 years. Four groups involved with the blockchain will receive these tokens. These are:
- the miners, who will receive 70% of the tokens
- Protocol Labs, who built the initial code and handled the launch, will receive 15%
- initial investors will receive 10%
- Filecoin Foundation will receive 5%
Main Features
The creators of Filecoin also built the IPFS protocol, which allowed internet users to share and store their data in a peer-to-peer (P2P) system. This means that each peer in the network holds a portion of the total system’s files making up a decentralised storage system.
The network’s purpose is to incentivise internet users to make storage available to other users. This is done by rewarding them for renting out storage instead of relying on users to make their storage available voluntarily.
Furthermore, it consists of a blockchain, retrieval nodes, storage nodes, and the FIL token. Storage nodes are miners with a complete copy of the blockchain and sealed copies of the data they said they would store.
Retrieval nodes only get and deliver files to users without needing to commit storage or provide proof of storage.
On the other hand, storage miners need to provide proof-of-spacetime (PoSt), put up collateral, and pledge storage they can make available. Storage miners can also mine new blocks on the blockchain, so they receive block rewards.
Moreover, in February 2021, LongHash launched the Filecoin Frontier Accelerator initiative. It gave 11 start-ups a 12-week accelerator program and $2,000 in grant funding to create new projects.
These include tools for creating multiplayer competitions in single-player games. Also, tools for advancing medical technology, educational platforms, a data monetisation platform, and an automated background check service.
Finally, a host of applications allow users to use decentralised storage solutions, like Slate and Lotus.
How Filecoin Works
Filecoin is a P2P network, and all the nodes in the network communicate by sending messages, transferring data, and maintaining the integrity of the network through various protocols.
These nodes sync data on the network and validate messages in individual blocks on the blockchain. They can manage Filecoin wallets and receive FIL with them.
They can also broadcast messages on the network. For example, they can suggest storage and retrieval deals and pay miners once they execute them.
Users can run a node with very limited hardware and software. They only need to run a program 24/7. They can use Lotus to set up a node or other available options.
Miners execute deals on the blockchain and add new blocks to the network every 30 seconds. They receive FIL tokens for adding new blocks. These miners must provide proof on the network and require powerful hardware to participate in the mining process.
Next, there are two kinds of deals on the network. The first, storage deals, are contracts between storage miners and clients. Here the client makes a deal to store data using a miner’s storage space. Once the miner receives the data, and the deal is complete, the miner must consistently prove that they are still storing the client’s data. If they cannot, they will be slashed and lose FIL.
Furthermore, there are retrieval deals. These are contracts between a client and a retrieval miner to extract data on the network. These deals happen off-chain using a variety of channels. For example, a client needs to use a payment channel like PayPal to pay a retrieval miner to extract their data.
How Mining Works
The network operates through clients and miners creating deals and using FIL tokens as a mode of payment.
Storage miners require powerful hardware to mine blocks on the network. They need an 8-core CPU, at least 128 GB RAM, and a powerful GPU to speed up SNARK computations. Miners generally use AMD GPUs but can also use an Nvidia GPU.
Storage Miners
These miners differ from bitcoin mining because they are not ranked by hashing power but by the amount of storage they contribute to the network. So, if a miner provides more storage on the network, they have a higher probability of mining new blocks and receiving block rewards.
Storage Mining
Storage mining happens in three steps and begins with a miner pledging. They put up an amount of storage on the network. They do this by posting collateral via a pledge transaction on the network. The network holds on to the collateral until the miner provides proof of storage for the amount of time they pledged to provide the storage service. If proof of storage fails, the miner loses some of their collateral.
After the pledge transaction appears on the blockchain network, miners can offer storage services on the Storage Market. They can set their prices and create an ask order on the market’s order book.
The next step is receiving orders. Once a miner matches with a client, the client sends their data to the miner. Once the miner receives the data, the two parties sign a deal and submit it to the network.
After that, the miner needs to prepare the data for future proofs. They need to seal different sectors of their storage. Sealing involves transforming data into a unique physical copy of the original. The copy of the data is associated with a miner’s public key on the network.
The final step is proving. Miners must constantly prove they are storing the data they agreed to store. They need to post proof-of-replications on the network regularly. They also need to provide proof-of-spacetime (PoSt). Here any miner on the network can verify if a specific miner is storing the data for the time they agreed to.
Retrieval Miners
There are two steps to retrieval mining. The first is receiving orders. Miners get data requests from the retrieval market. They then set their price and create an ask order on the market’s order book.
The second step is sending data pieces to the client. Here the miner retrieves the data pieces from the network and sends them to the client. Once the client receives the data, both parties sign, deal and submit it to the network.
This process differs from storage mining because transactions happen off-chain. It means that clients need to pay retrieval miners using an external mode of payment. Accordingly, clients must deal with the miner directly and then submit the deal to the network.
How To Buy Filecoin
Future clients and miners can purchase FIL tokens on major crypto exchanges like Binance or Coinbase. They would need to buy FIL tokens before performing any actions on the network. Clients must pay storage miners’ gas fees for creating proof-of-replication and pay them for their storage services.
FIL tokens currently cost $42.71, and it has a circulating supply of 57,415,312 tokens. This means that users can easily find these tokens without breaking the bank.
Competitors
Filecoin has two main competitors in the decentralised storage market. The first, Siacoin, has more than 360 storage providers and a total capacity of 2.3 petabytes. It also has a cryptocurrency named Siacoin. It is currently valued at $0.0123.
The other competitor, Storj, launched in March 2020 and has over 80 petabytes of storage capacity. Its cryptocurrency, STORJ, stands at $0.7075.
Both have their blockchain networks and provide similar services to Filecoin.
Conclusion
Filecoin is the future of decentralised storage. It incentivises users to rent out their storage to clients on the internet. It also gives internet users an alternative to centralised storage services like Google or Amazon.
Finally, mining does not require a lot of hashing power. Instead, it requires available space on a miner’s system. This widens the scope of who can participate in the network.
