What is Filecoin?
Filecoin is a highly anticipated decentralized storage solution. In 2017, Filecoin’s first coin offering became the largest token sale in history, raising $ 257 million in contributions.
The project is still under development and the developers have not yet released an alpha version. Some early camp and miners are currently testing the network. Nevertheless, there is reason to be excited about Filecoin. The team is highly regarded in the industry and has also produced successful projects in the past.
In addition to the record breaking ICO, Filecoin also received investments from top venture capitalists in Silicon Valley, including Y Combinator, Naval Ravikant, Andreessen Horowitz, and Winklevoss Capital. This size and mix of funding, combined with the team’s experience, gives this project a level of legitimacy rarely seen in the crypto industry.
This article examines whether the project justifies the hype it has received.
The problem with file storage and data usage
Current data storage solutions such as Amazon and Google are centralized and therefore vulnerable to attacks. We have seen this come with high profile data breaches. Perhaps the most notable recent breach is the Equifax hack.
In addition, we create huge amounts of new data every year. This year humanity will produce more data than in the last 5,000 years combined. The demand for storage does not seem to be slowing.
Filecoin is trying to harness the increasing demand for storage using blockchain technology to coordinate a peer-to-peer network of storage nodes. It is not alone, however. The Race for the best decentralized storage solution is crowded. Platforms like Storj and Be have already started and are building a user base. Decentralized storage is gaining in importance as a practicable solution for more secure storage.
Where Filecoin fits into the decentralized storage ecosystem is user control. Storj and Sia control the prices for their platforms, while Filecoin implements a marketplace for bids between uploaders and hosts. This marketplace is an incentive to make storage much cheaper over time. Filecoin also allows users to prioritize speed, redundancy or costs when ordering.
Two types of knots
A key part of Filecoin’s value proposition is its unique architecture. If most networks implement a single standard type of node, Filecoin suggests a dual solution.
1. Storage node
This is known to everyone who knows about Storj or Sia. Anyone can rent additional hard drive space on their computer. Filecoin uses this hard drive space to store small, encrypted pieces of other users’ files.
Ideally, Filecoin wants to create incentives for medium-sized storage nodes. Huge data centers would be too centralized and would ruin Filecoin’s mission. However, small operators would also be problematic with inconsistent connections and little available storage space.
2. Polling node
Polling nodes are only available in the Filecoin system. They must be close to the storage nodes on the network. However, polling nodes also require high bandwidth and low latency. They get paid when they can find and retrieve a file the fastest for a user.
In practice, this likely means that the most successful polling nodes will operate on high-speed links in high-density population centers with many storage nodes operating concurrently.
How Filecoin works
As a Filecoin user, you specify the file you want to upload and pay a small fee to have your upload request listed on the Filecoin exchange. There, storage nodes offer the rights to save your file. With this bidding process, the uploader should receive the lowest possible price. The Filecoin exchange is a decentralized exchange whose order book lives entirely in the Filecoin blockchain.
After that, Filecoin encrypts your file and divides it into many segments. These different segments are sent to different points on the network that provide for hosting your file. The exact position of all your file segments is recorded in the Filecoin blockchain in a so-called allocation table. In order to get all parts of your file you need to know the private key of the file. Only the file owner has the private key, so only the file owner can find, reassemble, and decrypt the file.
Unique consensus mechanism
The developers of Filecoin have created a unique consensus mechanism for Filecoin. Consensus mechanisms can be seen as incentive systems to secure the network. In Bitcoin’s proof of labor consensus, the incentive is to devote a lot of processing power to the hashing algorithm.
Filecoin’s novel solution uses consensus to promote hard drive space instead of computing power. The consensus model for demonstrating replication requires miners to demonstrate to an auditor that they have made various copies of various files on the network. This increases the redundancy and reliability of the network while providing incentives for storage nodes to add more storage space to the network.
The full version of the consensus mechanism for evidence of replication is not yet available to the public. It is therefore difficult to determine the details of how the protocol works. However, the development team released one White paper with preliminary explanations.
Much of the excitement behind Filecoin has to do with the team that created it. Protocol Labs is a well respected team in peer-to-peer technology. You are the company behind projects like IPFS, libp2p, IPLD, Multiformats and CoinList. Filecoin takes advantage of these other technologies, especially IPFS, where much of the peer-to-peer infrastructure for transferring and storing files is already in place.
Needless to say, the team is rooted in the blockchain tradition. You have extensive experience in the use of open source technology. They are also very familiar with the code bases of other projects in the room. They explicitly cited Ethereum and Zcash as influences on their opinion on the implementation of Filecoin’s blockchain and smart contracts.
Before the Filecoin ICO, Protocol Labs worked on a relatively tight budget of $ 3.5 million and built these various, quite successful projects in a very small space.
Filecoin Token (FIL) ICO
The Filecoin ICO is the largest token sale in history, bringing in a whopping $ 257 million. The presale and the ICO together make up 10% of the total token allocation.
The ICO was only open to accredited investors within the meaning of US regulations. In practice, this generally means people with an income in excess of $ 200,000 or a network in excess of $ 1 million. Filecoin endeavored to meet legal compliance standards with its ICO. However, many community members felt held back by the decision to exclude retail investors.
Investors can transfer their tokens for different time periods to get a discount on the initial purchase. Filecoin sold the tokens as SAFT (Simple Agreement for Future Tokens). There are no FIL tokens yet, and they won’t be there until Filecoin launches its Genesis block. Anyone who claims to own FIL or to offer it for sale is lying.
30% of the allocation is created and paid out at Genesis: 15% to the development team, 10% to investors and 5% to the Filecoin Foundation. That team allocation of 15%, plus another 5% for the foundation, is pretty high. Especially when you consider the enormous amount of funds raised.
The remaining 70% is reserved for mining bonuses. Miners receive the rewards with each block in exchange for replicating files on the network.
How to buy Filecoin (FIL)
The ICO has ended and FIL tokens do not yet exist. Therefore, you cannot currently buy FIL.
Gate.io sells Filecoin futures for those who want to speculate on the future price of FIL after launch.
Filecoin (FIL) location
FIL tokens do not yet exist, so there is currently nothing to store. At launch, FIL comes with its own native wallets.
Filecoin Roadmap for 2018
The developers published an extensive roadmap for 2017 prior to the ICO. However, a similar roadmap for 2018 has yet to be published.
We can assume that the development team is working hard to create and test the Filecoin network with its early private users. We don’t have a release date for a public test network or an alpha version, let alone a full version. Communication is one area the Filecoin team has been weak in after its ICO.
Another priority for Filecoin in 2018 is recruitment. You’re looking to quickly expand from a rather small team to a large company that is making a $ 275 million round of donations.
Filecoin certainly has the team and the capital to cause a sensation in the decentralized storage. However, you are entering a market that has already established competitors. Ultimately, the ease of use and robustness of its product will be the deciding factor if Filecoin is to fly or flop.
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