Filecoin is a decentralized storage system that aims to store “humanity’s most important information”. Unlike cloud storage competitors such as Google Drive or Dropbox, Filecoin does not use a centralized server to manage the information on its system: data is stored on a peer-to-peer blockchain, with financial incentives for users that provide storage space on their own computers. Without a central authority, the price of Filecoin’s services is not set: Instead, the decentralized system acts as an open market with storage providers setting their own prices, and users that are seeking storage space selecting their preferred offering based on factors such as cost, redundancy, speed.
Filecoin was developed by Protocol Labs which was founded by computer scientist Juan Benet. Filecoin’s launch took place over a number of years: In 2017, Filecoin’s ICO raised $257 million (the largest in history at the time) and attracted interest from high profile venture capitalists such as Union Square Ventures, and Andreessen Horowitz. Following the ICO, the Filecoin mainnet went live in October 2020.
Benet’s interest in peer-to-peer online storage preceded the development of Filecoin. In 2015 Benet launched the Interplanetary File System (IPFS) which facilitates the storage and sharing of files in a distributed network and enables users to send, receive and host content in a manner similar to file-sharing networks like BitTorrent.
The Filecoin network is built on top of the IPFS. While the IPFS is free to use, Filecoin monetizes its offering by building a financial reward into its storage process in the form of the network’s native token, FIL. Filecoin miners effectively rent out their storage capacity to clients in exchange for FIL, to facilitate the storage and retrieval of data on the network. Because it has no centralized server, and therefore no single point of attack, information that is stored on the Filecoin blockchain is not as vulnerable to hacks as with centralized storage providers. Because the Filecoin system breaks down a file or piece of data into smaller parts before sending to miners who store it, the privacy of the contents is protected.
The services that Filecoin offers are integral to its economy and define the roles of its users:
Storage miners: In exchange for FIL, storage miners (or storage providers) make their computing resources available for clients. Storage miners set out the price of their storage offering on Filecoin’s open market, along with other features such as their computer’s speed and redundancy, while clients can decide whether that fits their needs and budget.
Retrieval miners: Retrieval miners retrieve specific files for their clients in exchange for FIL. The cost of retrieval miners’ services is based on the size of the file they are retrieving and the speed of their response, which is itself dependent on their bandwidth.
Clients: Clients use the Filecoin network to find the storage miner or retrieval miner that is best suited to their needs (storage capacity, duration of storage, and price). Once they have chosen a miner, they enter into an agreement which locks up the necessary FIL. The finalized arrangement, or ‘deal’, is published to the blockchain and clients then pay their miner incrementally as it progresses.
Miners must submit regular proofs to the network that they are delivering on the terms of their storage deal. If a proof is missing, delayed, or otherwise unsatisfactory, the miner’s FIL fee will be reduced.
Filecoin aims to allow individuals and organizations to offer data storage services at a fraction of the cost and complexity of large industry competitors. In exchange for their FIL fee, clients get a more flexible service that allows them to pay for exactly the amount of storage they need. Data can also be made universally available on the Filecoin network and benefits from the privacy-enhancing technologies.
Functionally, Filecoin can be used to:
- Buy and sell data on data exchanges and marketplaces.
- Store and distribute valuable data resources safely and securely, including encyclopaedias, historical documents, works of literature, and scientific papers.
- Provide blockchain services including storage for distributed ledgers, supply chains, and dApps.
- Facilitate payments for goods services via the FIL token.
- Provide time-stamped long-term storage for large amounts of client data.
- Act as a decentralized store of value, backed by its utility as a cloud storage service.
With that functionality in mind, Filecoin has announced a number of partnerships and real-world applications.
In July 2020 (prior to the Filecoin mainnet launch), Truffle Suite announced that it would be supporting Filecoin to allow its user to build dApps with 100% uptime, taking advantage of the availability of Filecoin storage miners around the world. A similar collaboration with ConsenSys was announced in October 2020, which saw Filecoin’s distributed marketplace integrated into the ConsenSys Ethereum-based product stack, serving millions of users with access to an array of new cost-efficient data storage options.
Over 70 organizations have built on or collaborated with Filecoin and the network exceeded 1 exbibyte of storage capacity in November 2020. Since its mainnet launch, the Filecoin network has been used in the development of Textile’s Powergate, a multi-tiered storage service, and Space, an open-source file storage, sharing, and collaboration platform. Filecoin has also been demoed as a data retrieval tool for Chainsafe.
Filecoin is aiming to spur a wave of innovation and affordable pricing in the internet storage space. In November 2020, Huobi Group announced a collaboration with Protocol Labs and the launch of a $10 million incubation centre to support promising Filecoin developers, academic research, and the growing ecosystem. The partnership reflects the goals of the Filecoin development team to build an ecosystem and community of users, and the incubation funding will focus on 3 key areas:
- Incubation: Facilitating collaboration with existing Filecoin accelerators and incubators.
- Investment: Providing funding, technical support, and guidance to the most promising Filecoin ecosystem projects.
- Community: Hosting annual summits and quarterly meet-ups in locations around the world in order to foster communication and connections amongst the Filecoin community of developers, miners, users, and token holders.
Similarly, the Filecoin Ignite initiative represents a series of events and competitions to encourage developers to innovate and experiment with the Filecoin network. Ignite includes the Filecoin Launchpad, Filecoin SlingShot, and Filecoin Frontier Accelerator, with more projects to be announced in the future.