What is Filecoin (FIL)?
With networks of human activity flourishing across the internet, data like NFTs, media files and blockchain transactions all require increasing amounts of storage.
Filecoin is a blockchain storage solution that aims to solve this problem, but with a decentralized twist.
Read on to find out exactly what is Filecoin, why the FIL coin had one of the biggest token sales in history, and where you can buy / store the FIL token.
What is Filecoin?
Filecoin, often referred to as “the decentralized Dropbox,” is trying to build an online marketplace for the storage and retrieval of data.
The project was founded by Juan Benet of Protocol Labs, an American computer scientist who created the IPFS or Interplanetary File System, on which the Filecoin network is built.
Benet compares Filecoin to Airbnb, saying: “There’s a ton of storage in the world that’s not getting used. Think of it like Airbnb. You had people with rooms that weren’t being used; Airbnb built a marketplace for them.”
During its initial coin offering in 2017, Filecoin attracted massive attention, collecting a record-breaking $257 million from high-profile venture capital funds including Y Combinator, Andreeseen Horowitz, and Winklevoss Capital.
The Filecoin mainnet then launched in October 2020, and was likewise successful. Since then, the network has grown exponentially, with the Filecoin network reporting a milestone storage capacity of 2.5 billion gigabytes in February 2021.
What Are the Advantages of Using Filecoin?
Filecoin is seeking to disrupt traditional, centralized digital storage solutions like Dropbox, Amazon Web Services, and Google.
Unlike these enterprise-owned services which set the market price on storage, a decentralized and free marketplace remains hyper-competitive, with fair prices based on what users are willing to bid and pay for.
Also, decentralized storage solutions, when implemented properly, are significantly more robust and secure than that of their centralized counterparts.
Being a large, multi-national company is no guarantee against data breaches, as companies like Adobe, eBay and Yahoo can attest. Centralized storage solutions represent a single point of attack that can cause serious problems if hacked or taken offline.
Instead of building more data centers around the world, Filecoin leverages existing storage resources from idle computers to meet growing consumer demand for cloud storage.
Users pay with FIL to rent unused hard drive space from miners, who bid for the storage contract, store and encrypt the user data, and are then incentivized with FIL tokens.
FIL stakers who help to secure the Filecoin network are also rewarded with FIL tokens.
Filecoin’s node architecture allows it to operate as an alternative network to centralized authorities that can delete, withhold or prevent users from sending or receiving files at will. Like Bitcoin, it cannot be shut down, and is censorship-resistant.
Protocol Labs IPFS solution has, for example, been used to create a mirror site for Wikipedia, enabling those who live in censorship-heavy countries to access Wikipedia, even if the site has been blocked by the authorities.
Another interesting use case for Filecoin is the “Photographic Archive of Trust'' project.
The project had Reuters photojournalists document, cryptographically seal, and verify over 250 photos, including the day of the Capitol Hill insurrection, across 78 days of the United States presidential transition in 2021. In an era of fake news and political misinformation, having an incontrovertible and immutable way to verify data could prove to be vital.
Is Filecoin a Good Investment?
In this Zettabyte Era, data is growing by the day and the trend doesn’t seem like it is slowing down. While still on the fringe, decentralized storage solutions could one day grow to rival centralized solutions.
Filecoin was one of 5 altcoins that attracted the interest of the Grayscale Investment Group, which has enabled traditional investors to buy FIL as a security through the independent Grayscale Filecoin Trust. This FIL is stored custodially for customers in offline, cold storage wallets that are owned by the Coinbase Custody Trust Company.
Filecoin mining is also proving to be very popular in China, where the Chinese Communist Party apparently considers Filecoin a good fit for its “agenda to build out its own internet infrastructure as a defense mechanism in the ongoing tech cold war.”
It’s worth bearing in mind, however, that Filecoin is not the only project seeking to capture the decentralized storage market. Competitors like Sia, Storj (built on Ethereum) and Crust Network (building on Polkadot) are also active decentralized storage solutions.
But even if other players enter the scene, cloud computing technology is predicted to generate revenue of approx 411 billion dollars worldwide, and this figure is expected to grow at a compound annual growth rate of around 25% over the next 5 years.
So there might just be enough human-generated files to go round.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.