In this article, What is Filecoin (FIL)? We will answer the question and provide detailed information about the project.
In this article, What is Filecoin (FIL)? We will answer the question and provide detailed information about the project.
What is Filecoin (FIL)?
Filecoin is a cryptocurrency that aims to encourage a global network of computer operators to provide a file sharing and storage service.
The project founders claim that if adopted by a sufficient number of people, it could be the fastest and cheapest way to store data on the internet. Moreover, it does not rely on a central authority, meaning that the exchange of its files cannot be censored by governments or other actors.
This is because Filecoin is maintained by miners who dedicate their computing power to providing the computing that runs it. Filecoin miners get paid to provide users with storage space. Filecoin users, in turn, must pay miners to store, retrieve or distribute this data.
The Filecoin network runs on another protocol for decentralized file processing called the Interplanetary File System (IPFS). Although the two systems share many similarities, the main difference is that although IPFS is free to use, it will not earn any money to the miners. Filecoin costs money to use, but it can also generate revenue.
Still, investors should note that Filecoin is not the only protocol that claims to offer a decentralized storage and file sharing system powered by cryptocurrency.
Competing protocols include Storj and Siacoin. Storj claims to have reached a network capacity of more than 100 petabytes, while Siacoin reported 2 petabytes of network capacity as of 2020.
However, Filecoin may be the most anticipated among these cryptocurrencies, which raised $ 205.8 million in their first cryptocurrency offering in 2017, one of the industry’s largest funding rounds.
Who created Filecoin?
Filecoin is an open source software created by Protocol Labs, the same firm that created technologies such as IPFS and Libp2p, aiming to replace existing internet protocols.
For example, IPFS is a system that can replace the Web’s hypertext protocol by specifying that Web addresses must begin with an http: // prefix.
Protocol Labs was founded by Juan Benet, co-founder of a game developer called Loki Studios while studying computer science at Stanford. The company was acquired by Yahoo in 2013. Benet later joined the Y Combinator startup accelerator to launch Protocol Labs.
Protocol Labs received funding from key investors such as Digital Currency Group, Stanford University’s startup accelerator StartX, Coinbase co-founder Fred Erhsam and AngelList founder Naval Ravikant.
How Does Filecoin Work?
Filecoin is a bit like Dropbox, but powered by blockchains. Users who want to store some data on the Filecoin network need to pay a miner to do so.
How much they will pay is determined by an open market where miners compete with each other to offer the lowest price for storage. Filecoin claims that this market will be “extremely competitive” and therefore cheaper than centralized data storage such as Amazon Web Services.
Miners, in turn, have an incentive to provide storage because they have the opportunity to receive rewards from the network in the form of Filecoin tokens. The more storage they offer to the network, the better their chances of getting rewards.
However, these rewards are not free. Miners must perform a large number of computationally intensive processes (called proofs) to prove to the network that they are storing the data they claim to be storing and that they have done this reliably over a period of time.
If they do this reliably and provide adequate storage, they can create new blocks on the Filecoin blockchain and receive the network reward and transaction fees.
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