Try to imagine what a Google suite, WeTransfer, DropBox, Wiley online library, and other services built into a unified platform based on a blockchain protocol would look like. Whatever scenario you can capture in your imagination is a depiction of what Filecoin is or is capable of doing.
However, if that too much to grasp, you can simply think of Filecoin as a decentralised, peer-to-peer digital storage marketplace that is hosted on blockchain technology. But just before we proceed to dive into the answer to ‘what is Filecoin?’ let’s quickly take a look at the project’s back story…
A brief history of Filecoin
Filecoin started in 2017 as an alternative to traditional online storage providers like some examples we mentioned earlier, but unlike them, it is built on a blockchain protocol. The project was developed by Protocol Lab which was founded by Juan Benet in the year 2014.
Specifically, in 2017, Protocol Lab was looking to build a decentralized data infrastructure that could be utilized by both blockchain and traditional developers, as well as providers such as Amazon Web Services, Microsoft Azure, and Linux’s Nextcloud, among others.
In order to achieve the aforementioned, Protocol Lab went ahead to create a marketplace where any potential partner with a storage facility can plug into, thereby creating a supply of unused storage both in consumer hardware as well as online data centres of existing businesses.
Although the primary goal was to provide a more sustainable alternative to conventional digital storage services, Filecoin also presents itself as a more affordable alternative compared to the bulk that is offered off-chain.
It is also important to note that Filecoin was developed alongside IPFS, another on-chain facility that addresses similar problems as Filecoin. While Filecoin is based on IPFS, it operates as a cooperative storage cloud in its own case.
Furthermore, the company, in 2017, was able to raise around $205 million through token sales considered to be one of the largest in the industry. Ever since it has continued to wax stronger with each passing day. This brings us back to our main discussion, “what is Filecoin?”
What is Filecoin?
Filecoin is a decentralised cloud storage network that allows users to rent out their excess storage space, leveraging the platform’s open-source capability. On the other hand, end-users who are not providing storage space can also buy storage on the network.
Unlike centralised storage systems, Filecoin stores end-user’s data, using a peer-to-peer blockchain network rather than on a single server, as with other centralised storage providers like Google Drive, Microsoft Azure, etc.
More so, Filecoin allows users to store a wide range of data, including in-web services, movies, podcasts, contract data, app data, dApp services, security archives, and many more. In comparison, most centralised storage providers offer selective storage services.
Notably, Filecoin operates in the same manner as most decentralised blockchain initiatives, with the exception that participating nodes process data storage in place of cryptocurrencies.
Filecoin also acts as an incentive layer built on Protocol Lab’s IPFS (Inter-Planetary File System) infrastructure that enables peer-to-peer storage and sharing of data files.
Specifically, Filecoin turns the underlying IPFS storage system into a so-called ‘algorithmic market’ allowing users to pay storage providers in FIL – the platform’s native token – in order to store and distribute data on the network. This leads us to the next phase of discussion – How does Filecoin work?
How does Filecoin work?
Filecoin is built on an IPFS blockchain architecture that uses a hash-addressed content structure to store data in place of centralised servers and IP addresses.
This type of underlying blockchain architecture ensures that the entire network is constantly operating at a full capacity, implying that there is increased permanence and efficiency with little or no redundancy.
While IPFS provides the fundamental storage architecture, Filecoin Protocol interacts with nodes that are either storage providers or retrievers and subsequently rewarding them for contributing resources to maintain the network’s smooth operation.
On the other hand, Filecoin Protocol, just like Bitcoin, employs a proof-of-work (POW) consensus mechanism. However, unlike the flagship cryptocurrency, the Filecoin POW consensus mechanism functions specifically for the storage of data.
As a result, in place of validating transaction on the blockchain, the Filecoin POW, in its case, proves that a miner (node) has successfully stored data for an agreed period of time and replication.
Furthermore, the Filecoin PoW system employed can achieve these outstanding feats by leveraging two main sub-types of proof-of-work. The first is called proof-of replication (PoRep) which validates whether a stored data has been reproduced, while the second is proof of spacetime (PoST).
These two POW systems function concurrently to validate the activities of a node over an agreed period of time and replication.
What is Filecoin’s miner proof
Aside from the various proofs that have been discussed so far, there is one more type of proof left to be discussed – miner proofs. These type of proofs are used to create the Filecoin network using three major methods known as ‘put’, ‘get,’ and ‘manage’.
Both put and get are responsible for storing data and accessing it, although upon the request of the client. The manage method, on the other hand, is responsible for managing buyer and seller (of storage space) reputation on the platform.
These two methods also allow the network to operate across two different marketplaces; one for storage and the other for retrieval. The storage miners are responsible for receiving put requests as well as storing client’s data. To do this, they pledge a certain amount of FIL token that is commensurate to the client’s data.
Retrieval miners, on the other hand, manage get requests and are also responsible for retrieving clients’ data. While retrieval miners are not required to pledge collateral, they are compensated in Filecoin for their contributions to the network
Filecoin governance protocol
In terms of governance, the Filecoin network employs what it refers to as Filecoin Improvement Protocol (FIP), which according to its whitepaper, contains the set of fundamental governing principles for the Filecoin network.
This set of principles also outlines the network’s vision, the process of achieving it, as well as stakeholders that can participate in the execution process. The stakeholder or parties involved in the execution process are responsible for making decisions on behalf of the network which, ultimately, influences the future of the network. More so, these stakeholders can make adjustments to the pre-set rules or governing policies.
Generally, the network’s FIP Protocol is classified into three main categories; Technical FIPs, Organizational FIPs, and Recovery FIPs.
The first category, Technical FIPs, is designed to gather feedback from the community regarding technical Fiilecoin issues, while the second, organisational FIPs allows the Filecoin community to propose, discuss, and achieve consensus on Filecoin governance.
Recovery FIPs in its case aims to provide a forum where the Filecoin community can raise, address, and achieve consensus on fault recovery and chain rewrites, under a very limited, clearly-defined set of criteria.
Filecoin native token – FIL
Filecoin, like most decentralised blockchain projects, uses FIL tokens as its native utility currency. The FIL token, once obtained by end-users, is used to purchase storage space.
Likewise, the native token is used in the network reward system to pay incentives to network nodes – storage providers and retrievers, for example. Technically the nodes function as miners and are responsible for the storage, distribution, and retrieval of data.
In this case, storage providers stake FIL as collateral in an attempt to provide end-users with a certain level of assurance. This, however, means that the staked FIL token can get slashed if a deal with a customer falls through.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.