Blockchain and Cryptocurrency Filecoin (FIL): what is it and how does it work

Main

• Filecoin is a blockchain platform focused on decentralized data storage with built-in economic incentives for users. It is one of the main infrastructure projects in the Web3 direction.
• The creator of Filecoin is Protocol Labs, which developed the IPFS network communication protocol for distributed file storage. She also launched the popular crowdsale platform for crypto projects CoinList.
• The security and verification of data stored on the Filecoin network is provided by two consensus algorithms at once: Proof of Spacetime (PoSt) and Proof Of Replication (PoRep). Miners on the Filecoin network are responsible for storing and providing data.
• The native cryptocurrency FIL is used as an economic incentive for storing data and other participants of Filecoin.

History of creation

The foundation of the Filecoin blockchain platform was laid in 2014 by the Californian company Protocol Labs, together with publication concepts of the first version of the platform based on Proof-of-Work consensus.

The next stage of development of Filecoin took place from 2014 to 2017. At this stage, Protocol Labs developed and developed a new protocol for the decentralized network InterPlanetary File System (IPFS). IPFS is a more advanced analogue of a torrent network for storing and distributing files.

The head of Protocol Labs, Juan Benet, became the author of IPFS. This solution is used in place of the HTTP and HTTPS Internet protocols. All file addresses in IPFS storage start with a prefix ipfs://.

One of the first crypto projects to integrate IPFS technology was the OpenBazaar protocol in 2016. The project grew into a decentralized marketplace, but finally stopped working in 2021.

In 2017, the Filecoin team raised $257 million through an ICO. The token sale took place on the CoinList platform, which was developed by Protocol Labs in conjunction with AngelList. The tokensale passed in accordance with the SAFT legal framework, which implies that the ICO complies with financial legislation

The mainnet of the decentralized storage platform Filecoin was launched in October 2020.

In February 2022, it became known that a large investment company Tiger Global Management was investing in crypto projects, one of which was Filecoin.

Architecture and features of Filecoin

The Filecoin platform is a decentralized version of popular cloud storages such as Amazon Web Services or Alibaba Cloud. It is built on the basis of the IPFS protocol, but complements it with economic incentives.

Filecoin performance and total storage

The block generation rate on the Filecoin network is about 30 seconds, or 120 blocks per hour. The developers consider this speed sufficient for transferring FIL coins between users.

The transaction time between the customer and the storage provider is 1-2 minutes, and the transfer speed of a 32GB file is about 90 minutes.

According to the data Filfox block explorerthe total capacity of the decentralized storage of Filecoin as of September 22, 2022 is 18.56 exbibytes – this is about 20.75 million terabytes.

Filecoin Consensus Algorithm

An important feature of Filecoin from other blockchains is the presence of two algorithms at once, responsible for reaching consensus in two different network processes.

Copying information

The consensus algorithm is responsible for this procedure. Proof-Of-Replication (PoRep). The task of PoRep is to prove that the data stores accurately received and properly encoded the files transferred for storage. This is part of the proof in Filecoin provided at the beginning and end of a file storage transaction.

Data storage

The Proof of Spacetime (PoSt) consensus algorithm is responsible for this process in Filecoin. The task of PoSt is to prove that the “custodian” of information still stores the data associated with the transaction.

Both algorithms use zk-SNARK technology to compress and encrypt the transmitted information.

The consensus in Filecoin is designed in such a way that the validity of both proofs is checked in each new block of the network, providing the necessary security for the data.
Filecoin is a modular project that includes various components.

FIL Cryptocurrency Functions

The native Filecoin coin is the main unit of account for transactions within the network. At the same time, FIL is an incentive currency for storage providers, as well as for miners who create blocks and record all transactions on the Filecoin blockchain.

FIL works similarly to the Ethereum blockchain, where all transactions and transmitted messages are paid in GAS. Moreover, inspired by the coin burning mechanism EIP-1559 in Ethereum, team implemented similar variant of compensation of network resources. When the network experiences congestion, you should expect an increase in the gas limit for faster operations, and vice versa – a drop in the level of activity in the network will lead to a decrease in the gas limits for operations.

Filecoin has not bypassed the decentralized financial applications (DeFi) and Web3 market by releasing a wrapped version to expand the ecosystem in other blockchain platforms. Such tokens released in Ethereum, BNB Chain, Fantom, Polygon, Avalanche, Solana, Arbitrum, Celo networks.

The investment potential of the platform has been recognized by Grayscale Investments, the company behind the creation of the largest bitcoin trust in the world – the FIL token has become one of Grayscale’s investment products. Another FIL-based regulated financial product, Filecoin Asset Use Swap (FAUS), is operated by DARMA Capital.

Competitors

The global data storage market is actively developing. In addition to centralized companies that develop cloud solutions (Amazon, Google, Dropbox, DigitalOcean, etc.), decentralized solutions have appeared in recent years, in addition to Filecoin.

bittorrent

The developer of the protocol, which lies in one of the most popular networks for exchanging and storing files in the world, was sold to the founder of the Tron (TRX) blockchain platform Justin Sun in mid-2018. In 2019, the project held an ICO, raising $7.2 million. After that, the platform introduced incentives for network users in BTT tokens for participating in the distribution of files.

Arweave

Platform Arweave positions itself as a collective hard drive with an unchanged file storage history, allowing you to store not only files or information, but also applications. By preserving history, he does not allow others to rewrite it. Blockchain platform Arweave has secured support from major venture capital investors including Multicoin Capital, Coinbase Ventures and Andreessen Horowitz.

NFT Storage Service

One of the most successful applications of IPFS and Filecoin has been in the field of NFT, which, with the help of a blockchain project, has been able to solve the problem of secure storage of metadata of digital objects.

In 2021, Filecoin developers launched the NFT Storage platform. This is a free decentralized metadata storage service for NFT tokens called NFT Storage. The solution is based on IPFS and Filecoin, with the ability to access the file through a normal browser. Use the platform Maybe any holder of a non-fungible token.

According to official statistics As of the end of September 2022, NFT Storage holds approximately 92 million NFTs, with a total data volume of approximately 258 GB. By words Protocol Labs product manager Pooja Shah, among the major users of the service are the OpenSea NFT marketplace, Flow ecosystem applications and Hedera. Filecoin also stores data from other popular networks, including Ethereum, Near Protocol, and Polygon.

Ecosystem development

In addition to NFT, Filecoin is used to store and archive datasets, metaverses and blockchain games, scientific research, as well as projects with audio and video content. In total, as of the end of July 2021, the ecosystem included Revolut, Travala, Opera, Infura, Cloudflare, Stanford University and dozens of other organizationsthat use the Filecoin blockchain to some extent.

Some examples:

• Audius – a music streaming application using IPFS;
• Huddle01 — Web3-platform for video conferencing
• Internet Archive — archive of sites, web pages and files.
• light house is an application for quickly uploading files to a decentralized IPFS cloud.

Trading interest from institutional investors is accompanied by technological innovations. In May 2022, the Filecoin Foundation and Lockheed Martin Corporation announced the development of an Interplanetary File System (IPFS) deployment program in space.

It is worth noting the cooperation with other crypto projects. For example, the Electric Coin Company (ECC), behind the development of the ZCash cryptocurrency, is working with Protocol Labs, the Filecoin Foundation, and the Ethereum Foundation to increase the scalability and privacy of their ecosystems.