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Filecoin the cryptocurrency of "eternal" data storage

Filecoin's mission is to ensure that the most essential data for users and society is stored forever (at least in theory) and can be accessed no matter what.

The developer of Filecoin is a very well-known company, Protocol Labs, which created the IPFS protocol for decentralized file storage, used not only in Filecoin but also in several other projects for data archiving.

Interestingly, the ICO of Filecoin back in 2017 was held on the CoinList platform, also developed by Protocol Labs and successfully operating until now. In other words, these developers are notable and successful people in the crypto space.

How Filecoin works

The principle of operation of Filecoin distributed storage in many ways resembles the familiar torrent trackers. However, blockchain is used to manage the ecosystem, and an economic component has been added to the system itself.

In general, the process of placing data in the blockchain is as follows:

  1. The user uploads data to decentralized storage, paying a fee to the network to host it.
  2. The miners providing their disc space copy the data and commit to storing it.
  3. The protocol occasionally performs integrity checks on the data in the miner's storage.
  4. The protocol provides access to the data. The market determines the cost of access, and from this money, the additional remuneration of the miner is formed.

In addition, miners are paid for adding transaction blocks.

Two consensus protocols ensure the functioning of the system. Proof-Of-Replication confirms that the files are copied to the vault entirely and accurately, and Proof-of-Spacetime confirms that they continue to be stored properly.

Proof-Of-Replication and Proof-of-Spacetime use zero-knowledge proofs (zk-SNARK), allowing the network to provide proofs of data completeness and correctness without revealing them.

New blocks are added to the network approximately 2 times per minute. This provides an acceptable data handling speed: it takes 1-2 minutes to conclude a storage transaction, while transferring a 32 GB file takes about an hour and a half. The total volume of decentralized storage exceeds 21 million terabytes.

FIL cryptocurrency

Filecoin (FIL) is the native currency of the blockchain of the same name. It is used to pay for all operations in the ecosystem, from data hosting and access to transaction fees (Filecoin uses a gas system similar to Ethereum). The same coin also pays rewards for adding blocks and for storing information.

However, the market history of FIL is quite complicated. So, right after the project's release, there was its dump — due to a mistake of developers, a vast volume of coins from the testnet was thrown on the market. This led to a drop of more than 80% in 4 days in the first week. For most coins on the market, this would have meant virtual death, but Filecoin survived, mainly due to its fundamental infrastructural value.

And there is now a high probability that FIL will be recognised as a security in the US. The Securities and Exchange Commission(SEC) is currently considering the matter. Recognition as a security would have the potential to apply very different rules and impose significant restrictions on the circulation of FIL.

In recent months, the FIL exchange rate has fluctuated between $3.4 and $4, but the general downtrend echoes the movements of the crypto market as a whole. Filecoin, like most altcoins, follows the Bitcoin exchange rate fluctuations.

Prospects for Filecoin in the near future

Filecoin's investment prospects depend on the general situation in the cryptocurrency market — the correlation with the BTC rate is evident. And it is still unclear when the current period of stagnation will end.

On the other hand, Filecoin's prospects as a project that fulfils an essential function in the cryptocurrency ecosystem look much more favourable. This is not least because Protocol Labs pays much attention to keeping Filecoin relevant.

For example, the surge in popularity of NFT led to the introduction of NFT Storage, a free NFT metadata storage service, into the blockchain ecosystem, and's rise in popularity of DeFi led to the release of "wrapped" FILs in several blockchains.

It is evident that Filecoin's policy of adapting to the changing realities of the market will continue, so news about this project is worth following.

© BestChange.com – , updated 10/05/2023
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