Filecoin: the decentralized solution to data storage
Filecoin might be one of the more curious and actually useful projects of the crypto space in the last couple of years. It’s a blockchain with an eponymous token that is meant to address the issue of data storage. It basically leverages the ability of blockchains to provide enhanced security by applying said security to storing data.
Data storage doesn’t suffer from any particular setbacks. You can store your files comfortably enough in the cloud in a variety of online services. However, there’s still the issue of all this crucial data being entrusted to a company somewhere. A decentralized approach seems like an invaluable step up in this sense.
Meaning of Filecoin
Filecoin is an independent blockchain, where storage providers (miners) and users (clients) come together in a mutually beneficial arrangement.
Miners earn a proportional sum of tokens in exchange for allocating storage space to the common pool. The more you allocate, the more you get in exchange. It seems like a twist on the old proof-of-work consensus mechanism except the application is different and you actually help someone else besides yourself.
Clients are obviously the people who decide to use the platform’s primary feature of data storage. They actually have to pay a small amount of FIL (the token) to the storage providers. The amount is proportioned to the duration and volume of storage. It’s not much, and that’s how you ‘mine’ tokens on Filecoin — by taking storage fees.
Besides data storage and surrounding infrastructure, Filecoin doesn’t concern itself with many other functions. In this way, it’s unique among crypto projects in the sense that it doesn’t offer any help in developing apps, facilitating transactions, etc. It has a purely supplementary function of letting you store your data for a small fee.
Why use Filecoin?
Even though it’s cheap, you must still pay money to use the storage functionality. The same thing is free on Google, so why would you pay? Well, there are several good arguments.
- Decentralization. It’s the main selling point of the entire Filecoin system and the reason it became so important. The storage capacity miners add to the pool isn’t really in the control of these people anymore — it’s distributed and decentralized.
- Encryption. To ensure an additional layer of security to this arrangement, all data is encrypted and likewise distributed in this decentralized system so that no one would be able to tell what it is or steal it. There’s nothing to steal if it’s encrypted.
- Simply retrieval. You could think that these complex procedures will complicate the retrieval process, but they don’t. The data is marked by its content and not its location. It makes retrieval and restructuring of data very simple.
To summarize, the system takes your data, encrypts it, marks it for later retrieval, throws it into a big pool of storage space, and lets no one have any control over it until you decide to take it back. At this point, you’ll be able to easily access and use it for any purpose, be it for some decentralized activity or other needs.
The FIL token
FIL is the utility token used on the Filecoin network for many different means. Although not a financial platform, it still makes use of cryptocurrencies as a primary element.
For governance
There is still a governance consensus on this blockchain. It’s not really used to validate transactions because the few transactions that happen on Filecoin are automated. Instead, FIL holders vote on new proposals and ideas, and the amount you hold is proportionate to your voting power.
For data storage
Clients pay miners for data storage with FIL, meaning that it’s always needed if you aim to use the platform on a regular basis. It’s not costly in any way, and these transactions are largely automated. There is no sense in customizing and personalizing each transaction if they all serve the same purpose.
For paying fees
You’ll still have to interact with smart contracts on this blockchain, which will require that you pay gas — a small amount of the native token — each time the network has to process the smart contract transaction. There are few transactions here besides paying for services, but there are several notable instances.
For trading
FIL is also listed on many crypto exchanges, as it’s a moderately valuable asset. It’s currently in the top-35 cryptocurrencies by market capitalization. Its introduction into the market, Filecoin’s ICO, was one of the biggest fundraising activities in crypto history. Admittedly, it deteriorated from its peak in 2021, but it’s still a valuable token.
Is Filecoin worth using?
A decentralized data storage platform seems to be an incredibly valuable project, even if the current data storage solutions are pretty comfortable for most people.
The main point of criticism is the payment model. It’s a paid service, even if the payment fees are pretty low. It means that if you aren’t ready to pay for decentralized storage (which is really just regular storage but with additional security), then you’ll just have to stick with regular solutions. It makes it something like a privilege.
On another hand, the advantages this service offers to an everyday user are well worth the fees. They are low, anyway. In addition, the increased interoperability of the service makes it possible for you to transfer the data to another blockchain, which makes Filecoin indispensable for developers of decentralized solutions.
Compared to regular cloud storage solutions, Filecoin lacks some comfort features. However, it compensates for them with transparency, decentralization, security, and ease of use. In terms of sheer efficiency, it might be even better than all those non-crypto solutions.
