What is Filecoin
Filecoin is a decentralized protocol that allows users to rent out their free space on computers for data storage.
In other words, Filecoin is a functional Web3 alternative to leading Web2 cloud service providers such as Google Cloud, Amazon
Web Services, and Microsoft Azure.
FIL is the web’s native cryptocurrency that is used to log or access storage plugged into the web.
The token powers the entire Filecoin network. Customers pay into FIL to store their files on the network, and nodes that have committed space on the network are rewarded in FIL. FIL also acts as a governance token that you can use to vote on key project decisions.
Protocol Labs is developing Filecoin. Juan Bennett published the project’s white paper, “Filecoin: A Cryptocurrency Operated File Storage Network,” in 2014. It describes a blockchain network similar to Bitcoin in which nodes (nodes) in the network can store data guaranteed by a Proof-of-Retrievability (PoR) component.
In 2017, Filecoin raised over $250 million in its ICO, which was a record at the time. The underlying network was subsequently launched in October 2020.
How does Filecoin work?
Users can choose their preferences in terms of trade-off costs, storage speed, and space redundancy, and Filecoin’s suite of applications can help negotiate storage with different providers on the network without implementing a different API for each provider – unlike centralized storage systems.
Filecoin’s network is based on the Proof-of-Work (PoW) consensus mechanism. FIL cryptocurrency is mined through the mining process.
Filecoin uses two models of PoW to prove that work is complete. These are Proof-of-Replication, which allows the network to confirm data replication at a unique location, and Proof-of-Time, which confirms that data is stored for a certain period.
Thus, large-scale storage networks spanning multiple independent countries are formed by combining the two models. This eliminates the possibility of network tampering while increasing the mining rewards.
Miners offer their own available computer storage space in exchange for FIL. This enables users and miners to arrange storage in a live marketplace where issues of space requirements, timing, and costs are confirmed and bound within an algorithmic contract.
As well as having a large range of storage providers, Filecoin’s blockchain framework allows users to verify that their files are being stored correctly by reviewing available evidence for higher levels of security. Also, files that are actually stored on someone else’s computer cannot be accessed by whoever is operating them.
How does the Filecoin market work?
- Choosing a provider: if you want to store your files using Filecoin, the first step is to choose a Filecoin-based decentralized application, such as ChainSafe Files or Estuary. These apps provide a quick and easy interface through which you can upload your files, choose a provider, and define the terms of the agreement.
- Contract Negotiation: Once you have selected a provider based on your specific needs, you can proceed to negotiate the price in FIL tokens for storing your data. Once an agreement is reached, you pay the provider to store your tokens. The transaction and agreement contract is then recorded in the Filecoin blockchain.
- Data mining: once you submit the request, the network assigns “mining” miners tasked with retrieving your data as quickly as possible. Naturally, this service comes at a cost to FIL. If you take your time, the extraction will cost you nothing. However, suppose you need it within a few seconds. In that case, you’ll need to fork out a significant amount to FIL for them to prioritize your transaction.
