Have you ever wondered how you could store and retrieve your data from a database without totally relying on central servers? The data storage industry has been centralized for so long and has given rise to the demand for a more efficient and decentralized data storage platform.
Filecoin was founded to provide better storage space for users like you who desire to have complete control of their data storage. Filecoin is a blockchain-based data storage platform that is decentralized and allows users to store and retrieve data in a peer-to-peer network. What is more to know about this platform and what is its utility token (FIL) used for? Let’s find out together.
What is Filecoin?
Filecoin was established by computer scientist Juan Benet and developed by Protocol Labs. The launch took place in 2017 and successfully raised about $257 million during its ICO event. The success of its ICO attracted the interest of popular venture capitalists like Union Square Ventures and Andreessen Horowitz. It later launched its main net in October 2020.
Filecoin aims to build a decentralized and efficient data storage platform for everyone. Its decentralized storage network allows anyone in the world to store or retrieve files. Filecoin also aims to provide a data storage platform that is cheaper and more reliable for users.
For increased dependability on the platform, the Filecoin protocol gives users the flexibility to store duplicate copies of their files with different miners on its blockchain network. It uses a unique mechanism to verify that files are appropriately stored by miners. This is preferable to what exists with centralized cloud storage providers, which back up data in a way that can’t be verified by users and has high storage prices in many cases.
It’s difficult and expensive to store large data sets with servers by transferring them over the internet. Filecoin provides a cheaper offline deal protocol that allows you to store your large data on hard drives, deliver the drives to miners, and regularly verify that your files are stored safely.
Filecoin Use Case: Storage Miners Reward
One of the uses of Filecoin (FIL) on the Filecoin protocol is that it is used to reward storage miners for providing their storage devices for users on the platform. Storage miners earn FIL tokens for their services in three ways:
- Deal fees: These fees are immediate payments from clients that miners receive for storing data on their devices over time.
- Block rewards: These are payments that storage miners receive from the Filecoin protocol for participating in the process of maintaining and updating the blockchain and providing credible long-term storage to users.
- Network message transaction fees: These fees are paid like tips by users to motivate miners to prioritize their transactions above others.
You need to note that all these fees are paid in the form of Filecoin (FIL). However, storage miners are required to perform a few computationally intensive proofs to demonstrate to the network that they are storing the data reliably over any period of time. This is known as the Proof-of-Spacetime. If this proof is confirmed, miners will be able to add new blocks to the Filecoin blockchain and receive block rewards in Filecoin.
Furthermore, Filecoin storage miners are rewarded with block rewards based on the percentage of their storage against the total storage power provided by all other miners. For instance, if a miner offers 1 PiB of storage power against a total network size of 100 PiB, such a miner will receive one percent of block rewards over time.
Filecoin Use Case: Gas Fees
Filecoin (FIL) is used to pay for Gas fees on the Filecoin network. Carrying out transactions or validating proofs in Filecoin’s chain consumes both computation and storage resources on the network. Gas is used to measure the number of resources consumed by messages or files. The gas consumed by a message directly affects the gas fee that the sender has to pay for it to be stored.
In many blockchain networks, miners charge GasFee in a unit of the blockchain’s native currency and users pay the block producing miners a priority fee based on how much gas is consumed by the transaction; it’s a similar case in Filecoin as well. Filecoin’s difference is that an amount of the gas fees is burned (sent to an irrecoverable address).
The number of fees burned in the Filecoin network is determined by a BaseFee which is automatically modified according to the network congestion parameters or block sizes.
Filecoin Use Case: Retrieval Miners Incentive
Retrieval miners are one of the vital nodes on the Filecoin network They earn Filecoin from users for retrieving a particular file. The fee is determined by the market value of such file’s size. A retrieval miner’s bandwidth and initial response time for deals (latency and proximity to clients) will determine its ability to close more retrieval deals on the network. The highest bandwidth of a retrieval miner will define the total quantity of deals such a miner can make, as well as the retrieval speed and overall retrieval process.
Since retrieval miners are rewarded for delivering content or files quickly to users who send “get requests” on the network, well-placed miners tend to earn more FIL for providing files and data at the fastest speeds. Miners for storage in the retrieval market compete to provide users with requested files at the lowest prices of storage, but with the highest level of reliability.
Retrieval deals are carried out on payment channels. Thus, it enables private and highly scalable off-chain payments to take place directly between the specific parties. Payment channels can later settle transactions on the blockchain at any time.
There is a rising demand for cloud data storage in the world today and Filecoin’s decentralized storage network is providing a better alternative to popular centralized platforms.
Filecoin’s decentralized storage network makes data easily retrievable and hard to censor. It also allows users on the network to be custodians of the data that they store. Its FIL token is used as a reward for storage and retrieval miners on the network.
Filecoin’s expansion in the next few years will be subject to how fast its network user base grows, the efficacy of managing organization Protocol Labs, and how well the Filecoin Data Market is utilized for data storage.