Filecoin is an open-source, public cryptocurrency and digital payment system designed to function as a blockchain-based cooperative digital storage and data retrieval solution. Protocol Labs created it, and it is built on top of the InterPlanetary File System, allowing users to rent underutilized hard drive space. The transactions are registered using a blockchain system. Filecoin is a decentralized storage system that aims to “store humanity’s most important information,” according to its creators.
Filecoin is an open protocol supported by a blockchain that records the network’s participants’ commitments, with transactions conducted in FIL, the blockchain’s native currency. The blockchain is built on both proof-of-replication and proof-of-spacetime principles. In contrast to centralized storage methodologies, Filecoin intends to store data in a decentralized manner that is resistant to centralized storage concerns. Because of its decentralized structure, Filecoin ensures the integrity of data location, making it easily retrievable and difficult to censor. It also enables anyone on their network to act as their data custodians. Furthermore, Filecoin compensates network nodes for mining and storing data on their blockchain network.
Filecoin is a peer-to-peer file storage network with built-in economic incentives to ensure files are reliably stored over time.
Filecoin users pay storage providers to store their files. Storage providers are computers that are in charge of storing files and ensuring that they have been saved correctly throughout time. Anyone who wishes to save their files or earn paid to store the data of other users is welcome to join Filecoin. There is no single firm that controls available storage or the price of that storage. Filecoin, on the other hand, provides open markets for storing and retrieving files in which anybody can participate.
Filecoin has a blockchain as well as a native cryptocurrency (FIL). For storing files, storage services get FIL units. The blockchain of Filecoin records transactions to transmit and receive FIL, as well as verification from storage providers that their files are being stored correctly.
How does storage work?
Miners are network participants who execute the effort required to advance the blockchain and maintain its validity in most blockchain protocols. Miners are compensated in the native cryptocurrency for delivering these services. The word miner first appeared during the Proof-of-Effort era, contrasting the work done by hardware miners employing computational power to secure blockchains to that of gold miners who invested massive physical resources in the hopes of a large payoff.
Mining in Filecoin, on the other hand, works rather differently: instead of donating computational power, providers donate storage capacity to be used in transactions with customers wishing to store data.
There will be several sorts of providers on the Filecoin network:
Storage providers are those who are in charge of storing files and data on the network.
Retrieval providers are in charge of providing fast pipes for retrieving files.
Providers of repair: to be implemented.
Storage providers are the network’s beating heart. They earn Filecoin by storing data for clients and calculating cryptographic proofs to ensure storage over time. The likelihood of collecting the block reward and transaction fees is proportional to the quantity of storage contributed to the Filecoin network, rather than hashing power.
The veins of the network are the retrieval providers. They obtain Filecoin by winning bids and provider fees for a specific file, which are determined by the market value of the file’s size. The bandwidth and bid/initial response time for deals of a retrieval provider (i.e., latency and closeness to customers) will affect its capacity to close retrieval deals on the network. The overall number of agreements that a retrieval provider can make is determined by its maximum bandwidth.
Deals are the Filecoin network’s main function, and they represent an agreement struck between a client and a provider for a storage ‘contract.’
Once a customer has selected a provider to store with based on available capacity, duration, and preferred price, they deposit enough cash in an associated wallet to cover the whole cost of the transaction. Once the storage agreement has been accepted by the provider, the transaction is publicized.
Following the publication of the transaction, the client prepares the data for storage and passes it to the provider. When the supplier receives all of the data, he or she packs it into a sector, seals it, and begins delivering proofs to the chain. Once the first confirmation is received, the client can be confident that the data is being properly stored, and the transaction has officially commenced.
The supplier contributes continuing proof to the chain during the duration of the transaction. Clients pay in installments using the monies they previously set aside. The supplier is fined if proof is missing or late. More details can be found in the slashing section.
Power and rewards
Each Filecoin provider in the network has a power value that is proportionate to the quantity of space supplied and determines the possibility of winning the opportunity to produce a block in each epoch. Providers earn block rewards and collect fees for the messages included in that block by mining blocks.
Furthermore, suppliers send storage evidence to the chain regularly. This allows them to collect storage fees from clients who have made arrangements with them.
Filecoin allows customers to store their files at ultra-low costs while also verifying that their data are being saved correctly.
Users can choose the best trade-off between cost, redundancy, and speed by selecting the storage provider with the greatest storage offer for their needs. Filecoin-enabled applications can negotiate storage with any storage provider on the network. In contrast to centralized storage solutions, there is no need to build a separate API for each provider.
Users can check proofs on Filecoin’s blockchain at any moment to ensure that their files are correctly preserved. Web3: Filecoin and Ethereum Perform Better Together
Summary of a talk delivered at EthCC 2021 by Protocol Labs Founder Juan Benet – see the entire talk here.
The Filecoin network is ecosystem-oriented, which is consistent with Protocol Labs’ preference for building modular solutions. Filecoin, which was created to be used by others, has found a natural fit with other Web3 stacks, apps, and ecosystems. Filecoin has expanded to over 8 exbibytes of usable storage since its introduction in October 2020, with 400+ new projects entering the field. Ethereum is one ecosystem that has proven to be collaborative and mutually beneficial.
Filecoin plus Ethereum Filecoin plus the EVM
The EVM and Filecoin
The Filecoin ecosystem understands the value of having smart contracting capabilities on the network. Initially, the development community anticipated that building bridges between Ethereum and Filecoin would be sufficient to enable smart contracts on Filecoin. Using smart contracts across bridges, on the other hand, is cumbersome and pales in contrast to the functionality and composability of smart contracts directly in Filecoin. The suggestion currently is to incorporate the EVM into Filecoin, allowing for smart contracts on the storage layer and more options to integrate the two ecosystems.
Developer Resources & Tooling
Fleek allows users to host websites, store and deliver files, and create decentralized web applications (dapps). Fleek accelerates the decentralized web’s adoption by making it easy for everyone, from committed developers to average internet users, to create apps and store files in a decentralized manner. Fleek provides automatic archiving on Filecoin and makes use of the Ethereum ecosystem via applications such as ENS.
Web3.Storage is a straightforward interface that allows developers to store and retrieve data on Filecoin’s decentralized storage network. Web3.Storage provides a straightforward way for developers, including Ethereum dapp developers, to build apps with redundant, decentralized storage and safe, content-addressed data.
PowerLoom decentralized gathers on-chain and off-chain data to generate snapshots with cryptographic proofs.
Through a rich ecosystem of peers and stakeholders who are incentivized to engage in the protocol, it strives to create trust and provide relevant information on demand. PowerLoom is particularly relevant to complicated ecosystems such as Ethereum DeFi, which require confidence based on verification.
Applications for DeFi
Secured Finance is a marketplace offering smart contract-based peer-to-peer fixed-rate loans, collateral management services, cross-currency swaps, and other interest-rate products. Secured Finance’s protocol is a decentralized P2P financial protocol that leverages Ethereum smart contracts to enable the capability of middle and back-office banking activities on top of the blockchain. Secured Finance has been able to meet needs inside the Filecoin network by giving a solution to the high demand for FIL loans among Filecoin miners.
Marketplaces for Data
On top of Filecoin, Ocean Protocol is a data marketplace. Ocean’s data tokens are Ethereum ERC-20 tokens that facilitate the publication and consumption of data services. You can access a certain data service if you have a 1.0 data token. Ocean market, a data-focused DEX, uses a forked Balancer AMM to cut gas expenses. Users can post, purchase, sell, consume, and stake data in the marketplace.
Users of Filecoin can utilize Ocean to build their Filecoin data market, as well as create a Filecoin dataDAO or index fund. The creation of an open data economy is taking place thanks to Ocean Protocol’s tools and Filecoin’s decentralized storage database.