What is cryptocurrency Filecoin (FIL) and how does it work?

What is Filecoin (FIL)?

Filecoin (FIL) is a peer-to-peer network that allows users to store files on the internet using the Filecoin blockchain, which records each transaction with a storage unit. The built-in economic incentives of Filecoin ensure that each file is reliably and accurately stored so users don’t have to worry about losing their uploaded data. The amount of storage available and the price of the data being stored are controlled by the free market with more exclusive, valuable, or popular data commanding a higher premium.

The network’s native cryptocurrency, FIL, is not an ERC-20 token as Filecoin uses its own blockchain technology to manage the network. Filecoin needs to use its own token because it runs its own consensus, which incentivizes network participants to provide the best services.

How Does Filecoin (FIL) Work? 

Filecoin is a decentralized peer-to-peer network for data storage built on the InterPlanetary File System (IPFS) protocol. When a user wants to use Filecoin to store their personal data, they will select storage miners on the network and pay them in FIL to host their files. Miners are the computers responsible for storing users’ files and play an important role in securing the Filecoin network.

Due to the decentralized nature of Filecoin, files can be stored in a trustless manner over the peer-to-peer network. Users can choose from various Filecoin miners based on their cost, redundancy, and speed, which ensures that each user has the storage option that best matches their data needs. Filecoin (FIL) can also be integrated with decentralized applications (dApps), which can then store data with any miner on the Filecoin network. Miners will execute these different types of “deals” for users while also earning fees for their participation. Every 30 seconds a new block will be appended to the chain and miners will collect their FIL rewards.

When a user wants to verify that their submitted data is stored correctly they can check the proofs on the blockchain. Proofs are publicly verifiable cryptographic math problems which are regularly and automatically submitted by the miners on the Filecoin network. Filecoin uses Proof of Replication (PoRep), which demonstrates that a miner has received all of the data and coded it uniquely compared with other miners. That means two deals for the same data will use different disks. The use of PoRep allows trustless and timestamped guarantees that the data has been received. The miner then uses Proof of Spacetime (PoSt), which requires random miners to verify the storage of random parts of the data. This proves that the data is still being securely stored for the duration of the deal.

Who Are the Founders of Filecoin? (History of FIL)

Filecoin was created by Protocol Labs, the company behind IPFS, libp2p, IPLD, Multiformats, and Testground, and held an initial coin offering (ICO) in 2017. The price of each FIL at the ICO was $1.30. The Filecoin ICO was one the largest token sales in history at launch, raising $257 million. $186 million of funding was raised by Protocol Labs within the first hour.

However, the ICO was only open to accredited investors as defined by U.S. regulations. Protocol Labs sold the FIL tokens to investors using a SAFT (Simple Agreement for Future Tokens). Investors received their tokens on the genesis block of the Filecoin network during launch unless they chose to vest their tokens. Vested tokens received a discount on their initial purchase based on how much longer they locked their tokens.

30% of FIL was created and disbursed at the genesis block, with 15% going to the development team to support the project’s growth and 10% to investors from the ICO. The other 5% was reserved for the Filecoin Foundation. 70% of the supply will be distributed over the next 16 years to nodes in the form of block rewards.

What Makes Filecoin (FIL) Unique?

Storage systems allow people to be custodians of their own data but are normally very centralized. Filecoin (FIL) allows users to store their data on a decentralized peer-to-peer network making it more resilient to censorship, outages, and hackers. Filecoin also leverages the unique technology of its blockchain to provide incentives which encourage participation and reward honest actors.

Another unique feature of Filecoin is its architecture. Filecoin uses a dual node solution while most networks only operate with one type of node. Storage nodes are used to store the data on the network. Filecoin incentivizes medium-sized users to ensure decentralization. There are also retrieval nodes used on the Filecoin network. Retrieval nodes need to be located near the storage nodes on the network, have high bandwidth, and low latency. Retrieval nodes get paid when they are the fastest to locate and retrieve a file for the user.

Filecoin also offers a unique business model for its customers. Uploaders and hosts are able to participate in bidding on the open market which drives a competitive organic price that reflects current market conditions and storage availability. Participants in the Filecoin marketplace are incentivized to make storage cheaper over time.

What Gives Filecoin (FIL) Value?

Filecoin was one of the first tokens to launch legally and properly within the framework of US Securities Law. This attracted several large investors such as Sequoia Capital and Union Square Ventures which made the project more attractive to other investors and also reliable due to their large token allocations with long vesting periods of a year to three years.

Filecoin was also created by Protocol Labs, a popular company that is well known for making reliable open-source protocols such as IPFS. Their previous experience and brand recognition made them a popular choice for speculative tech-inclined investors.

The role of the FIL token is to maintain and operate the Filecoin network. Users realize value by participating in various activities on the Filecoin network, primarily by participating in the data market. FIL enables its holders to use Filecoin’s peer-to-peer network, make transactions on the data market, and run storage or retrieval nodes.

How Many Filecoin (FIL) Coins Are in Circulation?

Filecoin (FIL) currently has a circulating supply of 69,832,523 FIL tokens and a maximum of 2 billion FIL tokens will ever be created. This supply will never be increased, but has the potential to decrease as bad behavior is disincentivized in the Filecoin network by a slashing penalty. This means that if a network participant misbehaves, part of their FIL collateral or potential FIL rewards can be confiscated and burned. FIL tokens can be purchased on the secondary market. FIL can also be earned through participation in Filecoin’s dual node system. Filecoin had an ICO in 2017 with a mainnet release on Oct 15, 2020. 30% of the total supply was disbursed on the genesis block.

How Is Filecoin (FIL) Secured?

Filecoin requires honest and active participants to ensure users get timely and accurate data. In order to discourage malicious actors or lazy nodes, Filecoin has implemented several features to enhance security and participation in the network. Filecoin requires upfront collateral from users who want to participate in the network. Block rewards are also subject to vesting periods. Vested block rewards ensure that users will stay around long enough to honor any commitments. Miners are also required to submit PoReps, which guarantees that all data is accurate. Filecoin places priority on serving “verified” clients. By keeping an active list of miners and a verified list of businesses, users are able to transact securely and as frequently as they like. A detailed explanation of PoRep can be read on the official Filecoin whitepaper.

Other Technical Data

As of May 2021, the amount of storage capacity on the Filecoin network is over 5 EiB (exbibytes) from more than 2,200 active miners, with over 125 organizations building on the network and at least 220 new projects entering the ecosystem through Hackathons and Accelerators.

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How To Use Filecoin (FIL)

In order to easily participate in the Filecoin (FIL) network and store or purchase data, users will need to use either Slate or Lotus. Slate is an open-source storage system built on top of Filecoin that provides an easy to use GUI while Lotus is the official client or software for nodes on the Filecoin network. Users who want to run a Lotus node to interact directly with the Filecoin blockchain can refer to the official documentation.

How to Choose a Filecoin (FIL) Wallet

The type of Filecoin (FIL) wallet you choose will likely depend on what you want to use it for and how much you need to store.

Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Both Ledger and Trezor hardware wallets offer storage solutions for FIL. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of FIL for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of Filecoin (FIL) or more novice users.

Online wallets or web wallets are also free and easy to use, and accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your FIL, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.

Kriptomat offers a secure storage solution, allowing you to both store and trade your Filecoin (FIL) tokens without hassle. Storing your FIL with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Selling and buying FIL, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Filecoin (FIL) Staking

Filecoin does not offer traditional staking or yield farming. Users do need to stake collateral to participate in the network. The amounts vary depending on the storage the miner is utilizing.

Closing the File

Worldwide cloud data storage is in increasingly high demand. Filecoin’s decentralized storage network offers a competitive alternative to Amazon AWS, Microsoft Azure, and Google Cloud. Filecoin is frequently faster than its competitors due to the dual node system and the Filecoin network currently has about 6 billion gigabytes worth of storage available and it’s growing daily.

This puts Filecoin in a unique position to take advantage of an emerging data market on the blockchain. Utilizing Protocol Labs’ previous experience as an open-source development team will be crucial in attracting more investors and users to the platform. Filecoin’s performance over the next few years will be highly reliant on how fast its network user base can grow and how much the Filecoin Data Market is utilized.

Filecoin (FIL) FAQ

Is Filecoin a Competitor to Storj?

Yes. Both platforms offer data markets and seek to be decentralized leaders in data storage for different users. However, Storj has been around for longer and is designed to directly serve front-line developers, whereas Filecoin is designing a blockchain infrastructure and is a bit more decentralized.

Is Filecoin Storage Cheaper Than Centralized Cloud Services?

There are many different miners in the Filecoin network offering different prices, which creates a hyper-competitive market. The network’s low barriers to entry and Filecoin’s permissionless model can make operations more efficient so storage is often cheaper than the fixed-price offerings of centralized providers.

How To Buy Filecoin (FIL)

Buying FIL is as easy as visiting Kriptomat’s how to buy Filecoin page and choosing your preferred method of payment.

How To Sell Filecoin

If you already own FIL and hold it on a Kriptomat exchange wallet, you can easily sell FIL coins by navigating the interface and choosing your desired payment option.

Filecoin Price

Several factors influence Filecoin price and market cap, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

The price of FIL is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action and news using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.

The current Filecoin (FIL) price is EUR.

The 24-hour trading volume of FIL is EUR. FIL is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of FIL.

Register now to begin your journey into the world of Filecoin and cryptocurrencies with with Kriptomat!

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