What is Filecoin (FIL) | How it works, Why it is Important, & How to Store Filecoin

Discover the mechanics and significance of Filecoin (FIL)!

25 May 2022 | 6 min read

Table of Contents

Disclaimer: User Generated Content – Original Content created by a member of CoinDCX Ambassador Program – The Pathbreaker Initiative. The views and opinions expressed within this post belong solely to the author.

Article Source: Filecoin: A Decentralised Storage Network

Author: Nikhil Srinivas

What actually is FileCoin?

Filecoin is a decentralized, peer-to-peer digital storage marketplace using blockchain technology. It’s built on top of InterPlanetary File System (IPFS) and allows users to rent unused hard disk space and earn FIL tokens in return.

Filecoin is a decentralized storage network that lets anyone rent out storage space. In the same way, anyone can buy storage on the network. Instead of having to trust only one company with important data, it can be split up and stored on different computers around the world.

Filecoin was first introduced in 2014 when Juan Benet released the whitepaper: Filecoin: A Cryptocurrency Operated File Storage Network. The proposal is a blockchain network similar to Bitcoin, but where Nodes in the network can store data, guaranteed by a proof-of-retrievability component. Filecoin is developed by Protocol Labs.

Filecoin is sometimes called an incentive layer on top of IPFS. This just means that users are incentivized to rent out their storage space by getting paid in FIL tokens. So, can you use Filecoin to send Christmas photos to Mars or Venus? Not yet. IPFS is a peer-to-peer data storage and retrieval protocol that’s built using a more decentralized approach. Unlike HTTP or HTTPS, it doesn’t rely on centralized servers to store data.

Filecoin raised over $250M in their 2017 ICO, which was a record at the time. The Filecoin mainnet was subsequently launched in October 2020.

Check the latest prices, data, and charts of FIL/USDT

How Filecoin (FIL) works

The Filecoin infrastructure is a distributed, peer-to-peer network whose main purpose is to provide a new way for organizations and individuals to store data around the world. When people have free storage available, they can become storage miners, who are essentially responsible for storing data on the Filecoin network. Clients pay FIL tokens both to store and retrieve data.

Proof of Replication: the network verifies if storage miners have actually stored the number of copies of data they claim to hold.
Proof of Spacetime: with proof of spacetime, the filecoin ensures that miners have stored all data over the agreed period.

Retrieval miners are another class of participants. As you’d expect, they facilitate the data retrieval process between clients and storage miners and also receive a small amount of FIL for their services. Filecoin uses end-to-end encryption, and storage providers don’t have access to the decryption keys. Since it’s a distributed system, files are kept safe across multiple storage locations.

So, what makes Filecoin potentially better than its centralized competitors? Well, it offers a peer-to-peer cloud storage solution for businesses and consumers. Because the same item (storage) is offered by different sellers potentially at different prices, the consumer may benefit in the end. While at times you might not have enough storage for all your data, sometimes you’ll have excess, and you can sell it. That’s the promise of Filecoin.

Additional Read: How to prepare for a Crypto Market Crash

Major Concern

A staggering 83% of company’s workloads are stored on the cloud and the average employee uses 36 cloud-based services in their daily routine. This increase comes at a staggering cost as businesses struggle to get hold of their spending but its not only the costs associated with having a few big cloud storage providers dictating the markets. Another problem is the permanent risk of hacks.

Here is an alternative to purchasing Amazon S3 storage buckets, Dropbox space in this decentralized world? Where you store your data in the decentralized space.

Why Filecoin (FIL) is important

Over the past few decades, the way that we store and access data has changed. In business, this has changed from on-site storage, where companies have huge server rooms, to remote data storage warehouses and more diversified cloud storage across the entire world. Currently, most businesses use a combination of all of these. Similarly, consumer data storage has also changed with an increased reliance on cloud storage.

This brings up cloud storage market superpowers such as AWS, HPE, and Dell. Business customers usually pick one provider and stay with it for years, which hinders competition. Filecoin allows customers who want to purchase storage to navigate the best deals on the fly, no matter who the storage provider is. This can likely create a more competitive cloud storage market.

Filecoin (FIL) use cases

Filecoin allows consumers to choose the best storage option rather than having to go with locked-in vendor contracts or high rates for on-demand storage. Organizations and individuals who have unused storage space are able to offer it on the network. By sharing their resources, they are rewarded in FIL. This may not be obvious at first, but you can build DApps for storage, too! These include consumer storage apps, DeFi apps, decentralized video apps, and more.

How to store Filecoin (FIL)

Whether you’re spending or making FIL on the Filecoin network with storage activities or simply trading your tokens, you’ll need somewhere to store them.

Filecoin recommends three wallets for FIL. Lotus, which can be used to run Filecoin nodes, can be hooked up to Ledger. Glif wallet is a web-based interface that can also be connected to your Ledger if you don’t want to run Lotus. And the Filfox Wallet is a web-based wallet that you can use for your tokens.

Conclusion

Filecoin presents a great solution to worldwide file storage and retrieval inefficiencies. It also puts the power in the hands of the customer, who is less likely to be bound by contracts with big businesses.

With a live mainnet and a polished set of tools, Filecoin is already out in the wild. The Filecoin ecosystem’s success will depend on the usage it gets within the cryptocurrency community, but also whether it can attract new people into the world of Web 3.0.

Take the first step towards building your crypto portfolio with CoinDCX, crypto investing app