What Is Filecoin (FIL)? The Beginner's Guide

If you’ve been looking for a stable cryptocurrency that’s not just your average Bitcoin or Litecoin and is decentralized, then Filecoin might be for you. The currency was created in 2017 to offer a new way to store data through the use of blockchain technology.

Unlike other cryptocurrencies where users can see their balances and transactions, Filecoin has an algorithmic layer that doesn’t reveal information about who is using the coin or what they’re storing.

Filecoin functions are completely different from other online data storage options like Dropbox and Google Drive. The currency hasn’t been fully released yet, but speculators hope the coin will become adopted as a way to store files through peer-to-peer networks. If so, the currency will be stable compared to its competitors where users pay fees for transactions.

In this article, we’ll talk about what is Filecoin and how this new technology could change how you store information online.

What Is Filecoin (FIL)?

What Is Filecoin (FIL)

Filecoin is a digital currency that intends to motivate a global network of computer operators to offer a file-sharing and storage service. It does this by rewarding those operators with cryptocurrency.

The creators of this project believe that if enough people use it, it will eventually become the most efficient and cost-effective method for storing data on the internet. In addition to this, it would not be dependent on a central authority, which would mean that governments or other players would not be able to censor the distribution of its contents in any way.

This is because miners are responsible for maintaining Filecoin. Miners dedicate their processing resources to supplying the computation that makes Filecoin function. Miners of Filecoin are compensated for making user storage space available to the public. Users of Filecoin are obligated to pay miners for the ability to store, retrieve, or distribute the data they generate.

The Interplanetary File System is another mechanism for decentralized file management, and it is on top of this technology that the Filecoin network runs (IPFS). Both of these systems have many things in common, but the primary distinction between them is that IPFS is completely free to use, but it does not provide any financial benefits to miners. The use of file coins costs money, but it also has the potential to earn cash.

However, investors and traders should be aware that Filecoin is not the only protocol that asserts to provide a decentralized storage and file-sharing system that is driven by cryptocurrency. Filecoin is the only protocol that has been given the name Filecoin.

Storj and Siacoin are two protocols that compete with one another. As of the year 2020, Storj reports that its network has reached a capacity of over 100 petabytes, whilst Siacoin reports that it has only reached a capacity of 2 petabytes.

The initial coin offering that Filecoin held in 2017 was one of the most successful in the history of the cryptocurrency business, and it brought in a total of $205.8 million. This made it one of the greatest fundraising rounds in the history of the industry.

Filecoin has entered the testing phase as of July 2020, and an official launch is anticipated for the latter half of August 2020.

How Filecoin Works?

How Filecoin Works

The Filecoin network is made up of two different kinds of participants. The first kind of the participant is the “miners,” who contribute their resources to calculating the files that users want to store on the network. Miners are compensated with file coins for providing this service.

The second kind of participant is the client, or individuals who request data from the network and pay miners in filecoins to have their requests filled.

The miners have their market which functions as a free market for a file coin, and if they choose to sell the coin that they are holding, then they can do this. In addition to this, the process by which miners are compensated is not entirely open.

The miners of Filecoin will be compensated in part through a software payout token that is guaranteed to go up 50% every three months. Filecoin operates in a manner analogous to that of Dropbox, but it is powered by blockchains. Users of the Filecoin network who want to keep some data there are required to pay a miner to do so.

The amount that users pay is established by an open market in which miners compete with one another to provide the most storage space at the lowest possible cost. Filecoin asserts that this market will be “hypercompetitive,” and as a result, it will be less expensive than centralized data storage solutions like Amazon Web Services.

In turn, miners have the incentive to supply storage since there is a potential that the network may reward them with Filecoin tokens. These rewards come in the form of a chance to get rewards. Their potential for obtaining a reward increases in proportion to the amount of storage space they contribute to the network.

But you will have to pay for these privileges. To demonstrate to the network that they are storing the data they claim to be storing reliably over some time, miners are required to carry out several procedures that require a significant amount of computer power. These procedures are known as proofs.

They will be eligible to create new blocks on the Filecoin blockchain, as well as collect the network reward and the transaction fees if they can do it invariably and offer sufficient storage space. Filecoin is a cryptocurrency that has a lot of potentials.

Features of Filecoin

Filecoin is open source and it is not owned, operated, or controlled by any single authority. The system will operate without any central point of failure, which makes it very secure and reliable.

Filecoin can sustain thousands of transactions per second and it can scale up to support the data storage requirements of IPFS and Ethereum. Transaction fees will be very low, which is an incentive for miners to work with Filecoin.

Filecoins have a fixed supply, as well as a deflationary nature. These features make it very attractive to investors. There is no fixed limit on the number of coins that will be mined in each block, so there will be a continuous increase in the number of coins gradually over time.

Unlike most other cryptocurrencies, Filecoins do not need mining or mining equipment to function. It is open source, and it is also decentralized.

In short, the whole capitalist system of capitalism will come under pressure when the Filecoin cryptocurrency is out in operation because nobody will be able to ignore it. Nothing can go wrong with it. Every file coin will make money. It can be used as a store of value and its price will follow the laws of supply and demand very closely.

Advantages of using Filecoin

Economy:

Filecoin provides an opportunity for miners to receive rewards, and this attracts many users to the network, which leads to a more competitive market.

Filecoin is immune to some of the most common abuses that are found in other systems because it puts its trust in users who use filecoins and miners who work with them.

Filecoin’s central point of access is a security vulnerability, which facilitates attacks on the network. But removing this single point of access protects the protocol from possible problems.

Safety:

Using smart contracts, the file coin protocol guarantees data integrity and security. This makes the network highly reliable.

The file coin network will be composed of node pools, which are groups of computers that run a type of special software called an application. The nodes in these pools will enforce the protocol rules and operate as part of a distributed system made up of millions of computers across the planet.

Scale:

Filecoin claims that its system will be able to scale up to support the data storage requirements of IPFS and Ethereum, which is a very big boast. The Filecoin network supports thousands of transactions per second, which makes it extremely attractive.

Filecoin Technology

Filecoin operates in a highly competitive market, and as a result, it must contribute something of value to the discussion.

The developer of Filecoin had the vision to create from scratch a sophisticated ecosystem for data storage and retrieval utilizing the blockchain. This was although industry heavyweights such as Google, Amazon, and Microsoft were already established.

Because of the architecture of centralized data storage solutions, these solutions are susceptible to attacks. As a result, Filecoin decided to integrate blockchain technology to provide users with a storage service that is safer and more efficient.

The successful operation of the Filecoin protocol is dependent on four separate components. The following is a list of some of the most noteworthy inventions and technologies that are currently being employed by the Filecoin protocol:

Protocol of Consensus:

The Filecoin protocol uses the Protocol of Consensus to allow users, miners, and clients in the ecosystem. Filecoin uses a Proof-of-Work (PoW) consensus mechanism to provide information in the blockchain.

Filecoin blocks are generated every 10 minutes and they store metadata relating to each file that is stored on the network. These blocks are created by miners who provide storage space through the use of Proof-of-Storage (PoS), which is an alternative to PoW used by Filecoin.

Decentralized Storage Network (DSN):

The DSN is the part of the protocol that allows the storage of data in a highly distributed system that is decentralized. It includes nodes, software applications, and other components used to store data on the network.

Filecoin Storage:

The technology stack allows Filecoin to store files on a decentralized network. This can be divided into three areas: hardware security modules, file structures, and metadata.

Consensus Mechanism:

All Filecoin nodes on the DSN must be running the same code to guarantee data integrity. The Filecoin protocol uses a Proof-of-Storage (PoS) consensus mechanism. PoS is an alternative to PoW. PoS is used to generate blocks instead of miners.

The protocol also requires that witnesses are running in the network, which is designed as services that provide information about what has happened and which make up part of the decentralized storage network.

To realize its vision of establishing a decentralized network for data storage and retrieval, Filecoin utilizes two distinct processes for reaching consensus. The Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoSt) algorithms are both incorporated into the Filecoin blockchain.

The PoRep is concerned with ensuring that storage providers can persuade their respective clients that they have saved replicas of the original data for which they have been compensated by the physical storage provider.

A compilation of earlier systems that had the potential to be abused by nefarious miners, PoRep is a new protocol that was developed to combat this problem. PoRep was purposely developed to foil attacks such as Sybil, Outsourcing, and Generation.

On the other side, the Proof-of-Spacetime feature makes it possible for a user to determine whether or not the data that was outsourced is being stored by the provider that was previously agreed upon. Because the Proof-of-Storage mechanism was ineffective at monitoring how different storage providers store long data, this replacement approach was developed.

Smart Contracts:

This is a feature that has been built into Filecoin to facilitate the execution of smart contracts. The Filecoin protocol uses smart contracts to support consensus, while also allowing users to customize them to meet the particular storage needs of the user.

Metadata:

This is a tool that allows miners and clients in the ecosystem to go deeper into the storage process and gain additional information about files. Additional metadata allows users to be able to determine what has happened with their data, as well as when it was last touched by another file.

Storage and Retrieval Markets:

A mechanism for retrieving files that were borrowed from IPFS, Storage, and Retrieval markets gives users the ability to request a file and automatically receive it in a decentralized way.

Filecoin Project Tokens (FLL):

Filecoin Project Tokens (FLL) are used to secure the storage network while also ensuring that it is optimized in a way that guarantees proper operation. FLL tokens are used as the method of payment for transactions on the Filecoin network.

Conclusion: Filecoin and the Future

Filecoin is one of the most highly anticipated ICOs to be released in 2018. Even though the platform is still in a very early stage of development, it has garnered a lot of interest from the crypto community, with people becoming more aware and informed about how to buy FileCoin tokens.

The potential for this project and technology are endless, and some people say that it could even help blockchain technology become a viable alternative to existing cloud storage solutions. One certain thing is that Filecoin will become the cornerstone of a larger decentralized storage solution shortly.