Filecoin review: a decentralised storage market
How Filecoin pays storage providers to keep data and proves that they actually store it.
Filecoin is a blockchain network for storing data. It was created by Protocol Labs, the team behind IPFS (the InterPlanetary File System), and its main network launched in October 2020.
The idea
Anyone with spare disk space can become a storage provider. Clients pay providers in FIL to store their data. The blockchain records agreements and checks that providers keep their promises.
Proving storage
The hard part is proving that data is really stored without downloading it. Filecoin uses two kinds of cryptographic proofs:
- Proof of replication — shows that a provider has stored a unique copy of the data.
- Proof of spacetime — shows, repeatedly over time, that the data is still stored.
Providers lock FIL as collateral and can lose it if they fail to prove storage.
Filecoin and IPFS
IPFS is a protocol for addressing files by their content. It does not pay anyone to keep files online. Filecoin adds the economic layer — an incentive to store data for an agreed period. Many NFT projects use IPFS links, and Filecoin is one way to keep such files available.
Smart contracts
In 2023 Filecoin added the Filecoin Virtual Machine, which allows smart contracts on the network.
Risks
Competition with traditional cloud storage, demand for paid storage, and the complexity of the provider economy.
The market is on the FIL coin page.
This review describes the project's design and is not investment advice. Cryptocurrency prices can be highly volatile.
Blog posts are for education and information only and are not investment, legal or tax advice.