Introduction to Cryptocurrencies — The Mainnet Launch Caused a Stir. What Makes Filecoin So Special?
Written by the CoinEx Institution, this series of jocular and easy to understand articles will show you everything you need to know about major cryptocurrencies, making you fully prepared before jumping into crypto!
Among all the excitements in the cryptocurrency community this year, there must be the launch of the Filecoin mainnet. You must be no stranger to Filecoin. In 2017, Filecoin raised a total of 257 million US dollars in ICO, a record high in terms of the ICO (with Telegram excluded, whose ICO was stopped by the the US SEC). Till today, Filecoin remains on top of the world’s ICO ranking list.
Here comes another blockchain 3.0 project, as users applaud, followed by EOS. Ever since it was unveiled, Filecoin has been in the spotlight, and even the slightest move will seize the greatest public attention. What makes Filecoin so special? Now join me to get to know one of this year’s most popular cryptocurrency projects — Filecoin.
Its story starts with IPFS.
IPFS (“Inter Planetary File System”): A Peer-to-peer Distributed File System
Inter Planetary File System (IPFS), a peer-to-peer (P2P) distributed file system, initiated by an American computer scientist Juan Benet in May 2014, was designed to overturn the HTTP protocol (Hypertext Media Transfer Protocol). It is a file system that uses data storage technology, or rather, a transmission protocol.
More specifically, IPFS is a decentralized network low-level protocol, which is essentially a content-addressable, versioned, peer-to-peer hypermedia distributed storage and transmission protocol; similar to Bitcoin, IPFS miners can join this network at will to contribute storage space to the IPFS network and acquire various resources there. IPFS is aimed at supplementing or even replacing the HTTP prevailing for the past two decades and building a faster, safer, and more free Internet era.
By the way, here is some information about HTTP. Is anyone unfamiliar with it?
HTTP is a simple request-response protocol, usually running on TCP; it specifies what kind of message the client may send to the server and what kind of response it receives. For example, if we want to find something on the Internet, we have to enter the URL, which usually starts with HTTP.
HTTP uploads and downloads files through the transfer of domain names, IPs, and multiple central servers. Its merits are naturally irreplaceable. After all, we all rely on it to access the Internet.
But HTTP also has its shortcomings, such as poor performance and excessive reliance on the central server and backbone network. Compared with IPFS, it is a multi-centralized solution in which content addressing does not rely on the domain name or IP, but the unique HASH key. As a distributed file storage system, IPFS does not store file data on a centralized server, but on all eligible computers on the network.
Then again, IPFS was launched as early as May 2015. But strictly speaking, without using blockchain technology or issuing coins, IPFS cannot be deemed a blockchain project. Still, it coincides with blockchain in terms of decentralization.
Filecoin we are going to talk about in this article is the byproduct of IPFS.
Filecoin: A Distributed Storage Network on IPFS
Filecoin is a distributed storage network built on IPFS and also a blockchain cryptocurrency technology. Being part of the next-generation infrastructure, it carries data in the data storage network across the world. Filecoin uses idle hard disk space to provide data storage and retrieval services in the open market, so that anyone can engage as a storage space provider and profit from the idle capacity of hard disks. In addition, the Filecoin blockchain has a built-in self-healing process that detects failed storage nodes and redistributes stored files to reliable nodes.
On the other hand, Filecoin is believed to be the incentive level of IPFS. Users who participate in IPFS mining and contribute storage space and hashrate to IPFS can get FIL, Filecoin’s token. FIL was mainly mined in the early days.
The operation of Filecoin is quite similar to market rules: the buyer functions as a person looking for storage space services, and the seller is the storage provider. In this market, buyers are called customers, and sellers are Filecoin miners. Therefore, in this blockchain data storage network, sellers can get corresponding returns as long as they provide storage services. And Filecoin monetizes the unused and excess storage around the world in a distributed network.
Unlike Bitcoin POW (Proof of Work) mining, Filecoin is a valid proof of storage. Therefore, for Filecoin miners, greater hashrate is not derived from a larger hard disk but from more data stored.
Filecoin uses two proofs to ensure that information is stored safe and sound:
1. Proof of Replication (PoRep): To verify that the network node does store corresponding information as required;
2. Proof of Space-time (PoSt): To verify that the network node has the ability to replicate proof within a period of time.
What are the functions of Filecoin?
With certain characteristics, the Filecoin network is likely to be a storage network market with incentives:
1. The third-party custody can save Filecoin funds, allowing customers and Filecoin miners to negotiate the retrieval and availability of data and spacetime.
2. The customer bidding system is called the storage market and the miner retrieval market. Customers bid on available space by offering Filecoin. Filecoin miners compete with each other and respond to customers’ data requests, and get Filecoin as rewards after completing the service quickly.
3. As the token for network settlement and Filecoin’s native cryptocurrency, FIL can be exchanged for Bitcoin, Ethereum, Japanese Yen, and U.S. dollars on exchanges.
4. Storage prices are freely floating, subject to the demands of storage miners and customers.
5. The Filecoin network enables Filecoin miners and customers to build smart contracts for complex operations, such as designing flexible reward strategies and conditions.
6. Interoperability with other blockchain platforms.
7. New proof of storage and proof of replication.
FIL: The Collateral for Miners’ Engagement in the Filecoin Ecosystem
Now let’s talk about the Filecoin token FIL:
FIL is used as the collateral for miners to engage in the Filecoin ecosystem, and the required collateral will be proportional to the storage space provided by the miners. Filecoin has three different mortgage mechanisms:
1. Initial mortgage: the pre-mortgage for nodes to participate in network events. If miners are found to cheat maliciously, their token mortgage will be reduced.
2. Block reward mortgage: To reduce the pre-collateral demand, block rewards are also used as the collateral. If the storage interval of a hard disk is terminated before its expiration, the collective rewards of miners will be slashed.
3. Storage transaction mortgage: To mortgage the storage provider’s storage service for trading.
There are a total of 2 billion FIL. The distribution plan consists of four parts:
70% as the return of mining: Gradually distributed according to the progress of mining, like Bitcoin.
15% reserved for Protocol Labs: Gradually distributed in 6 years as R&D expenses.
10% allocated to ICO investors: Gradually distributed according to the mining progress.
5% reserved for the Filecoin Foundation: Gradually distributed in 6 years as expenses for long-term community construction, network management and other matters.
It should be noted that the IPFS system is not equivalent to the Filecoin system: IPFS is just a protocol, not the mining software itself; while Filecoin is the mining software, except it uses the IPFS protocol to run the system.
Filecoin has been carrying high hopes and expectations from the industry since its creation. Before its mainnet was launched, Filecoin had been made known to the public through promotion events featuring “pre-sale”, “pre-mining”, and “double-mining”. Unfortunately, it did not go on smoothly as the mainnet launch plan had been postponed again and again. In October this year, the Filecoin mainnet was finally launched amidst the public expectation. Among many well-known exchanges that stayed up all night to support Filecoin was CoinEx.
As the demand for storage in the era of big data grows, Filecoin is trying to reform the storage field using the blockchain solution, and it is expected that IPFS may add more possibilities to the implementation of blockchain applications. Yet the future remains uncertain as the mainnet has just been launched. Let’s wait patiently for the answer from Filecoin.
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