Web 3.0 Example: filecoin

5 min read

filecoin mining NAS

Filecoin in 100 words

Filecoin’s mission is “to create a decentralized, efficient, and robust foundation for humanity’s information.” Dubbed a paid version of ipfs, it creates a free market to bridge between storage users and crowd sourced storage providers. Filecoin (FIL) is a utility token that enables mining as well as paying for storage services. Filecoin aims to compete with centralized storage services like Amazon AWS, as well as other blockchain projects like storj and sia. Filecoin mainnet went live on October 15th, 2020 and FIL is listed on most major exchanges.

What is web 3.0 storage

Filecoin is a prime example of Web 3.0, focusing on decentralized storage as one of the three pillars of Internet infrastructure. Web 1.0 and 2.0 storage are dominated by large cloud providers such Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft Azure, Oracle cloud, Baidu, and Tencent

Problems filecoin addresses
Problems filecoin addresses

In contrast, Filecoin and web 3.0 storage has the following characteristics and advantages:

  • Decentralized and crowdsourced: anyone with extra storage can provide storage services to others. As one study finds, there are lots of idle and underutilized storage in the world, so web 3.0 storage will make effective use of them.
  • Token incentives: Web 3.0 storage typically used a utility token to facilitate the exchange of storage services. There are a few benefits: the lack of centrally controlled corporation means less “platform tax” and better pricing for both buyers and sellers; payment settlement can be instantaneous and verifiable; a smart contract can enable flexible and fluid pricing.
  • Proof of storage: since there is no centralized authority to ensure the client’s data are actually stored without tampering or cheating, it is critical to have an advanced consensus algorithm to enable everyone in the ecosystem the ability to verify the storage of client’s data. This is where math and algorithms replace trusted authority, and is crucial to the success or failure of a particular web 3.0 storage project.
  • Indexing and search of data: since all the data are distributed among many crowd sourced servers and there is no single centralized server to index all the data, web 3.0 storage solutions typically have a distributed indexing and search functionality. In filecoin and ipfs, there is also content based addressing which is not dependent on where the content is stored.
  • Data upload and retrieval: it is not enough just to store the data, fast and efficient upload and retrieval are equally important for commercial grade storage services. In Web 3.0 storage systems, there are typically Content Delivery Network types of services to accelerate the uploading and downloading of data.

A brief history: from ipfs to filecoin

Most people learned about filecoin because of ipfs, or Interplanetary File System. Therefore it is useful to understand ipfs a little bit as one of the foundations of filecoin. Ipfs uses content addressing and p2p network to store files in a decentralized manner. It was launched as alpha in 2015, and quickly became popular among tech enthusiasts. One notable use case is creating a limited and immutable mirror for wikipedia. It is true p2p in the sense that users will host the content for free and in kind, which could be somewhat limiting since we quickly run out of good samaritan who donate storage space for the good of mankind.

Ipfs mirrored version of wikipedia
Ipfs mirrored version of wikipedia

Then enter the filecoin, which is dubbed a “paid version of ipfs”. The key new ingredients that filecoin added to the ipfs are token incentive and two-sided market, so the web 3.0 storage solution can move beyond enthusiast to real enterprise adoption. Filecoin’s ICO in 2017, available only to accredited investors, raised over 257 million dollars and set a new record at the time. There is tremendous interest in a major alternative to web 1.0 and 2.0 storage solutions, which is built by a strong developer team with ipfs credibility and backed by top tier VCs.

Fast forward to 2020. After three years of development and several delays, Filecoin launched mainnet on October 15th, 2020. As of this writing, Filecoin token (FIL) is listed on coinbase, Gemini, Kraken, Binance, Huobi, and many other exchanges.

Use cases and applications

Filecoin brings along a large number of 3rd party applications from ipfs, as illustrated in the following diagram.

IPFS ecosystem
IPFS ecosystem

In addition, there are some early use cases that leverage filecoin:

  • Securely distributing large data sets onto thousands of computers
  • Storing all of web 3.0’s data
  • Video publishing as alternative to YouTube or Vimeo
  • Social networking, gaming, and AR/VR data storage
  • Storing developer assets such as container and virtual machines images

It is still early days of filecoin, and we expect to see more innovative dApps to be built on top of filecoin and ipfs in the coming months.

Technology

Filecoin is a more complex system than ipfs. Proof of Storage, is at the heart of filecoin and sets it apart from other web 3.0 storage projects. It is a variation of the Proof of Space algorithms, while adding security and efficiency enhancements. Even tuning the parameters for the algorithms is so demanding that the filecoin team has to build new computational tools to automate the process.

Proof of Storage in filecoin
Proof of Storage in filecoin

“I think no other network is using Proof of Replication, it’s an advantage we have that we created that field. So that’s one differentiating factor. We are also the only one with this fluid market structure that is meant to be optimized based on an ask and bid structure where miners and clients are able to reason about prices together and then form deals out of that. I think we are also the only ones doing consensus backed by useful storage. With other networks it may be a consensus backed by a Proof of Space, but in our case it’s useful. Those are the three biggest differentiating factors of Filecoin.”

According to filecoin’s founder Juan Benet:

For a more in-depth description of filecoin’s Proof of Storage technology, you can read in the blog “What Sets us Apart: Filecoin’s Proof System” as well as watching the Zero Knowledge podcast episode 106 “IPFS, Libp2p & Filecoin with Juan Benet”.

Business model

Filecoin’s business model is similar to other sharing economies (or gig economies) such as Uber or Airbnb, it creates a free market to bridge the consumers and providers of storage. The main difference is that this market is shared and owned by the filecoin community, instead of one single corporate entity. Protocol Labs, the developers who built the filecoin protocol, is just one of the several stakeholders in the filecoin market.

Filecoin enables free market for storage
Filecoin enables free market for storage

And the filecoin token is utilized to facilitate the exchange of services, among several stakeholders in the ecosystem such as miners, clients, developers, and token holders. It is minable through useful work, by proving that they are storing a unique copy of the client’s data.

Stakeholders and interactions within filecoin ecosystem
Stakeholders and interactions within filecoin ecosystem

Ecosystem strength

Filecoin has a very strong ecosystem, in part due to its popularity carried over from ipfs, libp2p and other successful projects. It attracted a sizable and vibrant developer community and 3rd party companies to work on and extend its ecosystem.

Filecoin also attracted a large number of miners, since its early testnet days. Many who missed the early bitcoin mining fortune, consider filecoin the next potential gold mine. On the eve of filecoin mainnet launch (October 14th, 2020), the miners have already amassed a respectable 561 PiB of storage on its testnet.

ipfs mining community
ipfs mining community

Trends and future

Filecoin interworking with other web 3.0 projects
Filecoin interworking with other web 3.0 projects

With the launch of mainnet on October 15th, 2020, filecoin’s journey towards a widely adopted web 3.0 storage solution just gets started. In addition to many enhancements to the protocol itself and further expanding the available storage space to exabytes of data, Filecoin intends to build bridges and standards to interwork with other blockchain projects. 

Together with Compute (Ethereum, Polkadot) and Networking (NKN, Helium), Storage solutions like filecoin will forge the infrastructure foundation of Web 3.0 to create a decentralized, efficient, and robust foundation for humanity’s information. 

Acknowledgment

The NKN editorial team thanks filecoin and ipfs team, and especially Colin Evran and Molly Mackinley, for supplying some of the material used in this blog post. You can watch an excellent video presentation of ipfs from NKN hosted “Web 3.0 Tech Talk: the power of offchain”:

Web 3.0 presentations:

For further reading

https://blog.coinlist.co/filecoin-why-its-a-big-deal/