What is Filecoin?
Project overview reviewed by Coindesk
Filecoin aims to become a decentralized storage network that allows users to buy and sell unused storage on an open market. The filecoin protocol is an incentive layer on top of peer-to-peer file system IPFS, built with a native token and distributed ledger.
Filecoin is a project started by Protocol Labs and its CEO Juan Benet. Protocol Labs was founded in 2014 and has since created IPFS, lib p2p, Filecoin and others.
The company consists of 12 core developers and focuses on open-source technology to improve how the internet works. The company was funded by notable investors including Digital Currency Group (CoinDesk’s parent company), Naval Ravikant, Union Square Ventures, Winklevoss Capital and Y Combinator.
The system design allows users to rent storage on available devices using the network’s native cryptocurrency, filecoin (FIL). Clients spend filecoins for sharing and retrieving data, and inversely, miners earn filecoins by storing and serving data. In order to incentivize miners to invest in storage rather than computational power, the probability that the network elects a miner to create a new block is proportional to their storage currently in use in relation to the rest of the network.
When mining a block, each miner is required to submit a proof-of-spacetime (PoST) to the network. PoST allows any member of the network to validate if a storage provider is fulfilling their responsibilities: storing the outsourced data for an agreed-on period of time.
🔹How does Filecoin Work?
Filecoin was funded through 200 million filecoins sold in both a presale and an offering, which amounted to $52 million and $205.8 million respectively.
🔹Network & Security
Filecoin’s protocol is built on IPFS, a distributed storage system that seeks to connect a network of peers who each hold their portion of the total system’s files. Filecoin acts as an incentive layer atop IPFS for people to be paid for their storage rather than participate in the existing voluntary storage system.
Filecoin consists of the blockchain, retrieval nodes, storage nodes, and a native token (filecoin). Storage nodes are miners who store sealed copies of data they have agreed to store, and the complete blockchain record of transaction between users. Retrieval nodes fetch and deliver files to users without needing to commit to store data or provide proofs of storage.
All storage miners must engage in the filecoin mining protocol by pledging storage, committing collateral, and abiding by proof-of-spacetime (PoSt). PoSt allows a user to check if a storage provider is actually storing the outsourced data for a certain range of time.
In this scheme, there is no designated verifier to audit the storage offered by miners, but any member of the network can hypothetically verify the miner’s responsibilities. Storage miners are also eligible to mine new blocks, and by doing so receive a block reward with transaction fees.
To incentivize miners to invest in storage rather than computational power, the probability that the network elects a miner to create a new block is proportional to their storage currently in use in relation to the rest of the network. When mining a block, each miner is required to submit a proof-of-spacetime to the network.
Retrieval miners exchange data and receive payment off-chain. After settling pricing, the retrieval miners will directly exchange particular data pieces based on the request from a user. The founders predicted the recording of retrieval payments on the blockchain would cause a bottleneck of validating payments. As a result, these payment channels are settled through an off-chain order book, and use the blockchain only in case of disputes.
To prevent bad actors from attempting to store fewer copies of data than they are being paid to store, filecoin also has a proof-of-replication (PoRep) mechanism, which requires miners to prove that they are storing the data they say they are.
The filecoin supply is capped at 2 billion coins, and new filecoins will be released via block rewards meted out over 16 years. The filecoins will be allocated across four groups participating in the filecoin network.
Filecoin miners will receive 70% through block rewards, Protocol Labs, which is responsible for building the initial code and facilitating the launch, will receive 15% upon the creation of the genesis block, initial investors will receive 10% on the creation of the genesis block, and the Filecoin Foundation will receive 5% on creation of the genesis block.
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