Filecoin (FIL) Review

Filling the Void in the Crypto Market? (2022 Update)

Filecoin is a cryptocurrency that was created in 2017 and has been a top option during the last few years for what it offers. Keep in mind that we’re not only referring to the token but also the blockchain and system. 

So, to begin with, the Filecoin network is open-source and decentralized, meaning there’s no central authority controlling filecoins or filecoin or cryptocurrency transactions. Pretty much like other blockchains and currencies. 

How it works continues to follow the same principle, but there’s more to it than just calling it “another token of the many.” 

We also need to cover a lot to understand Filecoin (FIL) and how it works in the market. Also, is it a token and network worth using? We will answer those questions later. 

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What Is Filecoin (FIL)? – Network & Token

To get started with the common description, Filecoin is a network and also a cryptocurrency that aims to encourage global network computer operators to offer a file-sharing or decentralized storage system and service. 

The project founders claim that they want it to become the fastest and most cost-effective way to store data online if enough people adopt it. And they are very confident about making it possible. 

The additional benefit is that, like every crypto and decentralized network, it doesn’t rely on any central authority to exchange files without restriction by governments and other actors.

Essentially, Filecoin is managed by miners, who use computing power to make it work. They are paid to make storage space available for users, and the platform must pay miners to store, retrieve, or distribute this data.

The Filecoin network operates on top of the Interplanetary File System (IPFS), a protocol that allows file sharing to be decentralized. Both systems have many similarities. 

However, the main difference between them is that IPFS can be used for free, but it will not earn miners any money. Filecoin is a cryptocurrency that can be used to generate revenue but costs money.

Investors and traders need to be aware that Filecoin isn’t the only protocol that claims it offers decentralized file storage and file sharing system powered by cryptocurrency. But it does look to be like the most promising ones. 

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When It Started: Filecoin Creation

Filecoin’s history goes way back to 1999, but we don’t want to fill you with all the useless information today. Instead, we will focus on this: It was created by Protocol Labs. 

This firm also created the previous IPFS we mentioned and Libp2p technologies that aim to replace existing internet protocols.

IPFS, for example, is a system that could replace the Web’s hypertext protocol. This specifies that web addresses must start with the prefix “http://..,” which means the basic idea is to get rid of it. 

Juan Benet founded Protocol Labs while studying computer science at Stanford. He also co-founded Loki Studios, a game development company. Yahoo acquired the company in 2013. 

Protocol Labs received funding from prominent investors such as Digital Currency Group, Stanford University’s startup accelerator StartX, and Coinbase co-founder Fred Erhsam.

Now, you must know that the development of IPFS and many other alternatives were involved in how Filecoin works today. Thus, these need to be, somehow, involved in history. 

IPFS, unlike Siacoin (which is another network and option similar to this), is a storage system that works without any incentives. Users share files with others altruistically. This doesn’t scale and gets to a limit.

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Juan Benet and his team at IPFS took the incentive model of Siacoin and added a token which they used to finance their own ICO. Users could then access the storage by paying a small amount. 

All of this could be paid using the FIL token, which is the native token of the platform.

Benet presented his idea in July 2017 when he released his whitepaper. After an ICO that lasted a mere minute, Benet was able to raise over $200 million to fund his project. 

This was enough to secure the financial funding of Filecoin’s development.

Filecoin’s first coin offering raised $257 million from prominent venture capital firms such as Sequoia Capital and Andreessen Horowitz. It ran from August through September 2017. This made Filecoin’s initial coin offering the largest at that time.

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How Does It Work? – System & Process

We have pretty much explained the basics about how it works with the decentralized and additional mentions. However, is it that simple? Not at all. 

Filecoin is somewhat similar to Dropbox or other storage options but powered by blockchains. This means its users can store data on the network by paying a miner.

The open market determines the price they pay for storage, where miners compete to be the best. Filecoin claims that this market will be more competitive than traditional data storage like Amazon Web Services while also being less expensive. 

In this way, they are trying to be quite competitive and set a good example of what others should be aiming for. 

In return, miners have an incentive to store data because they can receive Filecoin tokens as rewards. They have a better chance of receiving a reward if they provide more storage to the network. So, it is more than just storing something in a place. You get money in the process as FIL is worth more each day.

Now, these rewards are not free. To prove to the network that they are actually storing the data claimed to be stored, miners must complete several computationally complex processes (called proofs).

If they do this reliably and have enough storage, they will be able to create new Blocks on Filecoin’s blockchain and receive the network reward and the transaction fees.

But what are these proofs?

  • Proof-of Replication and Proof of Spacetime.

To ensure that everyone on the network agrees on new transactions, blockchains use proofs. 

For example, the Bitcoin network relies on proof-of-work. This is where a miner must prove that it has done a large number of calculations in order to be able to add new transactions and claim newly minted Bitcoin.

Filecoin employs two new proofs in order to prove that miners actually store the data they claim. Proof-of-Replication proves that miners have actually kept the exact number of copies it claims. 

The proof-of-Spacetime proves that the miner has kept the data for a specified time.

These proofs together allow users to believe that miners have the data they claim to have.

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  • Filecoin Storage Markets.

This isn’t proof, but it is a technology used by Filecoin we need to mention, and it will create a marketplace for disk storage. Users who want to store data can offer their bids on storage available from miners who offer it.

The reliability and prices of disk space they offer will be a key factor in judging miners. Filecoin’s Storage Marketplace will function in a similar way to a financial marketplace, where users can place bids and ask for help.

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How to Get Filecoin (FIL) & What’s Its Price

Moving on with the part of how to get the tokens and the cryptocurrency market cap, we will need to start with the mining. 

Filecoin miners can be described as users offering storage. Any user can plug in any hard disk and run Filecoin to start offering disk space in the Storage Market. 

These miners are called Storage Miners.

There is also a third category of Filecoin miners: Retrieval Miners and Services.

Users pay these miners to retrieve data or perform services that speed up data transmission, such as caching and participating in a content delivery system.

Since users are paid with FIL, you pretty much mine the token by participating on the platform, but you can also purchase it on the cryptocurrency market. 

With this in mind, FIL’s current price (at the moment of writing this) is $52.92. Although it has seen an increase for the last few days, it is kind of falling. 

However, with the cryptocurrency market growing and the market cap increasing for each digital currency, you can expect it to go up in the next few days. 

Now, the total supply is 130.2 million at the moment, but the max has been set at 1.97 billion. Thus, you may want to invest now that it is quite a lot and hasn’t been cut like other cryptocurrencies. 

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Does Cryptocurrency Investment Make Sense?

It is a good idea to invest in cryptocurrency but considering the risk. If you do decide to invest in it, remember that the market can fluctuate and be difficult to follow. 

Also, you can’t just follow the general volatility. Instead, you need to know how the currency or token you are buying fluctuates. 

If you are interested in what Filecoin aims and offers as a network, storage provider, and token, we believe it is a great investment among all digital currencies. 

However, depending on your situation, we may bet on other options. In fact, we would recommend investing in more than one currency only. This is the best investment advice we can give to anyone. 

Although we have made investments in cryptocurrencies, local lead generation has proven to be more profitable and cost-effective than this volatile investment option, especially because it is a real business, not a bet on a market.

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Written by Dame Cash

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