TL;DR

Filecoin is a decentralized peer-to-peer digital storage marketplace using blockchain technology.

Filecoin is built on the InterPlanetary File System (IPFS) and enables users to rent unused hard disk space and then generate FIL tokens in exchange. Let's take a look at how Filecoin is shaking up the online storage space.

Introduction

Filecoin is able to offer an attractive alternative to purchasing Amazon S3 storage buckets, DropBox space, and locking into the same cloud storage contract.

With the right infrastructure, anyone can buy and sell storage on the Filecoin network while setting their own prices and creating their own contracts. Let's see how it works.

What is Filecoin (FIL)?

Filecoin is a decentralized storage network that enables anyone to rent out storage space. On the other hand, anyone can buy storage on the network. Rather than having to trust just one company with important data, that data can be shared and stored on computers around the world.

Filecoin was introduced for the first time in 2014 when Juan Benet released his proposal: Filecoin: A File Storage Network Operated by Cryptocurrency. The proposal is a blockchain network similar to Bitcoin, but nodes in the network are able to store data guaranteed by a proof-of-retrievability (retrieval guarantee) component. Filecoin was developed by Protocol Labs.

Sometimes, Filecoin is referred to as an incentive layer on top of IPFS. This means that users will be incentivized to rent out their storage space by getting paid in the form of FIL tokens.

So, can you use Filecoin to send Christmas photos to Mars or Venus? Not yet. IPFS is a peer-to-peer data storage and retrieval protocol built using a more decentralized approach. Unlike HTTP or HTTPS, IPFS does not rely on a centralized server to store data.

Filecoin raised over $250 million during its ICO in 2017 which was a record at the time. Then, Filecoin mainnet was launched in October 2020.

How Filecoin (FIL) works

The Filecoin infrastructure is a distributed peer-to-peer network with the primary goal of providing organizations and individuals with a new way to store data around the world.

When people have free storage, they can become storage miners who are essentially responsible for storing data on the Filecoin network. Clients pay FIL tokens to store and retrieve data.

Retrieval miners are the only participating class. As the name suggests, they facilitate the data retrieval process between clients and storage miners and receive a small amount of FIL for their services.

Filecoin uses end-to-end encryption and the storage provider does not have access to the decryption key. Because Filecoin is a distributed system, files will remain safe across multiple storage locations.

So, what makes Filecoin potentially better than its decentralized competitors? Filecoin offers peer-to-peer cloud storage solutions for businesses and consumers. Because the same item (storage) is offered by various sellers at prices that tend to vary, consumers can benefit in the end. While sometimes you won't have enough storage for your data, sometimes you will also have excess storage and you can sell it. That's the promise offered by Filecoin.

Why Filecoin (FIL) Matters

Over the past few decades, the way we store and access data has changed. In business, this is changing from on-premise storage requiring large server rooms for companies to remote data warehouses and more diversified cloud storage across the globe. Today, most businesses use a combination of them all. Likewise, consumer data storage has also changed as confidence in cloud storage has increased.

This condition gave rise to cloud storage market giants, such as AWS, HPE, and Dell. Business customers typically choose one provider and don't change for several years, hindering competition. Filecoin allows customers looking to purchase storage to quickly navigate the best deals regardless of who the storage provider is. This could create a more competitive cloud storage market.

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Use of Filecoin (FIL)

Filecoin allows consumers to choose the best storage option rather than having to agree to locked-in vendor contracts or high fees for on-demand storage. Organizations and individuals with unused storage space can offer it on the network. By sharing resources, they are rewarded in the form of FIL.

This may not be obvious at first, but you can build a DApp for storage too! These DApps include consumer storage applications, DeFi apps, decentralized video applications, and others.

How to save Filecoin (FIL)

Whether you spend or earn FIL on the Filecoin network with deposit activities or by trading tokens, you will need a place to store it.

Filecoin suggests three wallets for FIL. Lotus can be used to run Filecoin nodes and can be associated with Ledger. Glif Wallet is a web-based interface that can also be connected to Ledger if you don't want to run Lotus. And Filfox Wallet is a web-based wallet that can be used for your tokens.

Of course, you can also store FIL on Binance and earn rewards on Binance Earnings.

Closing

Filecoin presents a great solution to inefficient global scale file storage and retrieval. Filecoin also empowers customers who are less likely to be tied down by contracts with large businesses.

With mainnet live and a suite of enhanced tools, Filecoin is out in the world. The success of the Filecoin ecosystem will depend on its use within the cryptocurrency community, but also on whether Filecoin can attract new people into the world of Web 3.0.

Have further questions about Filecoin? Visit our question and answer platform, Ask Academy, where the Binance community will answer your questions.