Filecoin is a decentralized storage network, just like our commonly used Google Drive, DropBox, and Amazon AWS cloud drives. Users can store data on the Internet, but the difference is that companies such as Google and Amazon store user data in their own servers. When users upload data to the cloud, the company takes ownership of the user data.
Filecoin uses the InterPlanetary File System (IPFS), coupled with the open, transparent and permissionless nature of the blockchain, so that anyone can rent and purchase storage space, and the data can be split and stored by different Filecoin miners. This avoids the risk of data damage and loss caused by relying on a single company.
What are the functions and potential value of FIL?
Pay for storage: If you want to store your data on the Filecoin network, just like renting cloud space, you need to pay for this service with FIL.
Pay the cost of retrieving data: When you need to retrieve your data from the Filecoin network, just like downloading your files from the cloud, you need to use FIL to pay for this service.
Miner rewards: In the Filecoin network, miners are responsible for verifying and creating new blocks, and they will use FIL as a reward (Gas Fee)
Participate in governance: FIL holders can vote on the future development direction of the Filecoin network.
FIL Token Economics
Theoretically, the maximum token supply of FIL is 2 billion, but in practice it will not reach this number.
Because the growth of the Filecoin network requires the consumption and use of FIL coins, the total supply of tokens is reduced. As of July 25, 2023, the circulating supply of FIL coins was 437.7 million, and a total of 38.2 million FIL coins were burned, accounting for 8.7% of the circulating supply and 1.9% of the total supply.
450,000 FIL will be added to the market every day (mining rewards + token unlocking), and about 252,000 tokens will be reduced (pledge + coin burning). Therefore, it can be known that the net increase of FIL is approximately 200,000 every day. Tokens to the market.
The total amount of new FIL tokens in one year = 200,000 * 365 (days) = 73 million
Inflation rate = 73 million / 437.7 million (current quantity) = 16.6%
The inflation rate of 16.6% means that if you simply hold FIL coins, the value of the FIL tokens in your hand will be diluted by 16.6% under the premise that the market value remains unchanged.
If you are really optimistic about the development of Filecoin in the long term, I recommend staking to earn rewards, or you can use LSD to avoid the loss of the value of the tokens in your hands due to the increase in issuance.
FVM: Fil’s most powerful update ever
In March 2023, the Filecoin Virtual Machine (FVM) was officially launched, allowing developers to use Ethereum's programming language Solidty to write smart contracts. It also means that Filecoin can not only provide storage services, but also an EVM that can deploy smart contracts. Compatible chain.
This also brings many benefits to the Filecoin network:
Increase programmability: FVM’s goal is to increase programmability for the Filecoin blockchain, which will provide developers with a variety of innovative options, including orchestrating storage, creating L2 networks on top of the Filecoin blockchain, and providing providers with and new reward structures for users, etc.
Smart contract support: FVM allows smart contracts to be deployed and executed on the Filecoin network. This means developers can create their own applications and run them on the Filecoin network, which is very useful for building decentralized applications (DApps).
Improved security and reliability: FVM ensures through its design that all operations performed on the Filecoin network are safe and reliable. This includes ensuring that all smart contract executions are deterministic and that errors are handled safely when they occur.
As of 2023/7/24, benefiting from FVM, more than 2,500 smart contracts have been deployed on Filecoin, with the number of transactions approaching 40,000 and the lock-in amount of US$3.64 million. If you look further down, you can find: LSD (liquidity) Mortgage) protocols account for a large part of the Filecoin ecosystem. Each protocol launches its own encapsulated FIL token, with STFIL as the leader. Deposit FIL in the protocol, and you can get 1:1 stFIL. The current annualized reward is About 10%.
It seems to be prosperous, but what about further investigation?
Filecoin Challenges and Controversies
Although Filecoin is currently the leader in the decentralized storage field, the biggest challenge it faces is that the entry barrier for miners is too high.
To become a Filecoin miner, you not only need ultra-high-standard computer equipment in terms of hardware, but also need experience in system deployment and management. If you do not operate in accordance with Filecoin specifications, you may be fined and have your pledged funds confiscated.
Filecoin also warned on its official website that it is not easy to become a miner, which also raised concerns that the overall network is too centralized. According to statistics, China is the overwhelming number one search area for Filecoin, and this is under a prohibited situation. Therefore, the general market believes that most Filecoin miners are Chinese.
As for the current suppression of mining in China, several of Fil's largest manufacturers, RenX Mining Farm, StarX Alliance, and ShiX Cloud, have all been affected at different levels, and their business has basically stagnated. Just imagine if no incremental funds come in later, who will maintain these servers? Domestic operations are not allowed, and migrating overseas does not mean just moving a few machines. Therefore, the subsequent development of FIL will be very difficult.
I have said before that if this coin enters the bull market, don’t expect high gains.
The first is a regulation on mining, which has almost cut off the main artery of FIL. The second is that there are countless hold-ups above. Almost all those who have bought FIL before are trapped. Gouzhuang will not be so kind to let these hold-ups unwind. , and the second is the issue of market value. The current market value of FIL is already not low. It will be very difficult to increase it by more than ten times or dozens of times. If you can survive, you can have a few times the space. If there is an ambush in the family, it is better to drag him up to see you. Just take it.
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