Updated: Dec 10, 2021
Filecoin is a peer to peer storage network, with built-in economic incentives to ensure files are stored reliably over time. The storage market runs on a blockchain which uses the native token "filecoin." This network was created by Protocol labs in 2017. Their goal is to create a fast and secure decentralized internet. The internet we have today maintains all of our web content on centralized servers. These servers can suffer outages or lock us out of hosting content at any given moment. Centralized servers today offer a faster and overall better quality internet connection at a low price. Decentralized servers were not feasible in the past as they were too slow and expensive. In addressing these issues Protocall Labs introduced the "IPFS", otherwise known as the InterPlanetary File System, and also "filecoin" the incentive layer built to support and grow on the IPFS.
The Filecoin Mainnet went live on October 15, 2020.
Filecoin aims to compete with other centralized cloud storage providers, such as Amazon, Microsoft, and Google
In direct competition with other decentralized data storage cryptos, such as Arweave(AR), BitTorrent(BTT), and Storj(STORJ)
How does it work?
Filecoin works similar to other cryptocurrency. It has a blockchain, a consensus mechanism, mining, and mining rewards with its native token. The Filecoin blockchain is used to secure the agreement between miner and client and is built on top of IPFS. The blockchain does not store any files, but rather acts as a ledger for transaction and filecoin wallet balances.
2 consensus mechanisms
Proof of replication: involves proving that a piece of given information is being stored by the miner. The miner must write this proof to the filecoin blockchain once the data storage contract is created.
Proof of spacetime: involves proving that a miner is still storing a piece of data. A miner must write this proof every time a client asks to see if they are still storing the data.
Unlike the mining procedures of Bitcoin your job is not to burn circuit with a mining farm, but to store a lot of encrypted user data. All you need is a good computer with loads of hard drive space. In addition to the hardware, miners will need to stake their FIL. This ensures the miner will fulfill the terms of the contract by staking FIL as collateral. If the terms of the contract are violated the miner risks getting their stake partly slashed. As the filecoin network grows, the cost of corruption becomes more expensive. Filecoin gives two types of staking options; either put your collateral upfront or use future block rewards as collateral. The reward each miner gets is proportional to the amount of storage space a miner is contributing to the network. There is a tough barrier of entry for filecoin miners as they require more equipment and more staking than their competitors SiaCoin and Storj.
China has once again cracked down on bitcoin miners, but show interest towards filecoin and IPFS with Xinyuan Technology investing over $89 million into filecoin miners
Grayscale recently announced a launch of five new trusts with filecoin(FIL) included. These trusts will eventually be converted to exchange traded funds (ETF) later next year.
A deflationary asset, filecoin is burned to pay for network fees or whenever a miners stake is slashed
Max supply is 2 billion
Initial supply of 600 million
70% of the coin set aside for miners
15% will go to protocall labs
7.5% sold during ICO
2.5% to fundraising and developing ecosystem
The rest reserved for filecoin foundation
My Thoughts on Filecoin
Filecoin at current prices provides a wide margin of safety, and now is an excellent time for entry. The cryptocurrency trades around $53 a coin; significantly lower from it's all-time high on April 21, 2021 when it hit $237 at its peak. This crypto has been rather dormant this alt-season, as cloud storage is a very underrated sector of the crypto economy. There has been tons of attention on the metaverse lately and for good reason; we will be living a huge portion of our lives within these virtual worlds. However, at this point investors are chasing. We already made huge profits within the metaverse i.e. Decentraland and Enjin Coin, buying these back in September. Facebook recently rebranded and changed their name to Meta and this was a big enough catalyst to set off the entire sector. I will continue to hold a small portion of these plays, although it is best to look at other opportunities.
Bored Ape Yacht Club
A big trend in markets right now are NFT's. These digital assets are growing in popularity and are likely to see hyperbolic growth over the next few years. Filecoin will likely see growth as the NFT markets expand. Traditionally data has been stored on the Ethereum blockchain, where a majority of projects are being built. However, the transactions for storing data have become too expensive. Filecoin has recently made deals with Opensea and Flow Blockchain, and this has caused a huge increase of users on the IPFS.
Some of the biggest projects are converting their metadata to the IPFS network. This trend will likely continue as the NFT markets are in its infancy. In Q3 the total number of NFT sales grew to $10.7 billion dollars. Nearly eight times more than the previous quarter. I expect a heavier volume of buyers next year as Coinbase NFT marketplace ramps up. Believe me, you are very early. To put in perspective, opensea.io is currently the largest marketplace in the world with over 100,000 buyers. Ebay has over 165 million buyers. As more businesses turn to decentralized applications the best place to store data will be on IPFS. I simply suggest buying the incentive layer to the whole network...Filecoin.
Overall trend looks bearish in the short to medium term
Falling Wedge broke out on September 30 but failed to maintain upward momentum
Chart now shows a descending triangle that will likely continue (Great opportunity for Dollar Cost Averaging)
On Balance Volume is Declining, indicating that volume on up days is lower than volume on down days (demand is below supply)
Less than 45 is bearish, but not quite oversold as RSI still lys above 30
Strong Support at $40
Next Year Price Target: $115+
Long Price Target: $250+
Filecoin makes for a great long opportunity, as they aim to store humanity's most important information. Being dubbed the Airbnb of file storage is not easy feat to live up to. This cryptocurrency is not for short term investors as bearish momentum will likely drive the price lower. I highly suggest a strategy of dollar cost averaging. With all the attention on the metaverse this will continue to fall. However, interest from China and recent inclusion into the Grayscale Trust makes this a no-brainer long term investment. Remember, volatility is the price you pay for performance. Now is a great time to start an entry into filecoin.