Filecoin is a decentralized data storage solution that works on the model of Airbnb because it allows users to rent out storage space on their computers through this network.
Many computer users have plenty of storage space on their computers that they barely ever use. They can earn passive income by renting out the storage space to those who want to store information securely.
It may also be considered an alternative for Google Drive and Microsoft 360. But it may need some time to compete with them because it doesn’t provide the features that are offered by these software products.
What is Filecoin?
Filecoin is a decentralized storage provider where users can get their desired storage space at a reasonable price. At the same time, it provides users the opportunity to rent out storage space on their computers to earn some passive income.
Filecoin is dedicated to becoming the fastest and cheapest storage solution on the internet but it’s directly associated with its adoption rate. It can provide a better storage solution if it’s adopted at a larger scale.
Filecoin isn’t only decentralized storage solution provider in the crypto space but there are participants like Storj and Siacoin that are providing similar services. Siacoin offers a network capacity of 2 petabytes whereas the Storj provides more than 100 petabytes of network capacity.
Filecoin Brief History
Filecoin was launched as open-source software by Protocol Labs. The company also introduced alternative technologies like Libp2p and IPFS (a replacement for the web’s hypertext protocol) for existing internet protocols.
Juan Benet is the founder of Protocol Labs. The company managed to raise funds from notable investors like StarX, Digital Currency Group, Naval Ravikant (the founder of AngelList), and Fred Erhsam (the co-founder of Coinbase).
A number of venture capital firms like Andreesen Horowitz, Sequoia Capital, and Union Square Ventures invested around $257 million along with hundreds of other investors during the initial coin offering in 2017. According to the stats, it was one of the largest fund rounds in the crypto industry at that time.
Filecoin Mainnet was launched in October 2020. More than 70 organizations joined the Filecoin network within a month due to which it achieved a storage capacity of more than 1 exbibyte by November 2020.
Importance of Filecoin
The use of cloud storage solutions has drastically increased over the past few decades. The companies used to store their data on local servers in the past but they started moving to the cloud solutions like AWS, HPE, and Dell because they are super fast and more affordable.
However, the companies still store the most valuable information on local servers because cloud solutions are managed by centralized authorities. So, they want to keep their information safe. Furthermore, the businesses stick to one service provider for years because the migration process is very daunting.
Filecoin provides a more competitive solution allowing them to move from one service provider to another without any hassle. The best part is that it provides a sense of security by providing a decentralized solution which means the companies don’t need to worry about any hacking attempts.
Cost – Filecoin provides more cost-effective storage solutions by offering a larger free data storage market for its users.
Scalability – It can eliminate the scalability issue by connecting millions of computer systems globally.
Economy – Filecoin has introduced the idea of using the existing computer systems for storage rather than building new storage computers.
Safety – Unlike iCloud and Dropbox, Filecoin can’t be hacked because a blockchain network stores information in the form of blocks that can’t be hacked easily.
How Does Filecoin Work?
Filecoin is a decentralized form of dropbox. The Filecoin network consists of miners and customers. Filecoin is a cheaper option than centralized data storage solutions like AWS, HPE, and Dell. The customers can find their desired storage space from an open market where miners compete with each other for providing storage services to the users.
The miners get to earn rewards from the Filecoin network depending on the storage space they offer within the network. Furthermore, the customers also pay them a fixed amount of money for accessing storage space.
The miners are also responsible for creating new blocks by executing several computationally intensive processes. Filecoin network uses two consensus protocols to verify the reliability of the data being stored.
This consensus protocol verifies the amount of data a miner claims to hold.
This consensus mechanism confirms whether the miner completed the storage process within the agreed period of time.
The users can install the Filecoin software on their computers to participate in the mining process. There are two type of miners in the Filecoin network.
Storage Miners – These miners are dedicated to providing storage space to the customers who are willing to store their data online. They share information about the available storage and other important specs of their computer on the Filecoin open market. They also update the price depending on the current market rates.
Retrieval Miners – These miners retrieve data from the Filecoin network at a customer’s request. The customers pay the service fees in the form of FIL tokens. The fees may vary depending on the size of file and response time.
Filecoin is a decentralized storage solution that works on the pattern of Airbnb. It provides an opportunity for users who have extra space on their computers that they don’t want to use. The network is aimed at providing the cheapest and fastest storage solution.
A vast majority of businesses are already using this storage solution because it provides excellent safety at a reasonable price. Feel free to reach out to us if you need more information about how Filecoin works.