What Is Filecoin (FIL)? How It Works and How to Buy FIL

Filecoin is a decentralised storage network that aims to create a global, peer-to-peer marketplace to store digital information. Here’s how it works.

Key Takeaways:

• Filecoin pioneers a decentralised network allowing users to buy and sell unused storage space, fostering a global, peer-to-peer marketplace for digital information storage.
• By employing cryptographic proofs like Proof of Replication (PoRep) and Proof of Spacetime (PoSt), Filecoin ensures the integrity and reliability of stored data, enhancing security in a distributed environment.
• The native cryptocurrency, FIL, forms the economic backbone of Filecoin, incentivising users to contribute storage space, maintain network integrity, and participate actively in the ecosystem.
• Filecoin’s integration with the InterPlanetary File System (IPFS) provides a comprehensive solution for decentralised storage and content-addressable storage, reinforcing its versatility and utility in various applications.

What Is Filecoin?

Filecoin is a decentralised storage network and cryptocurrency that aims to create a global, peer-to-peer (P2P), and open marketplace for storing and retrieving digital information. It was developed by Protocol Labs, the same team behind the InterPlanetary File System (IPFS), which is a protocol designed to create a content-addressable, P2P method of storing and sharing hypermedia in a distributed file system.

Filecoin uses blockchain technology that enables users to buy and sell unused storage space on a global network of computers. In this network, users can earn FIL, the native cryptocurrency of the Filecoin network, by renting out their available storage space to other users who need to store their data. The decentralised nature of Filecoin is intended to provide a more efficient and cost-effective solution for data storage compared to traditional centralised cloud storage services.

The Filecoin network relies on a combination of cryptographic proofs, including Proof of Replication (PoRep) and Proof of Spacetime (PoSt), to ensure the integrity and reliability of stored data. These proofs provide a way for network participants to demonstrate they are storing the data they claim to be storing.

Filecoin’s decentralised approach aims to address issues like data privacy, censorship resistance, and data availability. It provides an alternative to traditional cloud storage services by allowing users to leverage unused storage space across a distributed network, creating a more resilient and censorship-resistant storage infrastructure.

How to Mine Filecoin

To mine Filecoin, ‘miners’ offer storage in return for tokens. Below is how this process works:

Filecoin Storage

Filecoin operates as a decentralised marketplace where clients can find storage providers and negotiate terms for storing their data. The market is driven by supply and demand, with prices for storage influenced by various factors, including the amount of available storage and the urgency of data retrieval.

Storage Providers

Users who have spare storage capacity on their computers can become storage providers on the Filecoin network. These providers, often called SPs, offer their unused disk space to the network to store and retrieve data. In turn, users or organisations in need of storage space can become clients on the Filecoin network, and they pay storage providers in Filecoin (FIL) to store their data on the network.

Retrieval Providers

There’s also a second group of providers: retrieval providers. Often called RPs, they are responsible for providing users quick access to their data, focusing on rapid access to data rather than long-term storage. Most of the time, storage providers also provide retrieval access to their users as part of the same system. However, more and more stand-alone RPs are joining the network.

Learn more about both here.

The Filecoin Token

FIL is the native cryptocurrency of the Filecoin network. Users pay for storage and retrieval services using FIL, and storage providers earn FIL by offering their storage space. The economic incentives created by FIL are designed to encourage users to contribute storage space and maintain the integrity of the network.

How Filecoin Works With IPFS

Filecoin was developed by Protocol Labs, the same team behind the InterPlanetary File System (IPFS). While IPFS focuses on creating a content-addressable, peer-to-peer method of storing and sharing hypermedia, Filecoin provides an incentive layer for users to store and retrieve data using IPFS.

By combining these elements, Filecoin aims to create a decentralised and efficient storage network that is resistant to censorship and provides a more cost-effective alternative to traditional cloud storage services. Users can benefit from a distributed network of storage providers, and the use of blockchain and cryptographic proofs helps ensure the security and reliability of the stored data.

Filecoin Tokenomics

Below are a few key aspects of Filecoin’s tokenomics:

Initial Coin Offering (ICO): Filecoin conducted a highly anticipated ICO in 2017, raising significant funds for its development. Investors purchased FIL tokens during the ICO, and these tokens were distributed to contributors once the network went live.

Allocation: Below is an overview of how Filecoin holdings are distributed.

Vesting Periods: Mining rewards undergo a vesting schedule to encourage long-term network alignment. For example, 75% of block rewards earned by miners vest linearly over 180 days, while 25% are immediately made available to improve miner cash flow and profitability. The remaining FIL tokens are vested to Protocol Labs teams, with Filecoin Foundation over six years and SAFT investors over three years. 

Total Supply: The total supply of Filecoin is capped, meaning there is a maximum number of FIL tokens that will ever be created. The initial total supply was set during the ICO and subsequent token sales.

Mining Rewards: Filecoin uses a Proof of Replication (PoRep) consensus mechanism, and miners are rewarded with newly minted FIL for providing storage space and maintaining the network. This serves as an incentive for participants to contribute resources to the Filecoin ecosystem.

Burn Mechanisms: Filecoin has implemented mechanisms where a portion of tokens used for various purposes, such as network fees or penalties, may be burned. Burning involves removing tokens from circulation, potentially impacting overall token supply and scarcity.

Storage Market Transactions: Users pay for storage services on the Filecoin network using FIL, and storage providers earn FIL by renting out their storage space to clients. The marketplace dynamics, influenced by supply and demand, determine the prices for storage services.

Incentive Mechanisms: Filecoin’s tokenomics is designed to create economic incentives for various participants in the ecosystem, including storage providers, clients, and miners. This helps align the interests of different stakeholders and encourages active participation in the network.

Network Upgrades: Like many blockchain projects, Filecoin may undergo network upgrades to improve performance, security, and functionality. Governance mechanisms and decisions related to upgrades may impact tokenomics, and stakeholders typically have a role in the decision-making process.

It’s important to note that tokenomics can evolve over time, and specific details may change as the Filecoin network matures and undergoes upgrades.

How to Buy Filecoin 

Filecoin (FIL) is listed in the Crypto.com App with a growing list of 250-plus supported cryptocurrencies and stablecoins, including Bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), USD Coin (USDC), and Cronos (CRO). 

Crypto.com App users can now buy FIL with USD, EUR, GBP, and 20-plus other fiat currencies and spend it at over 80 million merchants globally using the Crypto.com Visa Card.

Alternatively, users can also buy Filecoin on the Crypto.com Exchange. To start buying FIL today, download the Crypto.com App.

Conclusion

Filecoin (FIL) is a decentralised storage network and cryptocurrency that addresses the challenges of traditional cloud storage services. Developed by Protocol Labs, the creators of the InterPlanetary File System (IPFS), Filecoin leverages blockchain technology to create a global marketplace for storing and retrieving digital information in a peer-to-peer and open manner.

The network operates as a decentralised marketplace, allowing users to buy and sell unused storage space. Users with available capacity can become storage providers, earning FIL for offering their resources, while clients pay in FIL for storage and retrieval services. Filecoin’s decentralisation is supported by cryptographic proofs, ensuring the integrity of stored data and addressing issues like data privacy, censorship resistance, and data availability.

For those interested in buying Filecoin, the Crypto.com App offers a convenient platform for purchasing FIL with various fiat currencies. Users can also utilise the Crypto.com Exchange to buy Filecoin. 

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