Filecoin is a decentralized protocol that allows people to rent out spare storage space on their computers. Filecoin is one of the most complex things the blockchain industry has ever marketed. With over 10000 different altcoins out there, it is hard to know which ones are worth investing in.
Filecoin’s developers claim that with enough support, this could be the fastest and cheapest way to store data on the internet has ever been there. A place to store data that do not rely on a central authority and no one can censor the data. If you are interested in this cryptocurrency, you should keep reading to understand everything about it.
What Is Filecoin?
Filecoin is a decentralized peer-to-peer network for sharing and storing data or Interplanetary File System (IPFS). Juan Benet created Filecoin as a blockchain built on top of IPFS, with its governance cryptocurrency named FIL. The total network storage of the platform has surpassed one exbibyte in November 2020.
This storage is enough to keep 4500 copies of Wikipedia, 290 million full HD movies, or 685,000 years’ worth of video calls.
Anyone can purchase storage on the network. People worldwide can participate in the network so that the protocol can create massive data storage.
How Does Filecoin work?
The Filecoin Network provides a peer-to-peer network that connects users and storage providers. If you wonder about mining Filecoin, you should know that miners in this platform are not rewarded in FIL. The proof-of-work consensus mechanism works differently in this protocol. Miners are Filecoin nodes that own computers with internet connections and rent spare storage. Nodes that provide the storage are the miners and are rewarded with FIL for providing storage to the network.
On the other hand, we have users who are the people looking to rent storage. You might not feel comfortable storing valuable information on someone else’s computer. However, Filecoin breaks down your important information before storing it. So in case of a hack, a malicious actor will only have access to a meaningless piece of data.
An agreement between users and storage providers is made to secure the network. The agreement is called a deal. We will talk about it later in detail.
After the deal is final, miners continue to store the clients’ data. To ensure this happens, Filecoin uses a unique consensus mechanism, called proof of replication or proof of spacetime. We don’t want you to spoil it and talk about it later.
Miners execute deals and add new blocks to the chain every 30 seconds, and they will get FIL as a reward. To be a Filecoin miner, you need hardware requirements.
Miners do not contribute computational power to the network. However, they contribute to storage capacity to deal with clients looking for a place to store data.
There are two different types of miners on the Filecoin network.
Storage miners are responsible for storing data and act as the heart of the network. They earn FIL for restoring data and providing proofs to guarantee storage across time.
Retrieval miners earn FIL by winning bids. If storage miners are the heart of the network, Retrieval miners are the veins. The Retrieval miners’ bandwidth determines how many deals they can make.
Storage deals and retrieval deals are two main types of Deals in Filecoin.
The deal between clients and storage providers (miners) for storing some data in the network is called storage deals. Once the deal is agreed upon, the miner will receive the data to the store and continue to prove that he’s still storing the data.
The deal between users and retrieval miners or storage miners to extract data is called retrieval deals. The main difference between storage and retrieval deals is that retrieval deals are fulfilled off-chain.
So far, we know that storage miners must prove that they continue to store the data per the terms of the agreement. It means they must continue to store the data the whole lifetime of the deal. There are two kinds of proofs miners can use.
Proof of Replication (PoRep)
By using this type of proof, miners illustrate that they have received the data successfully and encoded it so that no other miners can replicate it.
Proof of Spacetime (PoSt)
Once a deal is agreed upon, the miner should use Proof of Spacetime to demonstrate that he is still storing the data. The miner proves that the random part of the data he hold is still there.
Every miner that do not honor the deal will be penalized, slashed, and lose FIL.
What Are the Benefits of Using Filecoin?
The use of computerized systems increased over the years, and storing data became more difficult. The only available space is centralized, which costs a fortune. Filecoin joined the market to solve this problem.
Filecoin is a peer-to-peer network that allows easier access to storage. Using this network, people can rent out their spare hard disk space as storage. Increased storage meets the increased demand for storage and eventually leads to decreased costs for storage. By creating a free market for data storage, Filecoin reduced the cost. It solves the problem of scalability by bringing millions of computers around the world together to create a massive storage network. As the network uses the existing resources, there is no need to build new storage computers.
The Disadvantages of Filecoin
When a client asks to receive data, the retrieval miner needs to access multiple servers to piece together documents instead of one server.