Filecoin (FIL): What is It and How Does It Work

Filecoin is a blockchain platform for decentralized data storage that gives users financial incentives to use it. It is one of the most important Web3 infrastructure projects.

Protocol Labs made Filecoin. They did this by making the IPFS network communication protocol for shared file storage. She also started the popular platform CoinList for crypto projects to raise money through crowdsourcing.

Proof of Spacetime (PoSt) and Proof Of Replication (PoR) both work together to make sure that data stored on the Filecoin network is safe and correct (PoRep). On the Filecoin network, miners are in charge of storing and giving out data.

Filecoin’s native currency, FIL, is used as an economic incentive for people to store data and work with other Filecoin participants.

Filecoin Architecture

The Filecoin platform is like Amazon Web Services or Alibaba Cloud, but it doesn’t have a central server. It is based on the IPFS protocol, but it adds economic incentives on top of that.

Anyone can use Filecoin by paying for their files to be stored on the network. On the other hand, anyone can add their own storage equipment to the network and get rewarded with FIL, the native currency of Filecoin.

Main parts of how Filecoin works:

• The person who needs to put the data in Filecoin’s decentralized storage pays a fee to do so.
• Based on the idea of a service level agreement, a good storage provider (a miner) writes a guarantee for storing a set of data in the Filecoin blockchain.
• The blockchain protocol checks the integrity and parameters of the data that is stored all the time.
• A dedicated data provider fills requests for data for a price that is set by the market.

In addition to getting paid for storing data, miners also get paid for making blocks. How big it is depends on how much space the network gives it. At the moment, there are more than 4,000 miners working on the Filecoin blockchain. At the moment, one block is worth about 20 FIL.

Filecoin uses IPFS technology as well as the libp2p modular networking stack, IPLD-based data models, the Multiformats protocol suite for protocol flexibility and compatibility, and its own educational resource, ProtoSchool.

The Consensus Algorithm for Filecoin

Filecoin is different from other blockchains in a big way because it uses two algorithms at the same time. These algorithms are in charge of reaching consensus in two different network processes.

Information copied

This process is run by the Proof-Of-Replication (PoRep) consensus algorithm. PoRep’s job is to show that the data stores got the files sent for storage correctly and encoded them correctly. This is part of the proof that Filecoin gives at the beginning and end of a transaction for storing files.

Data storage

In Filecoin, this is done with the help of the Proof of Spacetime (PoSt) consensus algorithm. The goal of PoSt is to show that the person who is “in charge” of the information still has the information about the transaction.

The information being sent is compressed and encrypted using zk-SNARK technology by both algorithms.

Filecoin’s consensus is set up so that the validity of both proofs is checked in every new block of the network. This makes sure that the data is safe.

Filecoin is a modular project made up of different parts.

The History of Creation

In 2014, the Californian company Protocol Labs published the idea for the first version of the Filecoin blockchain platform, which was based on the Proof-of-Work consensus. This was the start of the Filecoin blockchain platform.

From 2014 to 2017, Filecoin went through its next stage of growth. At this point, Protocol Labs made a new protocol for the InterPlanetary File System, which is a decentralized network (IPFS). IPFS is similar to a torrent network, but it is a more advanced way to store and share files.

Juan Benet, who was the head of Protocol Labs, wrote IPFS. The HTTP and HTTPS Internet protocols are replaced by this solution. The ipfs:/ prefix is at the beginning of every file address in an IPFS store.

In 2016, the OpenBazaar protocol was one of the first projects to use IPFS technology. The project turned into a decentralized market, but in 2021, it stopped working.

In 2017, the Filecoin team used an ICO to raise $257 million. Protocol Labs and AngelList worked together to make the CoinList platform, which was used for the token sale. The token sale went through according to the SAFT legal framework. This means that the ICO is in line with financial laws.

In October 2020, Filecoin’s decentralized storage platform mainnet went live.

In February 2022, it became known that Tiger Global Management, a large investment firm, was putting money into crypto projects, including Filecoin.