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What is Filecoin (FIL)?

BitForex Editor
Feb 07, 2021

The concept of Filecoin is one that has generally become popularized over the years; it offers a more suitable alternative for Dropbox space, Amazon S3 storage buckets, and getting locked into similar cloud storage contracts. With the appropriate infrastructure, anyone is capable of purchasing and selling storage on the Filecoin platform while still making their contracts as well as setting their prices. Filecoin has numerous features and offers some significant benefits, but before diving into that aspect, it is necessary to understand the meaning of Filecoin.

Filecoin (FIL) Explained

Filecoin is the name given to a decentralized storage network that provides the opportunity for anyone to rent out storage space. It also allows anyone to purchase storage on the network. In this case, you are no longer limited to trusting one company with important information and data. With Filecoin, all your information can be divided and stored on different computers around the world.

The concept of “Filecoin” was brought to the public’s awareness in 2014 when the whitepaper, titled “Filecoin: A Cryptocurrency Operated FILe Storage Network” was released by Juan Benet. The proposal is a blockchain network which had certain similarity with Bitcoin, however, in this case, the nodes in the network are capable of storing data, guaranteed by proof of retrievability. It is necessary to mention that Protocol Labs developed Filecoin.

Sometimes, Filecoin is referred to as an incentive layer that sits on top of IPFS. In context, this means that users are incentivized to rent their storage space out by getting paid in FIL tokens. This does not imply that Filecoin can be used to send Christmas photos to Venus or Mars, at least not yet. IPFS is a retrieval protocol as well as a peer to peer data storage, which is built on a more decentralized approach. It also doesn’t rely on centralized serves to store information, unlike HTTPS or HTTP. In their 2017 ICO, Filecoin raised an estimated 250 million dollars, a record at that time. In October 2020, the Filecoin mainnet was launched.

How Filecoin (FIL) Works

The Filecoin infrastructure is basically a peer to peer distributed network that mainly serves the purpose of providing new means for individuals as well as organizations to store data around the world. When people possess available free storage, they can become storage miners who are basically in charge of storing data on the FILe network. Clients pay tokens both for retrieving and storing data.

Another class of participants are the “Retrieval miners.” They are responsible for facilitating the information retrieval process between storage miners and clients while also gaining a little FIL fee for their input. Filecoin makes use of the common end-to-end encryption, and the decryption keys are inaccessible by storage providers. As it is a distributed system, FILes are safely kept across numerous storage locations.

One crucial question is what reasons make Filecoin potentially more suitable than its centralized competitors. Basically, it provides a peer-to-peer cloud storage solution for consumers and businesses. Because a similar item, which in this case is “storage: is offered by various sellers potentially at different prices, the consumer tends to gain in the end. While most times you might not have enough storage for your data, sometimes you will have a surplus amount, which you can easily sell, and that is the benefit of Filecoin.

Why is Filecoin (FIL) Important?

Over the years now, there has been a change in the way we access as well as store data. This has changed for on-site storage in a business where companies have large server rooms to remote data storage as well as cloud storage across the entire world. Today, numerous businesses use a combination of all of these. In the same way, there have also been changes to the data storage of consumers with a higher dependency on cloud storage.

This increased the prominence of major cloud storage markets like Dell HPE and AWS. Business providers usually choose one provider and stay with it for years, which hampers competition. Filecoin provides the opportunity for customers who want to buy storage to easily check out the best deals on the fly, irrespective of who the storage provider is. Generally, this tends to bring about a competitive storage market, most likely.

Use Cases Of Filecoin (FIL)

As earlier implied, Filecoin provides the opportunity for consumers to pick the most effective storage choices instead of choosing high rates for on-demand storage or locked-in vendor contracts. People or organizations that possess unused storage spaces are capable of offering it on the network. They are in turn rewarded in FIL for sharing their resources. While this might not seem obvious at first glance but DApps can be built for storage, too and they include decentralize video apps, Defi apps, consumer storage app, amongst others.

How To Store Filecoin (FIL)

Irrespective of if you are making or spending FIL on the Filecoin platform with storage activities or trading your tokens, the fact is you will need somewhere to store them. There are at least three wallets that are recommended by Filecoin for FIL. One is LOTUS, which can serve the purpose of running Filecoin nodes and be hooked up to the ledger. Another is GILF WALLET, which is a web-based interface that can also be linked to your ledger if you don’t want to use lotus. Finally, the FILFOX WALLET, which is a web-based wallet, that can be used for your tokens.

In context, Filecoin provides one of the best solutions and answers to global FILE storage and retrieval inefficiencies. It also gives power to the customer, who is less likely to be bound by contracts with large organizations. With a polished set of tools as well as a live mainnet, Filecoin is already out in the world. The success of Filecoin’s ecosystem will significantly depend on the amount of usage it gets in the crypto community and also if it is capable of attracting new users into the world of web 3.0. There is no doubt that Filecoin indeed offers a lot of benefits for its users, and it is safe to say that it has other potentials that could be discovered in the future.

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