Filecoin is a decentralized computer storage protocol that allows anyone with a computer and internet access to host files on the blockchain. Think of Filecoin as a decentralized alternative to your favorite cloud storage platform, like Dropbox or Mega.nz.
In this article, I’m guiding you through the Filecoin protocol and its FIL token. You’ll learn more about how the protocol works, what it’s used for, and how big of a potential it has for widespread global adoption.
What Is Filecoin (FIL)?
Filecoin is a decentralized blockchain created to facilitate public, peer-to-peer file storage without the use of intermediaries or centralized entities. The protocol allows anyone to rent out free storage space on their computer for others to use.
The world is becoming increasingly interconnected. All facets of life nowadays are digital, and there is no doubt that the digitalization trend will continue. But to scale with demand, the world requires enormous data spaces practically impossible to introduce at a large scale without cementing centralization into digital life.
Data companies are already monopolizing the market. And given that things like IoT will lead to more and more personal information being stored online, there is a sense of urgency to prevent centralization from taking place.
Filecoin is a protocol that aims to prevent exactly that. The team behind the project wishes to enable anyone to provide online computer storage capabilities on their own. If the Filecoin blockchain grows large enough, internet users would gain access to petabytes of storage.
If successful, the project would also have a big impact on hacks. The nature of decentralization makes it impossible for a hacker to attack a blockchain network. There is simply no attack vector for the hacker to misuse because files are stored on a peer-to-peer network joined by individual computers.
Moreover, there is no big database to attack – a common case in centralized cloud storage platforms. In 2012, cloud storage provider Dropbox was hacked and leaked the passwords of 68 million users.
How Does Filecoin (FIL) Work?
The Filecoin protocol works by creating an open market for hosting file storage in which everyone can participate. The only things you need to join it are a computer (or another device) and internet access.
Clients requiring file storage inspect the blockchain and look at various offers. The client selects a person who offers the largest storage space at the lowest rate. Multiple hosts compete to sell their computer storage, so they’re incentivized to offer good prices.
The Filecoin initiative is basically a legal form of torrenting encapsulated into a capitalistic landscape. Those hosting data offer file storage at various rates while clients sign digital contracts to rent those spaces for a specific rate. Of course, the protocol uses its native FIL coin to process these renting agreements.
Decentralizing file storage removes censorship and price caps set by companies and their monopolies. In the first case, FIlecoin makes censorship impossible by hosting files on a network outside the domain of governments, regulators, and other entities.
Secondly, the project creates an open market in which anyone can participate. Doing so completely negates the relevancy of private cloud storage companies that keep artificial hosting prices that aren’t adequately represented by supply and demand.
Another important thing that Filecoin does is avoid the need to create new computer storage spaces. Instead, the protocol uses existing resources by allowing everyone with a computer to contribute to the network and rent their computer space. It’s an amazing way to reduce pollution and save the planet, right?
Disadvantages of Filecoin
Some disadvantages might prevent, or make it difficult, for Filecoin to reach global adoption and scale. You might have realized from other cryptocurrencies that the number one limitation behind blockchain networks is speed.
Modern file storage servers are superior to blockchains because of their centralization. They keep files on servers that have to meet certain criteria. Plus, they have all the infrastructure they need to ensure that these servers meet the standards of 2022.
The same can’t be said for the average user hosting files on Filecoin. There are large discrepancies between users. One might have a slow internet connection or a computer that can’t keep up with hosting files. So from the client’s perspective, he might get a good or bad deal depending on the specific individual he rents computer space from.
And even if everyone magically had a supercomputer with the fastest internet speed, there are still concerns regarding the Filecoin blockchain and its capabilities. If demand is high enough, the network might be unable to keep up and process transactions fast. This might also contribute to some delays with renting and hosting digital computer space – which would be noticeable compared to the cloud storage platforms I’ve previously mentioned.
Filecoin is an interesting and innovative alternative to digital file storage. The protocol aims to decentralized file storage by creating a peer-to-peer network in which everyone can participate and contribute computer space.
Such a move creates an open market with capitalistic characteristics in which the lowest rates win all the contracts. Those who host have to compete with others for contracts by offering the most data at the lowest prices.
If successful, Filecoin could break the monopoly established by modern cloud storage platforms. Moreover, it would remove data censorship because its blockchain is out of reach for any government, regulator, or federal agency.
Filecoin’s success depends mostly on its speed. The protocol should be capable of scaling with massive demand. There are some concerns about whether this is possible as there are two major limitations: the Filecoin blockchain and hosts. Those hosting storage have varying computer specifications and internet speeds, which makes establishing a uniform standard almost impossible.
If you want to learn more about blockchains, I recommend reading the following articles: