Filecoin production cuts, is IPFS mining the best investment?

Original by Shilian Finance

On April 15, 2021, Filecoin's production volume dropped for the first time, including the release of SAFT (Simple Agreement for Future Net Assets), Foundation, Team and Ecosystem. When all linear releases of SAFT for half a year ended on April 15, the daily production volume would drop by 43.2%, which means that the Filecoins flowing into the market would drop by 280,000 per day. The comparison of the market before and after the drop in Filecoin's production volume shows that Filecoin has grown more than ten times in just two months, from $22 in February to $328 in April.

After that, Filecoin will usher in another round of production cuts on October 15, 2021, and the linear release of all SAFTs for one year will be completed. After the expiration of FIL12 on October 15, the FIL flowing into the market every day will be reduced by 87,183 compared with the past. That is, the FIL circulation is expected to decrease by 29,057 per day, and the daily FIL release will be reduced by 23.8% compared with the current stage. The FIL market circulation will once again enter a trend of supply exceeding demand.

First of all, we need to understand that Filecoin's production reduction refers to reducing the circulation in the market, so this situation is bound to affect the growth rate of FIL. Supply is insufficient to meet demand, and the price of the currency rises, which is a truth that all investors understand. However, due to the early development of Filecoin, some people have seen business opportunities, so despite the reduction in production, most investors still want to join the ranks of miners.

This raises a question: Is IPFS mining the best investment?

With doubts, let's first understand what IPFS is? IPFS (InterPlanetary FileSystem) is a content-addressed, distributed, new hypermedia transmission protocol. Its emergence is to enable users to use the network more quickly, securely, and openly. The goal of IPFS is to connect all computing devices to the same file system, thus forming a global unified storage system.

Filecoin is the incentive layer of IPFS. If the IPFS network wants to run stably, users need to contribute their storage space and network bandwidth. Without an appropriate reward mechanism, it will become difficult to maintain such a huge resource expenditure on the network. Based on this, we know that IPFS and Filecoin are closely linked. The two coexist and complement each other. Filecoin has the advantages of optimizing global storage, greatly saving storage space; optimizing the global network, saving 60% of bandwidth (that is, increasing data storage by 60%); and optimizing resource allocation. With the support of Filecoin, IPFS has fundamentally improved the efficiency of society and become a true sharing economy.

According to Worldchain Mining, IPFS has been successfully applied in various fields such as browsers, data storage, file transfer, online video, social media, and decentralized applications since 2015. Its wide application is enough to show that IPFS has achieved success in many fields. The more IPFS users there are, the greater the demand for Filecoin, which will further drive the price of FIL up. Similarly, the more Filecoin miners there are, the greater the support for the IPFS network.

For investors who are currently mining, although FIL production has been reduced, their benefits will not be affected. At the same time, it reflects from the side that the cost of obtaining FIL is further increasing, causing the currency value to rise, which is helpful for recovering the cost and making profits. As we have mentioned above that IPFS and Filecoin are closely related, the process of miners mining is the process of collecting and storing data: users who need to store data pay a certain amount of FIL to miners - miners provide storage space to store user data and obtain FIL - miners retrieve files to data demanders and obtain FIL - data users obtain FIL to purchase the required file storage space. In this process, miners are always the party that obtains FIL, which shows that IPFS mining is indeed a good way to invest.

Furthermore, the increase in the value of Filecoin is mainly due to the fact that the FIL system of decreasing every 6 years leads to a decrease in the amount of currency produced, and the total amount is limited. However, the number of users is unlimited to a certain extent. The supply and demand relationship in the market is unbalanced, and price increases are inevitable. Then the huge demand provides a strong guarantee for miners.

Finally, for those who have not entered the market, or are still in the "preparatory" miners who are in the hesitant stage, the increase in the currency value may cause an increase in various fees, such as staking fees, GAS costs, etc., coupled with the accumulation of various butterfly effects, leading to higher entry costs, tight supply and demand in the FIL market, and further tightening of the circulation market, which is not conducive to profit.

With the further implementation of the IPFS distributed storage ecosystem, the number of miners entering Filecoin continues to increase, and the demand for Filecoin storage pledge is also increasing. According to the supply and demand relationship, when the number of SAFT releases decreases and the market demand for FIL increases, the price of FIL will inevitably rise to a certain extent. In addition, with the market recovery and the recent frequent positive actions of Filecoin officials, the future value and ecological prospects of FIlecoin are limitless.

It can be seen from this that at the moment when Filecoin production is reduced, IPFS mining is undoubtedly a safer investment method for miners who have already entered the market.

This article is original to Shilian Finance. Please indicate the source when reprinting.