In-depth analysis | To be honest, 95% of people have a narrow understanding of Filecoin

1. What is Filecoin?

Filecoin is more than just a transaction token.

It is a decentralized storage network that transforms cloud storage into an algorithmic marketplace.

It is a blockchain, but it is very different from traditional BTC.

It is a reward mechanism that encourages miners to actively provide storage and retrieval services to users in the form of FIL tokens.

It is also a protocol that uses three proof mechanisms - proof of replication, proof of space-time, and zero-knowledge proof. Miners provide effective storage space to create blocks and obtain corresponding FIL tokens.

Today's cloud storage solutions provide fast, highly scalable, and relatively low-cost data storage.

However, the pricing power of storage and services on these cloud storage platforms is in the hands of a small number of companies that provide storage services. The cost of these storage solutions is closely related to the use of the company's proprietary software, APIs, data infrastructure, and servers.

This means that storage buyers cannot directly and effectively access storage, but must pay for a large number of additional services and functions. It is estimated that enterprises waste $62 billion each year buying more storage services than they actually need from large technology providers that provide professional cloud storage solutions.

Beyond that, storage itself mostly exists near data centers that are already built or to be built, but these locations are generally far from where the stored data is generated or used.

There is also limited choice when it comes to cloud storage providers. Players with large data center networks and strong brand recognition make the barrier to entry very high. Migrating data from one provider to another can be slow, laborious, and expensive, and interoperability is not guaranteed.

We hope that in the future there will be a standardized tool that makes it easy for anyone to participate in the storage market as a provider.

Filecoin provides a blockchain-based marketplace that promises to revolutionize the global storage economy. The Filecoin marketplace provides a new and secure way for anyone to buy and sell storage.

Filecoin is more than just a network. The protocol lays the foundation for a market economy built around storing and retrieving data.

The idea behind Filecoin is that an open market for data storage and distribution will enable efficiency gains that centralized systems cannot achieve.

2. Filecoin, three markets, one network

1) Storage Market: Get data on the network. Storage miners provide rented digital storage, which will be verified by the Filecoin network.

2) Retrieval Market: Get data from the network. Clients pay FIL to retrieval miners to provide them with a copy of some verifiable data.

3) Token Exchange: Enables FIL to enter or exit the network. Exchanges allow participants to trade FIL with clients, miners, other token holders, or even other tokens.

The launch of Filecoin marks the beginning of a new two-sided market.

Two-sided markets are notoriously difficult to engineer successfully. The first problem is that you need both parties to show up (buyers and sellers), and the second is that you need economic incentives for both parties to work actively. A misstep early on could cost the network a lot of time, or worse, it could cause the network to never recover.

The challenges of building a successful marketplace are varied and complex.

An interesting and unique property of the Filecoin protocol is how it directly aligns economic incentives with the network mechanics.

For example, proving storage availability through cryptographic proofs is economically encouraged, but storing real data has a stronger incentive due to storage fees and verified client transactions. Similarly, through block rewards, the network incentivizes the technical behavior of providing data upon request in a timely and efficient manner, thereby promoting the efficient distribution of data.

In other words, the network directly incentivizes solutions to technical obstacles.

At the end of the day, Filecoin is a data market, an open exchange where you can provide storage rights to others in exchange for a fee. The Filecoin protocol itself provides specifications for almost all necessary market transactions, from storage transaction proposals, data transfer, storage proofs, and even data retrieval.