Research Report | Multi-dimensional Data Analysis, FIL Value Geometry

Filecoin is a decentralized storage network that transforms cloud storage into an algorithmic market. It is the incentive layer of IPFS and its only official token, with the token symbol FIL. The Filecoin mainnet was officially launched on October 15, 2020. In the past six months of development, the Filecoin network has gradually stabilized and its computing power has continued to grow. As of March 31, 2021, the total computing power is 3.77EiB, the coin price is $185, and the market value is $19.7 billion.

Data source: Filecoin network public data, coinmarketcap, 2021/3/31

Table 1: Filecoin project parameters (as of 2021/3/31)

The effective computing power is the computing power stored by miners after receiving orders, which includes both effective storage and self-filled storage; the FIL wallet is a tool used by miners and ordinary users to store FIL; the number of effective miners is the number of miners whose current effective computing power value is greater than 0. These three indicators are important parameters reflecting the participation in the development of the Filecoin project. The following figure shows the changes in each parameter as of March 31, 2021 after removing abnormal data. It can be seen from the figure:

1. At the beginning of the mainnet launch, the effective computing power of the Filecoin network increased at an average rate of 10PiB/day. As of March 2021, the average growth rate of the effective computing power of the entire network was 30PiB/day, and the total value has reached 3.77EiB (about 4 billion videos with a capacity of 1GiB can be stored);

2. The number of FIL wallet addresses continues to increase, and the number of new wallets added daily has increased faster than before. Since March, the number of FIL wallets has increased from an average of 1,000 per day to about 2,000.

3. The number of active Filecoin miners has increased nearly five times from the initial 311 to the current 1,601.

Data source: Filecoin network public data, 2021/3/31

Figure 1: Changes in effective computing power, number of wallets, number of effective miners, etc.

FIL not only has digital currency attributes, the Filecoin project also has a wealth of practical application scenarios. Before the birth of Filecoin, blockchain-based applications could not be developed on a large scale. One of the bottleneck technologies that restricted application development was that traditional blockchain technology could not store large amounts of data. The birth of Filecoin can effectively solve this problem.

Since the development of the project, in addition to continuous breakthroughs in the underlying blockchain technologies such as developer tools and protocol tools, more participants have entered the cross-chain transactions of FIL tokens and data storage Dapps. The Filecoin project closely links developers, Fil holders, and data storage customers, forming a rich ecological closed loop. At present, the Filecoin ecosystem is developing actively, with 4 mainstream ecological acceleration incubators: slingshot (a community competition focusing on data storage and development services), Filecoin frontier, Filecoin launchpad, and Huobi's Filecoin incubator. The Filecoin launchpad accelerator alone has received applications from more than 100 teams. Successfully incubated projects will receive capital investment from distributed capital, techyon, longhash, and Huobi Ecology. The following is a case diagram of the Filecoin ecosystem and some incubator incubation cases:

Data source: Filecoin Launchpad Accelerator, 2021/2/21

Figure 2: Case diagram of the Filecoin ecosystem

Data source: Filecoin blockchain, Filecoin Frontier, 2021/3/31

Table 2: Filecoin project related incubation cases

2.1 The data storage value of FIL

The main demand of data storage is to ensure the security of data access and optimize storage space while reducing storage costs. In response to such data storage needs, the current market is mainly dominated by centralized data storage solutions and decentralized data storage solutions. Centralized data storage can be simply understood as data information stored on servers that third parties have access to, while decentralized data storage uses fragmented encrypted storage methods to store data information on multiple servers, and data can only be accessed through effective verification. Although centralized data storage solutions and decentralized data storage solutions are both secure and efficient data storage methods, their performance is still different.

Because of the differences in the layout and performance of the servers storing data, centralized data storage solutions are often easier to update data and take less time than decentralized solutions. However, decentralized data storage represented by FIL is also less likely to cause permanent data loss and theft, and is less likely to cause congestion when there is a high volume of visits. Due to the high cost of personnel, venues, and operations for centralized data storage, the price per unit of data storage is also higher than that of decentralized solutions. For example, the solution provided by decentralized data storage provider Storj charges $55 per TiB of data, which is half the price of Amazon S3 and nearly one-third of Google Cloud. FIL has been online for a short time and is still in the market incubation stage, so the data storage order fee is very low. As the ecosystem gradually develops, Filecoin will continue to provide customers with secure and inexpensive decentralized cloud storage solutions.

Data source: Memolabs, 2019/8/25

Table 3: Comparison of indicators between centralized data storage and decentralized data storage

2.2 Currency Value of FIL

FIL is a decentralized digital encrypted asset that plays the role of a new era digital currency on the Internet. Whenever a user stores data on the Filecoin network or conducts a decentralized exchange transaction, FIL must be used.

2.2.1 FIL Circulating Market Value

FIL is a digital cryptocurrency. When studying its monetary value, it is inevitable to analyze its circulating market value. The following figure is an analysis of the changes in FIL's circulating market value.

As can be seen from Figure 3, since its launch, the FIL circulating market value (FIL circulating market value = FIL coin price * FIL market circulation) has shown a continuous upward trend. As of March 31, 2021, the FIL circulating market value has increased from $900 million at the beginning of its launch to $19.7 billion, that is, the FIL circulating market value has increased 28 times in half a year.

Data source: Filecoin network public data, 2021/3/31

Figure 3: FIL circulation market value analysis

2.2.2 Comparative analysis of the circulating market value of FIL, ETH, BTC, etc.

As the leader of digital cryptocurrencies, BTC's market value has always been an important reference for the market value assessment of other cryptocurrencies. We use the relationship between ETH's market value and BTC's market value to benchmark the trend of the relationship between FIL's market value and BTC's market value. As of March 31, 2021, ETH is the second-ranked digital currency by market value①. From 1% of BTC's market value in circulation to 20% now, ETH has gone through 5.6 years of development. FIL's current market value is about $20 billion (about 1.8% of BTC's market value). If FIL's market value is to reach the current level of Ethereum's market value in Bitcoin's market value, it will still require long-term market incubation.

Note:

①The data on the launch time, circulation market value, and related rankings of FIL, BTC, and ETH are from the official website of coinmarketcap.

Data source: Coinmarketcap, 2021/3/31

Table 4: Changes in ETH market value

FIL was launched on October 15, 2020, and it lasted for 168 days until March 31, 2021. Figure 6 shows the daily market value changes of FIL, BTC, and ETH① within 168 days of its launch. It can be seen from the figure that the market value of BTC and ETH did not change much in the first 168 days after its launch, while the market value of FIL increased from US$900 million to the current US$19.7 billion, an increase of 21.5 times, which is 21 times the increase in BTC market value during the same period (within 168 days of its launch) and 8.5 times the increase in ETH market value.

Data source: Filecoin network public data, 2021/3/31

Figure 4: Comparison of market value changes of FIL, BTC, and ETH within 168 days of listing

2.2.3 FIL daily on-chain transfer amount

The daily on-chain transfer amount is the number and composition of transfers that occur on the chain every day, in currency units (for example, 50 million FIL).

From Figure 5, we can see that after February 20, the daily on-chain transfer amount has continued to decrease. Although the currency price is increasing, the on-chain transfer amount is decreasing. This shows that more participants did not choose to earn profits when the currency price was high, but preferred to hold the currency for a long time. That is, the number of short-term speculators of FIL decreased, while the number of long-term holders increased.

Data source: Filecoin network public data, 2021/3/31

Figure 5: Daily on-chain transfers

2.3 The consumer value of FIL

2.3.1 Analysis of FIL supply and demand

The essence of the market is buying and selling, and the essence of buying and selling is the relationship between supply and demand. The supply and demand relationship of FIL affects the market trend. From the supply of FIL, the source of FIL tokens mainly comes from investors, officials, and miners. As of March 31, 2021, the total circulation of FIL is 109 million FIL, which includes the 20% linear release part held by Protocol Labs and the Foundation for a long time. Therefore, the actual circulation of FIL in the secondary market is less than the statistical value on the chain.

From the current demand for FIL, since Filecoin mining requires staking, part of FIL will be used for staking mining, and part will be used to pay for GAS fees in storage transactions. In addition, participants who are optimistic about the future market of FIL will increase the demand for FIL holdings, as well as the demand for FIL as a currency paid by customers for distributed storage in the future, which will also increase the market demand for FIL.

As can be seen from Figure 6, the supply/demand ratio is gradually decreasing, indicating that the increase in FIL demand is greater than the increase in market supply. Based on the current FIL market supply and demand relationship, there may be a shortage of supply in the future. In addition, it is worth noting that on April 15, 2021, the daily release of ICO will be reduced by about 160,000 FIL. At that time, the supply will be reduced accordingly, and the supply and demand relationship may face deflationary pressure.

Data source: Filecoin network public data, 2021/3/31

Figure 6: Changes in FIL supply and demand ratio

2.3.2 Currency ratio

Currency ratio: the ratio of FIL circulation to Filecoin network computing power. The lower the currency ratio, the greater the deflationary pressure on FIL tokens, and vice versa.

Figure 7 shows the change in the currency ratio after removing abnormal data. It can be seen from the figure that with the passage of time, the FIL currency ratio gradually decreases, that is, the amount of FIL that can be obtained with a single T effective computing power cost investment is getting smaller and smaller, indicating that the deflationary pressure of FIL is gradually increasing.

Data source: Filecoin network public data, 2021/3/31

Figure 7: Changes in FIL currency ratio

2.3.3 Token FIL Distribution Strategy

The distribution of FIL is carefully thought out and designed, and is not a random act. Protocol Labs has done a lot of analysis to ensure that the token issuance process is smooth and there will not be a sudden release of a large number of tokens that would cause drastic fluctuations in the currency price.

Data source: Filecoin Economic Model White Paper, 2021/3/31

Table 5: FIL distribution details

Note:

The distribution period in the above table refers to the time starting from the launch of the Filecoin network. For example, in a 6-month distribution period, all distribution will be completed within 6 months after the network goes online.

It is not difficult to find from Table 5 that 55% of FIL can only be obtained through mining, and the tokens released by ICO and the official account for 30% of the total. In a short period of time, there is very little FIL circulating in the market. Storage miners need to pledge a part of FIL tokens to promise that their hard disks are reliable and always online. Customers have to pay FIL to enjoy the service of file storage. The more people participate, the more FIL needs to be pledged and traded. The circulation of FIL tokens comes from the daily release of ICO, officials and miners. The FIL released in the early stage will not flow into the secondary market immediately, and may be held for a long time or mined and pledged. In addition, the official unlocks and releases 182,500 FIL every day, promising that it will not be sold in the early stage. Therefore, the circulation of FIL in the early stage is very small. As of March 31, 2021, the circulation of the entire network is 109 million, accounting for only 5.4% of the total supply.

2.3.4 Total amount of GAS tokens burned

GAS burning tokens are fees paid to the network for executing transactions, which are used to measure the consumption required to execute transactions. As the number of miners in the Filecoin network continues to increase, more and more cars are driving on the Filecoin network highway, the Filecoin network is becoming more and more crowded, and the price of GAS fees is also rising.

Regarding the destruction of FIL, in addition to the total amount of tokens destroyed due to penalties for storage failures and consensus failures, some FIL is also destroyed as network transaction fees for paying for on-chain computing and bandwidth, which brings long-term deflationary pressure to the tokens. In short, the burning token mechanism can burn a certain number of tokens according to predefined logic, thereby increasing the scarcity of tokens. In theory, this mechanism will eventually allow fewer tokens to chase more value.

As the FIL price rises, GAS consumption increases, and the investment costs of participants will increase significantly. In order to reduce costs, in principle, the investment will be reduced accordingly as the price increases. However, as we can see from Figure 8, the total amount of GAS tokens burned in the entire network has not decreased due to the increase in the price of the currency. Instead, the participants are constantly increasing their investment consumption.

Data source: Filecoin network public data, 2021/3/31

Figure 8: Total amount of FIL tokens burned

2.4 FIL asset value

2.4.1 FIL pledged asset value

From the perspective of miners' asset collateral, the amount of FIL pledged is an important indicator worthy of attention.

Filecoin's network mission is to create a distributed, efficient and powerful foundation for human information, and will achieve this mission by incentivizing its economic growth. It is difficult to achieve this mission by technical means alone, and economic means must be added to achieve it together, so the official added a pledge mechanism.

As with GAS token burning, the higher the price of the coin, the more staking is invested, and the higher the investment cost. In principle, investors should suspend or delay FIL staking when the price of the coin rises to save costs. However, as can be seen from Figure 9, as a collateral for miners' assets, the daily staking amount of FIL is constantly increasing, and it has not decreased due to the rise in the price of the coin.

Data source: Filecoin network public data, 2021/3/31

Figure 9: Daily new staked FIL

2.4.2 FIL loan asset value

The functionality and performance of the Filecoin network will continue to evolve over time. In order to better handle the problem of FIL pledge shortage, the official and relevant service providers in the market are preparing or have launched FIL lending services. FIL lending services, that is, token holders can lend their tokens to miners as third-party pledges, and cooperate with miners to diversify market volatility risks and obtain benefits.

This is another key shift in the value of FIL. The FIL lending function transforms FIL from a consumable commodity to a productive commodity. FIL holders will be able to generate interest by lending FIL, which is equivalent to giving FIL assets functions.

Its initial value comes from its commodity use and the supply and demand dynamics of the market. Those who are confident in the future price prospects of FIL can lend tokens to miners. Miners use the borrowed tokens as collateral for mining. Token lenders obtain interest spreads by lending tokens, while miners increase production operations with borrowed tokens to obtain greater profits. The lending business may eventually play a positive feedback loop role in the price of FIL.

2.5 Relative value of FIL

Decentralized data storage based on blockchain technology had its prototype as early as 2014. The project party hopes to attract all parties to participate in the construction of cheap and secure data storage solutions by integrating idle storage resources and issuing blockchain incentive layer tokens. With the surge in global data volume, more project parties are participating in the data storage track in a broad sense, but each company still has different development visions. In addition to ensuring data storage security and efficient retrieval, this track also includes data sharing, data value exchange, Dapp hosting and other data derivative services. At present, there are nearly 20 decentralized data storage service providers that have issued relevant tokens, and storage sectors have also been opened in major exchanges. The following table lists representative project parties. In terms of token financial indicators, Filecoin's current market value ranks first in the data storage field and is the only token in this field with a market value of over 10 billion US dollars. The market value gap with BitTorrent, which ranks second, is more than double, and the leading effect is beginning to emerge.

Data source: coinmarketcap, 2021/3/31

Table 6: Comparison of decentralized data storage tokens

Blockchain projects that are deployed in the data storage track are running public chains at the bottom layer, and their data storage methods and data protection mechanisms are different. In terms of technical indicators, the following will analyze the parties that have formed a clear competition with Filecoin. At present, Filecoin's effective storage space is up to 3.77EiB, and it is the only storage service provider that has reached the EiB level. This value means that there are massive data storage resources on the network. At the same time, as the network grows and develops, the improvement of participating nodes will be conducive to the speed of nearby data capture, and will have a long-term positive effect on data retrieval and exchange.

The vision of decentralized data storage providers is to more effectively centralize idle personal storage resources, but more and more projects tend to use professional-grade data server storage. Although there is a high-quality guarantee in storage performance, it also prevents the integration and utilization of personal resources. With the data storage quality guarantee of professional-grade servers and the steadily growing number of nodes, Filecoin will provide customers with high-speed and secure data storage and retrieval services in the future.

Among the major projects, only Arweave uses permanent storage to serve customers, and its customer positioning is mainly to serve projects with permanent data storage needs such as blockchain development and some non-profit online libraries. Other project parties are mainly focused on competing with traditional cloud service providers such as Alibaba and Amazon AWS in low-cost cloud services. Since the project is in the early stages of development, the cost of storing real and valid data on the Filecoin network is currently very low, and it has a clear price advantage over traditional cloud service providers. Finally, in the design of data protection mechanisms, in addition to adopting the industry's common practice of encrypting and fragmenting data and storing it on different servers, Filecoin also uses complex proof methods to require servers to continuously prove the validity and integrity of data to enhance data security.

Data source: Filecoin mainnet, Arwaeve, Siacoin, 2021/3/31

Table 7: Comparison of decentralized data storage technologies

The development of data storage requires the joint promotion of ecological members within the industry, including the incubation of value teams by capital parties; technological breakthroughs by project parties; community members enjoying the economic dividends of industry development; and data storage demanders obtaining effective solutions.

The following lists the important ecological members of each major project during its development. The Filecoin project attracted the favor of top digital asset venture capital and traditional financial private equity in the early stage of fund raising. In December 2020, Huobi Group further cooperated with Protocol Labs to establish a $10 million incubation fund to support the development of the Filecoin ecosystem. In addition, the market popularity of Filecoin has also spread to upstream miners. At present, the computing power of the Filecoin network has maintained an upward trend at an average rate of 30PiB per day, and the number of active miners has increased at an average rate of 30 per day. Although Storj currently has relatively more nodes than Filecoin, Storj mainly uses a decentralized storage method and uses idle data storage servers as the main storage means, while Filecoin uses a clustered method with professional-grade servers as the storage means, which will have more advantages in storage space, computing speed, and retrieval speed.

Finally, Filecoin's vertical ecosystem is broader. Since Storj runs on Ethereum and does not have an independent public chain, its ecological development is mainly based on commercial cooperation. The other companies all have their own public chains. In addition to traditional developer tools, token tools, and data Dapps, Filecoin is also deepening ecological cooperation in scientific research and cross-chain transactions.

Data source: Golden Finance, Arweave official website, Vernacular Blockchain, 2021/3/31

Table 8: Comparison of decentralized data storage ecosystems

At present, the Filecoin project continues to grow in popularity as the ecosystem expands. Not only are there more and more participants in the industry's source mining end, but more and more teams are joining in the customer data storage end and application development end. Although the FIL token was launched later and is younger than BTC and ETH, its upward momentum is faster. Currently, Filecoin has become the largest project in the field of decentralized storage in terms of scale and market value.

There is no clear FIL value assessment method in the field of market analysis. This article analyzes the value of FIL from four dimensions of value expression: blockchain storage value, FIL's monetary value, FIL's consumer product value, and FIL's asset value. It also conducts a relative value assessment based on ten indicators, including its circulating market value, supply and demand, currency ratio, GAS combustion, and pledged assets, for your reference.

The Filecoin project ecosystem is gradually becoming complete, and the price of FIL in the secondary market reflects the intrinsic value of the Filecoin project. We can observe from relevant data that multiple indicators such as the number of new FIL wallets, the number of active miners, the volume of storage orders, and the FIL circulation market value are constantly rising. These indicators are relatively positive signals for the development of the industry.