FIL is about to reduce production, which may push FIL into a market where "supply exceeds demand"

Recently, the topic of "FIL will reduce production on April 15" has attracted the attention of the community. Many people have expressed concerns and raised questions: "Is FIL really going to reduce production?" "Does the FIL production reduction mean that FIL miners will have less mining income?"

FIL is indeed about to reduce production, but this reduction in FIL will have almost no impact on miners’ mining block revenue, so the community does not need to worry too much.

Why is FIL production reduced?  

If we want to know the impact of FIL production reduction, we need to first know why FIL production will be reduced?

Why FIL production is reduced? This is related to the release rules of FIL.

Filecoin officials believe that a reasonable release rule can incentivize long-term adjustments, guide participants away from short-term speculation, and encourage all stakeholders to work together to improve the long-term effectiveness of the Filecoin network. The core principle and mechanism is the release of stakeholder tokens.

Therefore, the Filecoin official team carefully set up the FIL release mechanism.

• For miners . All mining rewards are subject to different forms of unlocking to encourage long-term network adjustments. For example, 75% of the block rewards earned by miners are unlocked linearly over 180 days, while 25% of the rewards are immediately provided to miners to improve miner cash flow and profitability.

• For SAFT investors . All FIL received by SAFT holders are subject to 6-month, 1-year, 2-year, and 3-year linear lock-up terms starting from network launch. Most purchased SAFT tokens unlock linearly over 3 years.

- 58% of SAFT tokens unlock linearly over 3 years.

- 5% of SAFT tokens unlock linearly over 2 years.

- 15% of SAFT tokens unlock linearly over 1 year.

- 22% of SAFT tokens unlock linearly over 6 months.

• To the Filecoin Foundation . The Filecoin Foundation's 100 million FIL will be unlocked linearly over 6 years from the launch of the network.

• To Protocol Labs . Protocol Labs' 300 million FIL will be unlocked linearly over 6 years from the launch of the network.

From Filecoin's economic model, we can see that the variable of FIL release lies in the SAFT (Simple Agreement for Future Tokens) part. SAFT can be understood as the FIL shares held by Filecoin's early investors. According to Filecoin's economic model, the shares held by early investors account for 7.5% of Filecoin's total shares.

The total amount of Filecoin is 2 billion, and 7.5% is 150 million FIL. These 150 million FIL will be released in 6 months, 12 months, 24 months and 36 months. The release in 6 months means that it will be continuously released from the first day to the 180th day (6 months) after the mainnet is launched, and it will be released on the 180th day (6 months), that is, on the 181st day, the total network output of Filecoin will be reduced.

Filecoin’s mainnet was launched on October 15, 2020.

Starting from October 15, 2020, the first phase of SAFT's 6-month linear release will expire on April 15.

After April 15th, there will be no more FIL6 released on the market, which means that the output of FIL6 will be reduced.

What are the impacts of FIL production reduction?

First of all, we need to make it clear that this FIL production reduction is limited to the SAFT part and has no direct impact on the daily block rewards obtained by miners.

However, as the number of miners joining Filecoin mining continues to increase, the demand for FIL staking + gas is also increasing. In addition , the FIL obtained by miners from daily mining is 30% released in one go + 70% released linearly over 180 days , which in itself makes the demand for FIL extremely large.

The daily output of FIL will be reduced again after April 15, and is expected to decrease by about 43.2%. This may push the FIL supply and demand market to a state of "supply is less than demand" or "supply is insufficient to meet demand".

So, what magical things will happen when FIL truly enters a supply and demand market where supply is less than demand?