Investing in the Filecoin Ecosystem

On December 11th, ETH Global and Filecon hosted the Storage Market Summit (SMS). A portion of the day was dedicated to investing in the Filecoin ecosystem. Here are the summaries, themes, and conclusions from the different conversations during this portion of the day.

Below is an excerpt from a presentation given by Ryan Zurrer, founder of SMS Dialectic.

At Devcon II in Shanghai, Juan gave a presentation on Filecoin and showed the audience videos pulled from outside the firewall in high definition. The presentation showed attendees a technology that solves a real fundamental problem for them, which is likely why Filecoin and other Protocol Labs projects are so popular in China and Asia.

Today, Filecoin is the first decentralized network that provides the same services as centralized networks at a significantly lower price. Using Filecoin to store files on IPFS is cheaper than storing files on Dropbox or AWS. This huge change is like crossing the Rubicon.

As we look at the cost-effective success of Filecoin and its implications, and where this team is headed for the related technology, I feel confident in the following prediction: in ten years, Protocol Labs will be a larger and more important company than Google on a global scale.

When we talk about Filecoin, something we don’t talk about enough is the energy efficiency of this ecosystem. As an industry, we need to think very deeply about the energy we consume. With Filecoin, we’re seeing one of the most energy-efficient networks out there, and it also provides real-world use cases that are important to people.

We should recognize that it will take several years to build applications, tools, wallet layers, and all the layers that connect organizations to actually get there. For Ethereum and Bitcoin, it took us several years to get people to actually use it. So, we encourage the community to continue to be patient, but not too patient. Let's go out and build those important infrastructure components, and you will unlock tremendous value in the process.

We should recognize that it will take several years to build out all the applications, tools, wallet layers, and connective tissue needed to make this actually work. For Ethereum and Bitcoin, it took several years to start seeing use cases where people were actually using weapons. I encourage the community to be patient — but not too patient. Go out and build those important infrastructure components, and you’ll unlock tremendous value in the process.

I would like to see and fund some businesses that can solve real problems in the Filecoin ecosystem:

1. Imbalance between supply and demand

The supply side of storage has seen incredible growth, led primarily by offshore miners, with over 1 EiB of storage now in use. On the other hand, we’re only using 1PB of storage on the network. Perhaps we should pay people to store files to bootstrap the network and drive up demand levels. We might see a decentralized group come together to bootstrap demand and pay people to store their files on Filecoin.

2. Fixed service

We should build white glove services that provide retrieval really quickly and ensure a level of redundancy. These services need to be similar to Google Drive or Dropbox in terms of ease of use to make them suitable for non-encryption native.

3. Browser plug-ins

Allows you to quickly click and save content to a specific content hash or a specific set of hashes based on topic interests.

4. DeFi Applications

I believe we’ll see them emerge in scope and use the Filecoin network soon.

The following is a summary of a speech given by Olaf Carlson-wee, founder of Polychain Capital, over SMS.

Now that Filecoin is online and operational, let us ask another question: What types of businesses will be built on Filecoin, and what types of businesses do we prefer to invest in?

We have finally found a product market fit for DAOs, which contains all the latest DeFi products and protocols launched in 2020. These DeFi projects and protocols are supported by on-chain, internet-based enterprise structures. These protocols are not run by enterprises, but by DAOs.

However, there are limitations to the types of projects that DAOs can currently fund on Ethereum. Ethereum is largely limited to mathematical logic and does not have the ability to provide complex data to end users due to scaling limitations built into the design. Since contracts are just doing math, they do well with trading, lending, custody, and basic finance.

As Filecoin launches, we ask the question, “What types of businesses will emerge?” I think we will see the rise of data DAOs. Data DAOs will manage and oversee Filecoin’s massive datasets and allow them to be applied to other chains like DeFi on Ethereum.

For example, we can take large research datasets, genomic databases. These datasets can be effectively stored by Filecoin for a long time with a lot of redundancy. All of this data can be owned and provided by a DAO, where the DAO provides the data for research purposes.

Overseeing these large and rich datasets is just the tip of the iceberg. People can use Filecoin to build more expressive applications that are beyond the capabilities of DeFi today. This is not about being competitive with DeFi, it’s about expanding what’s possible.

We’re still in the early days of how you can build novel business models with Filecoin, but one thing I think we’re going to see is DAOs becoming the fastest growing thing in the world.

On December 11, 2020, the Storage Market Summit closed.