Professionalism and focus, win-win cooperation This blog post aims to dissect how Filecoin tokens enter the circulating supply, provide more insights into how various stakeholders participate in its economy, and clarify how people should approach and think about Filecoin token economics. To read the paper on Filecoin economics and the detailed mechanisms outlined in the Filecoin Spec, refer to this article~ The momentum of growth in the Filecoin ecosystem is the primary driver of use cases, tools, and infrastructure for all Filecoin stakeholders. Since the launch of the Filecoin mainnet on October 15, 2020, the network has surpassed several important milestones: ➊The network has more than 700 nodes and the storage capacity exceeds 1EiB ➋ An ecosystem of over 90 projects building applications, developer tools, and infrastructure on the network ➌ 200+ new projects entering the ecosystem through hackathons and accelerators ➍Over 5,400 developers have contributed to the project’s GitHub repo ➎ Many use cases developed, including consumer storage applications, archival storage, DeFi, decentralized video, etc. For more information, check out Liftoff Week’s deep dive into the state of the Filecoin ecosystem, or this recent review of the network in October 2020. Filecoin as a Utility Token Filecoin is a utility token designed to be used, which gives token holders the right to use the network. People can think of Filecoin as an island economy where participants can come together to produce valuable storage products and services and export them around the world. On the network, one should expect to see storage providers, smart contract systems, lending services, various use cases, and more with their own unique characteristics, which can become their own unique businesses. The utility of the network is reflected in the attractiveness of those goods and services produced by participants in the network. The overall goal of the entire economy across participants, developers, researchers, customers, and token holders is to efficiently produce compelling storage-related goods and services and export them to the outside world. Economically and more efficiently producing more valuable goods will lead to more demand for goods and more demand for network tokens. The increase in purchasing power of participants in the economy will enable them to expand and improve their businesses, providing better and cheaper services to the world. Match the Miner Minting curve with Network Utility. As a utility token that aligns participant incentives with the long-term goals and vision of the network, Filecoin minting is aligned with the overall provable utility of the network. This means that most of the Filecoin supply will only be minted if the network achieves some ambitious growth and utility goals. Unlike most other blockchain networks, Filecoin innovatively adopts a dual minting model: a simple model and a baseline model: 1. Baseline Mining: Up to 770M FIL (most of the storage mining allocation) is minted based on network performance. This provides a strong incentive for the network to collaborate to reach the goal of ultimately reaching storage capacity to store a large amount of humanity's most important information. The full version of these tokens will only be released when the Filecoin network reaches Yottabyte's storage capacity in less than 20 years. According to some analysts, there is less than a zettabyte of data stored in data centers today (although growing rapidly), so this target is 1,000 times larger than today's cloud storage estimates . 2. Simple minting: 330M FIL is released over a 6-year half-life based on time. A 6-year half-life means that 97% of these tokens will be released in about 30 years. This small but meaningful amount is minted regardless of proxy actions to provide counter-pressure to shocks. 3. Mining Reserve: 300 million FIL are reserved to incentivize future mining types. It will be up to the community to decide how to release these tokens and which stakeholders should be incentivized, but for now, this part of the total supply is reserved. This way, efficient token minting is in the hands of the community, falling between the two lines in Figure 1. Figure 2 gives a sense of how much the network needs to grow to reach maximum minting. While the community may come together to update the network’s baseline, reaching the baseline requires competitive collaboration between all stakeholders, researchers, participants, developers, token holders, ecosystem partners, and storage clients. Figure 1: Max and min mining from storage mining Figure 2: Network storage benchmark for the largest benchmark mining of log scale You can find more information in the Filecoin specification. Token release should align stakeholders with long-term behavior. Another core principle and mechanism to encourage long-term alignment includes avoiding stakeholder vesting, thereby encouraging participants to stay away from short-term speculation and encouraging all stakeholders to work together to make the Filecoin network more useful in the long run. This applies to every core stakeholder of Filecoin, including: All mining rewards undergo some form of release to encourage long-term network adjustments. For example, 75% of the block rewards received by a node can be released linearly over 180 days, while 25% can be obtained immediately to improve the cash flow and profitability of the node. Of course, as described below, all rewards earned are subject to slashing over the life of the sector. Unreliable storage reduces the usefulness of the network, so the block rewards earned by those sectors will be slashed and burned. Starting from the launch of the network, all SAFT holders will receive FIL with 6-month, 1-year, 2-year and 3-year linear vesting terms. Most SAFT tokens purchased are vested linearly over 3 years:
58% of SAFT Tokens are released linearly over 3 years 5% of SAFTs Tokens are released linearly over two years 15% of SAFTs Tokens are released linearly within 1 year 22% of SAFTs Tokens are released linearly within 6 months
Starting from the mainnet launch, Filecoin Foundation's 100M FIL will grow linearly within 6 years. Protocol Labs' 300M FIL can be put to use linearly over 6 years starting from the network launch. When Protocol Labs encourages ecosystem development through grants with important collaborators, these people also typically have ownership for more than 6 years. These long-term vesting schedules for token holders help ensure that participants are qualified to participate in the network and take a long-term view on their behavior on the network. Collateral and slashing align participants with reliable storage. Blockchain networks such as Filecoin incentivize good behavior through rewards and punish bad behavior through penalties. The penalties (called slashing) come from the collateral that a participant must post, or the potential rewards that the participant may have earned. Filecoin has many of these mechanisms to incentivize high-quality, reliable, long-term storage. From providing network storage capacity to meeting customer storage needs, nodes must freeze Filecoin Tokens to achieve consensus security, storage reliability, and contract guarantees. Fil is locked as pledged collateral to bring storage supply to the network, and is required as transaction collateral and payment to meet storage needs. Naturally, the amount of Filecoin tokens locked up as collateral and slashed for misconduct is in the hands of the community: ➊At the network level, the amount of locked pledge collateral depends on the amount of storage capacity committed to the network and the circulating supply of the network at the time of commitment. At the individual level, pledge collateral is determined by the projected block reward that the node will receive, ensuring that pledge collateral is not prohibitively high. Fil will always be locked at any time as long as there is storage on Filecoin. ➋The amount of Fil used for transaction collateral and payment is the result of the joint efforts of all participants to make storage goods and services on Filecoin more attractive. ➌Nodes ’ collateral and all earned rewards are slashed over the life of the sector. Unreliable storage reduces the utility of the network, so the block rewards earned by these sectors are slashed and consumed. Filecoin Plus aligns participants with useful storage. Filecoin is a global marketplace powered by blockchain technology. Since there is no reliable way to algorithmically distinguish actual useful data from generated randomness, Filecoin Network innovatively and pragmatically introduces a social trust layer on top of the technical layer Filecoin Plus. Filecoin Plus puts the power in the hands of storage clients, as nodes store transactions from these clients and have them notarized by a network of notaries, gaining a 10x storage capacity advantage and, therefore, a 10x increase in their share of the network’s block transactions. This mechanism incentivizes all participants to develop relevant businesses, recruit useful data and use cases, and make Filecoin more useful. When a node receives a 10% share of the overall reward, they must also provide 10x the collateral and 10x the penalty to ensure that incentives are aligned. This is also a big step forward for community governance and decentralized cryptoeconomics, as the community is shaping operations and processes in public. Network transaction fees: Token supply is adjusted based on network usage. Whenever there is any action or utility on the network, Filecoin Tokens are used to compensate for the computing and storage resources consumed by on-chain messages. Similar to the rate at which nodes generate Fil, the rate at which tokens are consumed is also in the hands of the community as participants compete for on-chain resources. As of recently, Filecoin’s daily consumption has climbed to 180,000 FJD per day, a sign of a booming economy. The economic mechanisms embedded in the Filecoin protocol ensure that network activity and stakeholders are fully aligned with the long-term health of the network. Based on variable mechanisms such as network growth, vesting structure, Fil consumption, collateral requirements, and other mechanisms, the incentives and motivations of participants are aligned with the long-term success of the network. Making Web3 mainstream requires the efforts of all ecosystem participants. The incentives of the Filecoin protocol must balance the interests of all stakeholders, storage customers, manufacturers, developers, token holders, and ecosystem partners. A thriving economy benefits everyone in the network and aligns the long-term incentives of all participants. Most importantly, the future of Filecoin is in the hands of all its communities. |
