After 3 years of preparation, Filecoin seems to have messed up

The crypto industry has corresponding hot spots every once in a while, and the most popular project recently is Filecoin.

Today we are not going to talk about the future of decentralized storage, but just want to look at the return on investment of Filecoin. Before the mainnet was launched, many people had high hopes for Filecoin, but various signs after the launch showed that this delayed Filecoin did not seem to be so good that people praised it, but was controversial.

Before going online, the community criticized and forked it because of its unfair design mechanism; after going online, there was a suspected strike protest because miners did not have enough coins, and Filecoin officials seemed to have no choice but to revise the block reward mechanism under strong opposition from the community.

Five days have passed since the mainnet was launched, and the price of FIL tokens has fallen from $200 to $30. The mining machines that miners bought at high prices have not yet brought the expected high returns. In the current turbulent market, miners seem to have no choice but to continue betting on the future.

A Chinese-led overseas project

On the evening of October 15, the Filecoin mainnet was successfully launched. Let’s take a look at the situation of the project 5 days after its launch.

According to the FILFOX browser, as of October 20, the effective computing power of the entire network was 605.58 PiB, the number of active miners was 556, the average 24-hour mining income was 0.2478 FIL/TiB, and the output in the past 24 hours was 152,586 FIL. However, the unit price of FIL has fallen by 50% compared to 3 days ago, and is quoted at US$32.05.

Screenshot source: Feihu Browser

Although this project was founded and developed by an overseas team, most of the players who invested a lot of money and energy in it are from China. Not to mention how many of the mining machine manufacturer logos collected by the official before the launch are domestic brands, the top 10 nodes in the mining rankings after the mainnet was launched can be seen from the names alone.

Screenshot source: Feihu Browser

Although it was founded by an overseas team, the project's top miners are almost all "controlled" by Chinese, which reminds people of the former EOS.

Before the launch of the EOS mainnet, although China did not have the largest transaction volume, it had the most candidate nodes - at the time, it was considered a national war that had already been triggered before the mainnet was launched. Some people even worried that as Chinese "dealers" controlled the EOS nodes, it would lead to the withdrawal of hot money from other countries, such as South Korea, from the EOS market.

Due to dissatisfaction with EOS’s voting and dividend mechanism, community members launched EOS Force (EOSC) before the EOS mainnet was launched. The same is true for Filecoin today. Also due to dissatisfaction with the official design mechanism, before the mainnet was launched, the community had forked projects such as Filecoin Vision and Filecash, but they have not yet been widely recognized and supported by crypto wallets and trading platforms.

After its launch, Filecoin is still controversial.

Mining pays off in 70 days?

Like Bitcoin mining, if you want to participate in Filecoin mining, you also need to invest heavy assets. Guazi Power's Filecoin mining pledge/income calculator roughly calculates the payback period of mining. If calculated based on the 1T/year cloud computing power sold by a certain platform at RMB 2,500, the pre-pledged coins required for 1T computing power are about 6.0416FIL. At the price of FIL 210.24 yuan, the pledge cost is about RMB 1,270.19.

If mining can be done at full speed, based on the estimated revenue of 0.2543FIL generated by 1T computing power in 24 hours, the daily income is about RMB 53.46, and the estimated payback period is 46.8 days, about 1.6 months. Even if the pledge cost is added, the corresponding payback period is only 70 days.

Screenshot source: Staking calculator, staking cost and unlocking period are not considered

The payback period is surprisingly short. It seems that Filecoin mining is a good business. Is it really so?

Let's first take a look at the current situation of Filecoin mining machines. First calculate the cost. Take a mining machine on the market that can effectively store 60TB as an example. If it is to be sealed within 90 days (as stated by the mining machine manufacturer), then 0.6666TB will be sealed every day, which is approximately equal to 682GB. Each sector is 32G, which is equivalent to sealing 21.3 sectors every day. Miners need to submit 3.4 FIL (21.3*0.16) for these 21.3 sectors every day, and these 3.4 FIL must be invested every day until the storage space is full after 90 days. During this period, a total of 306 FIL (3.4*90) need to be pledged. According to the price of FIL 210 yuan on October 19, the pledge cost is about 64,260 yuan. The price of the mining machine is calculated at 200,000 yuan, and the total cost is about 264,260 yuan.

How is the income? According to the speed of sealing 0.6666TB per day, the average mining income in the past 24 hours is about 0.25 FIL/TB. On the first day, you can get 0.16665 FIL; on the second day, you can get 0.3333 FIL, and so on. After the 90th day, you will get a total of about 682 FIL (0.16665*(1+2+…+90)=682.4). At the price of FIL 210 yuan, the income in 90 days is about 143,220 yuan.

If nothing unexpected happens, the mining machine will be able to obtain about 15FIL per day based on full storage computing power, and the payback period of the mining machine is about 129 days.

In fact, a 129-day payback period is only the most ideal state. According to the analysis of Nicolas Bernard, co-founder of ChainZhi Consulting, if a 350TiB server purchased from a Filecoin service provider for $20,000 is taken as an example, only about 1TiB can be sealed every day, and it takes at least 210-350 days to complete the sealing. Currently, a large number of machines are in an "idle" state.

At present, many miners' machines are not mining at full speed, and the limiting factor is that there are not enough pledged coins. According to the design mechanism of Filecoin, miners need to pledge sectors to participate in mining. The sector pledge amount is 0.1894 FIL/32G, which means that miners need to submit 0.1894 pledged coins for each 32G sector.

It is understood that most of these pledged coins come from the rewards miners received during the space race. In other words, if miners do not have reserves in the space race, they can only buy in the secondary market or use lending methods to solve the pledge problem. Several miners told Rhythm that although the pledge pressure is high, most of the FIL currently pledged is obtained from the space race, and basically no large amount of FIL is bought from the secondary market, "the price is too expensive."

On the other hand, some miners did not fully reinvest the FIL rewards they received from mining for staking. After the mainnet was launched, they chose to sell them in the secondary market to recover their investment because they judged the price to be high.

At present, the effective computing power of the Filecoin network is about 600PiB. As far as Nicolas knows, the current sealing rate is only 1/7. It can be inferred that the computing power ready for deployment has actually reached 4200PiB (600*7). "The total investment value of this part of hardware has reached 240 million US dollars." He believes that this is only a conservative estimate, "not counting the undeployed machines."

Screenshot source: Twitter

The hardware equipment invested is already a huge expense. With the launch of the mainnet, miners need to invest in FIL. Since the government no longer subsidizes miners' costs, miners have slowed down their growth rate. Some miners' computing power increment has dropped to 0 within 24 hours. "Miners provided great support during the development of Filecoin, but they are tired now." Nicolas said, "The much-anticipated launch of Filecoin is disappointing, and there is an atmosphere of disappointment among miners."

In fact, long before the project was launched, many miners already had opinions about the project.

Game between miners and officials

As a decentralized storage project that has made the crypto community wait for three years, in addition to being dissatisfied with the delays of Filecoin, more miners are unacceptable to the design mechanism of Filecoin.

On the eve of the mainnet launch, when the market generally had different attitudes towards Filecoin's enthusiastic pursuit, miner Jamin expressed deep concerns about Filecoin. He told BlockBeats that although the mainnet was about to be launched, he felt that "the project was going to die."

Although the authorities lowered the entry threshold for mining machines on the eve of the launch, and compensated 100 FIL to mining nodes with negative Filecoin available balances so that miners would not have any debt before entering the main network, the market basically praised the authorities, but in Jieming's view, the core mechanism of the project has not changed, and the problem of mortgage coins has not been completely solved: "Big miners still have the computing power of the space race, while small miners have nothing."

The day before the launch of the Filecoin mainnet, a forked project called Filecash was launched ahead of schedule. "I think Filecoin is courting death by giving forked coins many opportunities." In Jemin's view, all of Filecoin's rules are formulated based on the project's own wishes. "For example, all block rewards obtained by miners who participated in stress testing and protocol improvements during the space race were migrated, and the test coins were directly used as mainnet coins."

Until the space race started in August this year, the community generally believed that the test coins would be invalidated after the mainnet went online. According to Filecoin core developer "Why", the code base will never be frozen.

This leaves room for official adjustments. On October 18, due to fierce protests from miners, Filecoin officials had to pass the FIP-0004 proposal to directly release 25% of the storage miners' block rewards, while the other 75% of the rewards were still released linearly over 180 days as originally planned. The miners won the first game with the official.

The impact of the official unlocking of 1.5 million FIL for "market value management" without following the white paper and informing the community is still brewing. According to filscan data on October 20, there are currently 20,109,798.92 FIL in circulation on the entire network, which is far from the number of the original unlocking plan.

According to the analysis of Cannon Ratings, the current circulation of FIL is close to 30 million. The "extra 26.5 million" are the miners who put the previous test coins into the market, "dumping the market to harvest", which is the reason why the price of FIL fell from $200 at the opening to $30. "As for why the test coins became the real coins of the main network, whether it was a bug in the team's code or negligence in the configuration, or the team did it intentionally, we are not sure yet."

“The project is about to go online, but no one knows the detailed rules yet.” A few hours before the mainnet went online, Jieming was still confused. “It feels like we are on the mainnet now.”

Uncertainty is the biggest problem facing Filecoin. There is no economic model widely recognized by miners, and the project has not reached the stage of transitioning to community governance. It is foreseeable that even if the main network has been successfully launched, the tug-of-war between miners and officials will continue. Filecoin's parameters may change at any time, and this will become a sword of Damocles hanging over the heads of all miners.

For miners with low risk tolerance, it’s time to make a decision.