Filecoin's mainnet launch marks its peak? Four risks involved in investing in FIL

After more than three years of waiting, the love-hate Filecoin is finally launched.

At 22:44 on October 15th, Beijing time, after the block height reached the scheduled 148,888, Filecoin produced by Protocol Labs officially ushered in its mainnet.

Before the mainnet was launched, the trading price of FIL tokens on some exchanges suddenly soared to more than $200. After the mainnet was launched, first-tier exchanges such as Binance, Huobi, OK, Kraken, and Gemini took the initiative to go online one after another. Coinbase Custody also announced its support as soon as possible. So a friend joked with me:

"You've become rich."

However, this is just a nice joke. In fact, I don’t have any tokens to sell on the market. According to the original regulations, the tokens of the public offering need to be unlocked linearly within 3 years after the mainnet is launched, which is about 0.0913% unlocked every day. Even if I chose the shortest release period of 6 months, the unlocking speed is only about 0.55% every day. Therefore, the current market price is just a phantom. This is similar to the highest price of Zcash when it opened at more than 3,000 BTC. As more and more coins are released, the market selling pressure will also increase...

Despite the cruel reality, Filecoin still carries the decentralized storage and dreams of getting rich for too many people.

“If you buy a coin and don’t go to CX, that’s your fault.”

This sentence seems to have become a general consensus in the circle, and in Filecoin, this phenomenon is even more obvious.

Well, I still want to pour cold water on it, even if it will be annoying to many people and seems to be against my own interest.

Four risks involved in investing in Filecoin

Regarding the first risk of Filecoin investment, I have actually mentioned it above, that is, there has been a lot of selling pressure on Filecoin for a long time. At present, there are many trading pairs in the Filecoin market. One is the main network coin FIL, and the other is futures tokens such as FIL6, FIL12 and FIL36. The difference is that the main network coin is a real token that can be withdrawn normally, and the rest are IOU tokens that need to be gradually unlocked. From the market price, the price of the main network coin is 2-3 times that of the IOU token, and the price of a 6-month IOU token is about twice the price of a 36-month token.

(Data from qkl123.com)

I think there are two possible explanations for this phenomenon:

1. Tokens that take time to unlock are undervalued;

2. The current spot market price is overvalued;

But for now, I am more inclined to the second explanation.

Another risk of investing in Filecoin is the uncertainty of its application. Although many investors have described many scenarios in which decentralized storage replaces centralized storage, in reality, if the FIL price that users need to pay to store data is higher than the cost of traditional centralized storage, it will suppress their demand for data storage. Therefore, many people have proposed that Filecoin storage is for high-value data, but there is a lot of uncertainty about which data is high-value data and who will choose Filecoin storage. Developing applications in the early stages is undoubtedly a big problem.

The third point about the uncertainty of Filecoin investment is the uncertainty of the project party Protocol Labs. The repeated delays of the mainnet are secondary. For example, the team suddenly released 1.5 million FIL tokens yesterday and called it "stabilizing the market price", which is really disgusting.

The last risk is the hype risk that blockchain projects generally face. Star public chain projects such as EOS and Polkadot are in the hottest stage of market hype during the pre-mainnet launch period. After the mainnet is launched, the bubble will gradually burst. As for whether it can return to the upward trend in the later period, it depends on the market's recognition of the project.

Regarding this phenomenon, the investment institution Placeholder gave an investment theory explanation in 2017 and drew a picture for it:

If we apply this to Filecoin, it may be at the peak of its Release phase.

Some final thoughts :

Although the author has raised many risks about Filecoin above, it does not mean that I am not optimistic about this project and this market.

However, at this time, I personally feel that it is very risky to blindly tout Filecoin, which has an unstable foundation and very obvious bubble.

Perhaps, pouring some cold water on it appropriately can lead to better development.