Filecoin founder explains Filecoin economic model

Here are some key questions about Filecoin’s economic model:

1. How does the network baseline work?

The network baseline is a KPI that defines the network level. It is based on network incentives and storage rewards, not just the sealing speed of the hardware. The amount of network rewards depends on the development of the network. If the network baseline requirements are always met, then it will be calculated according to the 6-year halving. Otherwise, some early rewards will be delayed until the future.

2. How is the initial pledge calculated?

The initial stake consists of two parts: the initial storage stake and the initial consensus stake. The storage stake must be small enough to allow miners to join the network, but also large enough to be used as a deposit to deal with early failures, fines and fees. Locking block rewards and using unlocked rewards as additional collateral can reduce the initial stake. The initial consensus stake is consistent with the proportion of the storage capacity committed by the miner, making the cost of attack high.

The initial pledge is balanced by using an initial storage pledge corresponding to an amount sufficient to cover 7 days of sector failure fees and 1 sector failure detection fee.

3. How to estimate daily rewards?

“Estimated block reward per day = number of blocks mined by the sector x size of block reward”.

The possibility of mining a block is affected by factors such as the QAP weight, and the block rewards are divided into simple rewards and baseline rewards. Both QAP and network baseline rewards are based on a smoothed moving average.

4. How is the minimum transaction collateral calculated?

There are three types of pledges. The third form of pledge is the storage provider transaction pledge. The protocol requires a minimum pledge to provide a minimum pledge guarantee. If the transaction is terminated early, the collateral will be punished. If the transaction is successful, it will be returned to the storage provider.

The collateral should reflect the fact that the transaction consumes on-chain resources, which will add more costs to the transaction itself.

5. How are block rewards unlocked?

Block rewards are mainly used to reward the maintenance of blockchains, the running of contracts, and to subsidize reliable and useful storage. The protocol tracks the block rewards obtained by each miner and linearly unlocks and releases block rewards within a fixed time. Block rewards will be used as collateral, and early block rewards will be cut until the commitment is successfully fulfilled.

6. Do miners need to purchase tokens as initial pledge tokens?

Miners need to purchase tokens for initial pledge (exchange, lending, space race rewards, etc.). However, in order to reduce the initial pledge that miners need to provide, the protocol supports miners to use unreceived rewards for pre-staking, and also supports miners to borrow pledges through other means. Currently, many lending methods are under development.

7. What happens if the price drops after miners purchase tokens for initial staking?

Tokens are uncertain. We cannot control or predict prices. Market prices are the collective behavior of all participants. It is meaningless to talk about prices without considering time. All participants need to make decisions based on their own cognition.

8. What are the network’s requirements for miners’ normal working hours and SLA?

As a cloud storage service, Filecoin should be open for trading 24 hours a day; we need to compete with traditional cloud storage services and be more reliable than 99.999% of traditional cloud storage services. Although the Filecoin mainnet has not yet been launched, we will definitely surpass traditional cloud storage service providers in the future. Therefore, storage miners need to work 24/7, because this involves consensus, storing data, proving data, accepting transactions, serving data, and more.

In addition, in the Filecoin network, timely response is very necessary because the network may also have problems, so miners need to discover and solve problems very quickly. Repair or upgrade of the problem may take 1-2 hours.

9. When will the final parameters of the mainnet be announced?

The parameters of the mainnet will be released soon. In fact, there is no such thing as final parameters, because the network is constantly evolving, and important features and network improvements may be added at any time, so the parameters will also be improved and changed.