Don’t miss it | Understanding Filecoin’s economy

“Many people have dismissed complex and creative solutions as insufficiently simple, but societies are complex, and humans are complex. For us to solve complex problems with simple solutions: it’s not a good idea.” — Elinor Ostrom, winner of the 2009 Nobel Prize in Economics for his analysis of economic governance, especially his work on the commons .

According to IDC estimates, data storage will grow to 175ZiB by 2025, and if 10TiB hard drives capable of storing this data were stacked together, they would reach up to the moon (1ZiB = 1 trillionGiB).

Today's cloud storage solutions provide fast, highly scalable, and relatively low-cost data storage. However, the pricing power of storage and services on these cloud storage platforms is in the hands of a small number of companies that provide storage services. The cost of these storage solutions is closely related to the use of the company's proprietary software, APIs, data infrastructure, and servers.

This means that storage buyers cannot directly and effectively access storage and must pay for a large number of additional services and functions. It is estimated that enterprises waste $62 billion each year buying more storage services than they actually need from large technology providers that provide professional cloud storage solutions. In addition, storage itself is mostly located near the location of data centers that have been built or are about to be built, but these places are generally far away from the location where the stored data is generated or used.

There is also limited choice when it comes to cloud storage providers. Players with large data center networks and strong brand recognition make the barrier to entry very high for new entrants. Migrating data from one provider to another is slow, laborious, and expensive, and interoperability is not guaranteed. We envision a future with standardized interfaces that make it easy for anyone to participate in the storage market as a provider.

Filecoin provides a blockchain-based marketplace that promises to revolutionize the global storage economy . The Filecoin marketplace provides a new and secure way for anyone to buy and sell storage. We are excited to share the storage economy on the Filecoin network.

Essentially, the market is an information processing system that allocates resources through competitive pricing. Filecoin hopes to create the best global storage market by directly connecting storage users and providers through a decentralized storage commodity market with no entry restrictions. This distinguishes Filecoin from existing large cloud storage providers.

Online marketplaces are a breakthrough in how we do business. Marketplaces like Airbnb, Amazon, and eBay are disrupting physical markets by eliminating unnecessary middlemen and leveraging internet technology. For the first time, buyers and sellers can connect on a global scale to trade services and products quickly, simply, efficiently, and easily.

Compared to traditional Internet 2.0 platforms, Filecoin is a more affordable and efficient way to store data. Filecoin is community-driven and distributed, which means that individual storage users and storage miners will compete for transactions based on price, reputation, reliability, retrievability, and latency. The Filecoin blockchain ensures that files are stored in a secure and publicly verifiable manner.

Not only that, Filecoin's storage market also utilizes the world's underutilized storage assets . With Filecoin, people around the world can make their unused storage space available to others. This creates a unique sharing economy that can free up large amounts of storage space and bring unprecedented economies of scale to the pricing of storage solutions.

Storage on the Filecoin network decouples hard drive space from many of the additional services that are typically bundled with other cloud storage providers. The protocol allows buyers and sellers to trade storage space directly. As a result, users and miners can freely negotiate prices and services.

Filecoin provides a secure network and tokens that users and miners can use to form storage contracts in a peer-to-peer manner. Unlike traditional storage providers, Filecoin also provides a unique service: daily cryptographic verification that storage client data is still being stored. This verification allows anyone to provide storage in an unrestricted market while also ensuring that storage users can trust that their data is stored on the network.

We believe Filecoin’s unique storage market represents the future of the storage economy.

Filecoin's mission is to create a distributed, efficient, and powerful foundation for human information. The economic design of the Filecoin network aims to effectively reward useful and reliable storage with as few rules as possible by aligning incentives. Many of the mechanisms and incentives of the protocol are carefully designed with only one goal: if participants in the network economy pursue their own interests, the network will continue to grow and develop.

In the first iteration of the protocol, storage miners are the core service providers of Filecoin, and there will be other types of mining in the future. Because Filecoin is a global network available to everyone, the demographics of storage mining are very diverse - including individuals, organizations, and enterprises. Storage miners compete and cooperate with each other in the Filecoin network. They compete for storage orders and block rewards, and collaborate with each other on developing the Filecoin storage economy and maintaining the Filecoin blockchain.

Given the unrestricted nature of blockchain networks, speculative and exploitative behavior is common, where short-sighted and selfish behavior will harm the network. In order to achieve the goal of a sustainable economy, it is necessary to design a set of mechanisms or rules to incentivize , constrain, support or punish different behaviors. The design of these mechanisms and their parameterization will provide a solid foundation for participants to create a thriving economy.

" Creating the Filecoin Economy" introduces in detail the economic mechanism and meaning of Filecoin.

The report outlines how incentives are aligned and useful and reliable storage is systematically rewarded. During the design process, the role of each mechanism and their interactions must be considered. Other economic structures and product services will develop and evolve on top of these. The document explains the specific incentives and economic incentives provided by the protocol itself. It also provides further explanation of how each fee, reward or penalty in the protocol contributes to the long-term use of the network.

This report will explore:

Click here to download the full report:

Chinese version

https://filecoin.io/zh-cn/2020-engineering-filecoins-economy-zh-cn.pdf

English version

https://filecoin.io/2020-engineering-filecoins-economy-en.pdf

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