The opportunities of Filecoin mainly lie in mining, but please be prepared to pay the "tuition fee"

Filecoin mainnet is about to be launched, and many people have been looking forward to it for a long time. Some people are very optimistic about this hot project this year, while others are skeptical. Sometimes the two voices are intertwined, and it is hard to tell which one to listen to. When something is not unanimously optimistic, but controversial or even biased, there will be fluctuations and underestimation, and this is when most people have opportunities.

For most people, whether there is a future or a problem, the most important thing is whether there are opportunities. What we need to do is to seize the opportunities while avoiding pitfalls and minimizing risks...

01How deep can the “pit” of Filecoin mining be?

Many people have known about Filecoin, a decentralized storage project that combines blockchain, for a year or two. Even though its mainnet keeps missing release dates, it still can’t stop people’s enthusiasm because it is worth looking forward to and may also contain many opportunities. Of course, people who missed out on futures or didn’t make plans earlier, including big Vs, will take the initiative to expose various problems with the mainnet, such as citing examples of historical projects that peaked as soon as their mainnets were launched, examples of Bitcoin mining, etc. The purpose of this article today is to objectively analyze how deep the “pit” of Filecoin mining is.

1. The bottomless mining pit

Filecoin mining machine, rather than a mining machine, is no different from our PC host. It is much simpler than Bitcoin mining machine. It does not require special chips or special optimization. The threshold is extremely low. How low is it?

1. Hardware 0 threshold

No matter you are educated or not, as long as you face other machines, get the accessories of ordinary computers or servers and assemble them in order, all the accessories are ready-made and no special customization is required. So you will find that there are no "chip mining tyrants" here, because this is not their home ground. This is the traditional digital accessories field, the home ground of businesses like Shenzhen Huaqiangbei.

2. No lower limit on cost

What is the lowest cost of mining machines? This is a mature industrial chain, from overseas garbage to sorting, recycling according to different qualities, and then repairing and refurbishing before it can be "listed". The cost of a hard drive that sells for hundreds of yuan on the market may be a few yuan or more than ten yuan. No one knows how many of the parts in the "brand new" mining machines that we see at tens of thousands or hundreds of thousands of yuan come from these? After all, most people who buy mining machines, even if they have property rights, still cannot see or touch them from placing an order to putting them on the shelves in the mine.

Rather than saying that there are many pitfalls in Bitcoin mining machines, it is better to say that Filecoin mining machines, which have a lower threshold and more universal hardware, have no bottom line.

2. Scams are rampant

During the period before the Filecoin mainnet was launched, scams such as not shipping mining machines or running away emerged one after another. There were even scammers who claimed that Fil could be mined by downloading an APP under the banner of IPFS. After being in the circle for a long time, it is not surprising. Many scams are just repeating the previous Bitcoin mining routines, but the threshold for scammers is lower. These scams are indeed difficult for many novices to identify. One reason is that they don’t understand it very well, and the other is that they are eager to speculate.

As we all know, many mining machines were already on sale long before Filecoin officially announced its specific parameters. Perhaps many mining machine vendors themselves did not understand what IPFS and Filecoin were. They only knew that many people wanted to buy mining machines for investment, and that mining machines were basically no different from computer hosts or server hosts. So they found these "inventories", put IPFS labels on them and started selling them...

3. Real Threshold

Some people think that Filecoin mining machines are simple, so there is no threshold for mining. In fact, the real threshold is not here. Many businesses advertise that they have built dozens of large Filecoin mining farms around the world, but what many people don’t know is that Filecoin does not have self-built mining farms like Bitcoin, but only IDC computer rooms. As the underlying infrastructure of the Internet, the construction and operation and maintenance of data centers are mostly in the hands of communication operators. Except for a few large enterprises that apply for self-built IDC computer rooms, they can only be approved, such as Alibaba Cloud and Tencent Cloud’s self-built cloud computing centers, etc. Therefore, IDC computer rooms basically cannot be built by themselves, but can only be rented, and the computer rooms are very large, and most of the time, only a part of the cabinets can be rented.

IDC-related businesses are already very mature, so there is no big room for price differences. If you want to move upstream, you usually need to apply for some relevant qualifications such as the "Value-added Telecommunications Business Operation License". The threshold is very high. This is why some Bitcoin mining pool bosses are still waiting and watching, because they currently have no advantages.

02What should you do if you want the bonus but don’t want to fall into the trap?

1. The “pitfall” allows cloud computing platforms to “level”

Earlier, Bitcoin mining launched a cloud computing platform. As we all know, it is a mining method that takes care of most of the affairs on the platform, which is worry-free, trouble-free and has a low threshold. For example, most people still step on the pit of purchasing mining machines. The mining machines purchased by the cloud computing platform are related to their own interests. The unsold parts are mined by themselves, and the cloud computing contract period is 1-3 years, which is not long. After the contract ends, they still have to deal with it themselves, so the mining machines are actually their own assets, and they will be more cautious in purchasing. As for renting IDC computer rooms and even applying for some qualifications and licenses, these thresholds can only be handled by platforms and large miners.

2. Are there pitfalls in cloud computing?

Because they are both mining, many people like to compare it to Bitcoin mining. Cloud computing platforms have many advantages, but the biggest pitfall is that the income is not as high as buying mining machines (especially after the Bitcoin halving, the income is low). But in fact, there are big differences between Bitcoin mining and Filecoin mining.

In Bitcoin mining, both mining farms and individual miners mainly connect to large mining pools. Individual miners mine at home, and can wait for their share of the mining power output to the mining pool they connect to. However, in Filecoin mining, it is not possible to connect to the mining pool in this way. The mining machines participating in cluster mining can only be placed in the same computer room to form a storage cluster, which is the most advantageous solution.

In fact, buying a mining machine by yourself to mine is no less pitfall than mining on a cloud computing platform. On the contrary, many times, after buying a mining machine, even if you have the ownership, you cannot see it from the time the mining machine is put on the shelf until it is declared to have reached the end of its life. In the end, you may only see the service provider telling you that the mining machine is finally sold at the electronic waste recycling price of xx yuan.

3. Basically, there is only one way: cloud computing platform

Because Filecoin mining is more complicated, in addition to a large amount of storage, it also consumes a lot of CPU and GPU resources. Compared with Bitcoin miners, which simply use superimposed computing power cluster mining, Filecoin large-scale miners need to use distributed computing + distributed storage cluster solutions.

1. Whether you buy a mining machine or cloud computing power, it is actually the same

This may seem a bit complicated. Based on the above introduction, to put it simply, in Filecoin mining, whether you buy a mining machine or buy cloud computing power, the form of mining is actually the same in the end. You can't put it wherever you want like Bitcoin mining. In fact, there is not much difference between buying a mining machine yourself and a cloud computing platform, because the mining machine you buy is also required to participate in formal cluster mining, and if the service provider you participate in is a large formal service platform, it also needs to form a distributed computing cluster, and the cost is calculated in the same way as cloud computing. At this time, it is equivalent to buying a mining machine in a large piece, and buying cloud computing power in a small piece. In the end, it is found that for small and medium-sized miners, the benefits of cloud computing power and buying mining machines may be similar. Of course, this is also related to the pricing of the service provider itself.

In short, participating in Filecoin mining is not as flexible as Bitcoin mining. Whether you buy a mining machine or a share, it is hosted on a cloud computing platform cluster for mining. In other words, for small and medium-sized miners, there is no difference between buying a mining machine and connecting to a mining pool like Bitcoin mining and buying computing power from a cloud computing platform and mining directly.

2. Filecoin mining is actually a cloud computing service

Rather than saying that Filecoin mining is a bit similar to Bitcoin mining, it is better to say that there is almost no difference between Filecoin mining and cloud computing services, because for IPFS, which wants to replace the HTTP protocol, the basic services provided by Filecoin mining are actually exactly the same as the services provided by cloud computing.

Friends who are familiar with the development of servers for Internet websites, applications, etc. should all know that people first purchased or assembled server hosts by themselves, rented the corresponding machine space, and then sent them to IDC computer rooms for hosting. However, with the rapid development of cluster technology, computer rooms no longer accept such scattered orders, but instead deploy efficient cluster computing and storage, and then distribute them through service providers, similar to the current Alibaba Cloud, which is actually a cloud computing platform for Internet services.

Finally, we can see that Filecoin has only one path, which is the cloud computing platform.

03Whale Exchange, a veteran DEX in the industry, fully supports Filecoin. What does its cloud computing mining bring?

We mentioned earlier that cloud computing platforms are basically the only form of mining for Filecoin. So, if we talk about pitfalls, it cannot be said that there are no pitfalls. Putting aside pure scammers and runaway platforms, what do we need to pay attention to?

Taking the cloud computing power provided by Whale Exchange as an example, in addition to being a well-established DEX platform and providing a technologically advanced one-stop Filecoin mining solution, we also see the following points from its publicly released information:

1. Excellent price, long-term and transparent

The cloud computing market is highly competitive. Whale Exchange has launched the slogan of "lowest price", 3-year ultra-long contracts, and transparency of filling time (the time required to store data, fast filling can get more benefits earlier, and effective storage can get more benefits). Rewards are distributed according to effective computing power to eliminate the possibility of black box operations. These three points are very important because many platforms cannot do it.

1. Price

The reason why Bitcoin mining cloud computing platforms were said to have pitfalls earlier was mainly due to the decline in revenue and the payback time after the halving. Therefore, the revenue of Filecoin is equally important. Even though we don’t know how the revenue will be after the launch of the Filecoin mainnet, at least we can choose a platform with a good price.

2. Contract Period

Most of the cloud computing power products on the market last for one year, and users are often working for the mining machine manufacturers - they use one year to fill up the effective computing power, and after that the product expires, the mining machine manufacturers grab a larger proportion of the profits.

The three-year long-term contract of Whale Exchange actually takes into account the entire value of the entire life cycle of a mining machine to be given to users.

3. Transparent filling time

As for why many platforms do not disclose the filling time, many novices may not be particularly aware of this. We learned from the information provided by the Whale Computing Platform of Whale Exchange that: theoretically speaking, the shorter the filling time, the sooner you reach 1T of effective storage, and the sooner you can enjoy the corresponding benefits of 1T of effective storage, and the higher the rate of return; but in fact, in order to encourage storage implementation and investment in long-term storage rather than just fast packaging, Filecoin introduced the concept of network benchmarks.

In layman's terms, only when the total storage computing power on the network exceeds the threshold of the network benchmark, the speed of Filecoin's block reward issuance will be the highest; when the total storage capacity is too low in the early stage, the block reward will slow down. Since the value of the network benchmark is not officially disclosed at present, it is difficult to make a reasonable estimate of the optimal filling time. Therefore, there is a situation where even if effective storage is quickly achieved in the early stage, the highest rate of return cannot be obtained, that is, the phenomenon of inverted return on investment occurs (long-term rate of return is lower than short-term rate of return). Different users have different expectations for the optimal filling time based on their own understanding and judgment, resulting in different product demands. Therefore, Whale Computing Power provides three products for investors to choose from: 12-month filling, 6-month filling, and 3-month filling.

Cloud computing power that does not disclose filling time is full of potential for rogue behavior, and the distribution of profits depends entirely on the platform, leaving users completely without the right to know and initiative.

The following picture is an introduction to Whale Hashrate from Whale Exchange:

A table for intuitive comparison:

2. Testnet Rewards

As the mainnet launch approaches, Filecoin will officially launch a testnet reward program, inviting miners from all over the world to compete for global and regional rewards totaling 4 million Filecoin tokens worth 600 million RMB (based on the current FIL futures price). The program aims to stress test the network, encourage global participation, and help miners prepare to run the world's largest distributed storage network.

Due to early investment and preparation, Whale Exchange Cloud Computing Platform actively participated in the Filecoin testnet. Whale Computing users will participate in sharing the FIL testnet rewards worth RMB 600 million.

04 Summary

Often, many big opportunities are accompanied by many pitfalls and risks. If you are optimistic about the future of Filecoin, you must be rational about some of the potential risks you may face. When you choose to become a miner to stay at the top of the food chain, you must cooperate with a brand platform that is strong and willing to share profits openly and transparently.

If you are not optimistic, it is recommended that you put aside some prejudices and learn more about it yourself, because for many people, missing out is the biggest risk.

Finally, I hope everyone can maintain independent thinking and choose the path that suits them.