Filecoin's mainnet will be launched this year. Will the hundredfold growth of the coin depend on FIL?

Finally, another project called blockchain 3.0 has emerged.

The last project to be called blockchain 3.0 was EOS. In 2018, EOS was a well-deserved star project, with its secondary market value reaching $5 billion, ranking fourth in the cryptocurrency market value ranking.

Today, EOS is gradually falling behind, while IPFS remains to be tested.

With the huge fundraising of Filecoin tokens, the market value of the entire project has reached 30 billion US dollars. Both Guo Hongcai and Shenyu, two big names in the cryptocurrency circle, said that IPFS is the next Ethereum-level investment opportunity.

"IPFS mainnet will be launched this year, and the hundredfold increase of the coin depends on FIL!" Bao Erye is selling his "belief" on Weibo again.

Capital, mining machine manufacturers, investors... before they even go online, a complete and tight industrial chain has come into being, blowing up a market value of 30 billion US dollars.

Who is hyping Filecoin behind the $30 billion market value? Who is organizing Filecoin? And who is eager for Filecoin?

Multiple bounced checks

IPFS, whose Chinese name is Interstellar File System, was initiated by American Juan Benet in May 2014 with the aim of subverting the HTTP protocol.

From the application perspective, its core cloud storage service has been online since May 2015.

Filecoin is the incentive layer of the Interstellar File System IPFS, and the market has high hopes and expectations for it. Before the mainnet is launched, it has already been hyped up with gimmicks such as "pre-sale", "pre-mining", and "dual mining".

In September 2017, Filecoin was publicly offered at a price of US$5 and raised US$257 million in just 30 minutes, making it the blockchain project with the highest amount of funds raised at the time. Investors included Y Combinator, Sequoia Capital and other star capitals.

After its testnet and mainnet were delayed one after another, IPFS finally announced the launch time of Filecoin mainnet on May 19: July 20 to August 20.

In order to welcome the upcoming launch of the mainnet, various Filecoin mining machine manufacturers, mining pools, and capital are gearing up and starting exercises and competitions.

Filecoin investment mainly involves buying FIL tokens and mining. In the early days, FIL was mainly generated by mining.

Unlike Bitcoin PoW (proof of work) mining, Filecoin is a proof of effective storage. Therefore, the bigger the hard disk of a Filecoin mining machine, the greater the computing power. Instead, the more data stored, the greater the computing power.

FIlecoin is being hyped higher and higher, all for the sake of the so-called "first mine" or "head mine".

"Anyone who has mined Bitcoin knows about the bonus for the first mine." Hu Yue introduced that early Bitcoin miners used computers to mine thousands of Bitcoins, which is now worth nearly 100 million yuan at current market price.

The total amount of FIL is 2 billion, of which 70% are mined by miners. This number is halved every 6 years and decreases linearly every month. 700 million were produced in the first 6 years.

"This is the next Ethereum-level investment opportunity." Cryptocurrency bigwigs Bao Erye and Shen Yu said.

Ethereum opened at $2.77 (August 8, 2015), and later reached its highest price of $1,506 (January 14, 2018), an increase of 543 times.

Can Filecoin create this miracle?

Crazy Miner

"We currently sell two products. One is a 10T computing power product priced at 19,800 yuan with a two-year usage right. The other is a 22T complete machine with permanent ownership price of 43,800 yuan." Hu Yao, a leading Filecoin mining machine manufacturer, told the author in early June this year.

"We can accept orders worth 200 million yuan." Hu Yue said that the 192T mining machine that will be launched soon will cost more than 250,000 yuan.

Half a month later, the price of the 192T mining machine mentioned by Hu Yue had reached 382,080 yuan, and it had increased by 52.8% before it was shipped.

The product mentioned by Hu Yue is the Filecoin mining machine, which is known as the blockchain's wealth-making machine in 2020.

"Filecoin sold 11 billion U.S. dollars worth of mining machines alone." Bao Erye said this shocking number, but no one verified it.

According to BlockVC data, there are at least 200 to 300 Filecoin mining machine sellers in China, and the sales of several leading manufacturers even exceed 1 billion.

"The initial cost of a mining machine was only a few thousand yuan, then it became 10,000 or 20,000 yuan, and now the cost of a mining machine is about 100,000 yuan."

There is no difficulty in supplying Filecoin mining machines. They are composed of CPU, motherboard, memory, hard disk, graphics card and other parts, and all accessories can be purchased on the market.

The Filecoin concept is in full swing, and the prices of related accessories are also rising.

"The price of motherboards has increased by 2-2.6 times. Graphics cards have increased by 32%, memory has increased by 56%, and CPUs have increased by 20-30%. "Hu Yue revealed that since the beginning of this year, due to the epidemic, global hardware has been in short supply, and hardware manufacturers have raised prices. "Now, if you order hardware, you will have to wait until September for delivery."

This forced Filecoin mining machine manufacturers to raise prices. One mining machine manufacturer raised prices twice in one month, with 1 T rising to 3,580 yuan.

On the other hand, IPFS miner Li Wenxing told TechFlow that it would take a long time to make a profit on a machine that costs 100,000 yuan.

According to the prediction of miners mining on the test network, Filecoin mining machines can produce about 0.3 FIL per terabyte of computing power per day. Based on the average price of FIL of 112 yuan on July 3, the daily profit per terabyte of computing power is about 33.6 yuan. If you buy the 10T machine with a two-year usage right mentioned by Hu Yue, you can get your money back in about two months.

The payback period is two months. Compared with most Bitcoin mining machines and graphics card mining machines, IPFS mining machines are full of fatal temptation.

But in fact, there are three uncertainties.

First, after the Filecoin mainnet is launched, the computing power of the entire network will definitely soar, and the mining efficiency will decrease. It is reported that some leading mining machine manufacturers and mining pools did not participate in this test.

The second is the configuration of the mining farm. If you build a mining farm yourself, you will need to pay for construction, operation and maintenance, electricity costs, etc. The construction cost of a 10,000 kWh mining farm is about 3 million yuan. If you hand it over to a mining farm/mining pool for hosting, the other party will charge a 30% service fee.

The third is the uncertainty of the currency price. The current futures price is full of expectations, and it is also confusing as to how the price will go after the opening.

Li Wenxing predicts that "retail investors currently participating in Filecoin mining will definitely lose money." In addition, the price of mining machines, which can easily reach hundreds of thousands, can also discourage a wave of people.

"These large mining machine manufacturers and mining pools have paid a lot of R&D costs and technical service fees. In order to recoup their investment in advance, they have adopted the currently popular cloud computing model." Li Wenxing said that cloud computing power is to transfer the risk from mining machine manufacturers to investors.

Filecoin mining equipment has gone through several iterations.

In 2019, the Filecoin code was open sourced, raising computing to the same level as storage, resulting in many previous mining machines being declared obsolete.

At the end of last year, Filecoin officially announced that mining requires a GPU and raised the hardware standard all the way to 128 GiB of memory, a multi-core CPU and a 2080Ti graphics card from NVIDIA. The mining machine had to be iterated again.

Li Wenxing revealed that Xi'an Lingdong had previously spent a lot of money to develop blade-type hard drives, but later had to give up due to official parameter changes, which resulted in a huge waste.

"All waste will be shared by the investors of Filecoin mining machines," said Li Wenxing. "These mining machine manufacturers and the capital behind them are all waiting to go online to recoup their costs."

Grab the first mine

Looking ahead, FIL coins have not yet been issued. In addition to mining machines, cloud computing power and futures currencies are following closely, and a tens-billion-dollar industrial chain has been formed.

Golden Computing Cloud, Mars Cloud Mining, Bee Exchange, Tiger Token, BKEX, HomiEx, HyperPay, Cloud Management Computing Power... IPFS cloud computing power sales platforms have sprung up like mushrooms after a rain.

Li Wenxing revealed that some projects in Shenzhen that were originally pyramid schemes have transformed into Filecoin cloud computing platforms.

Their slogan is the same: grab the first mine!

The so-called cloud computing power means that the mining farm packages the machine computing power, labor costs, electricity costs, etc. and sells them to users, and settles the mined coins to users.

Compared with physical mining machines, the IPFS cloud computing model does not require you to purchase an entire mining machine. Instead, it is sold based on the computing capacity, so the investment threshold is lower.

Different from ASIC mining, Filecoin mining has a significant Matthew effect. Testnet data shows that the coin production efficiency of the top 5 mining pools is more than 4 times that of the 6th to 10th mining pools.

Under the rules of Filecoin, the leading mining pools have absolute initiative, and small and medium-sized retail investors must rely on them. The most important way to invest is to buy their cloud computing power.

For the Filecoin cloud computing platform, scale means efficiency.

Industry insiders told TechFlow that investing in cloud computing power is simple, but there are many pitfalls.

The biggest risk is that some cloud computing platforms do not have real mining machines and computing power, which is essentially a fundraising fraud.

Li Wenxing said that if these platforms fail to hand over their equipment and coins after going online, it may lead to criminal cases.

Even if it is a reliable platform, you still need to think twice before acting.

Although cloud computing is convenient, it comes with a high premium. Jiang Zhuoer, founder of Litecoin Mining Pool, once said, "Cloud computing is basically 30% to 80% more expensive than mining machines."

A cloud computing product on the market with few sales

Secondly, whether the purchase of computing power can make a profit depends on two points: whether you can continue to receive coins; and whether the price of FIL can continue to rise after it goes online. If FIL performs poorly after it goes online, then the profit may be a long way off.

This is essentially a gamble that FIL will become the next 100x coin, the next BTC.

But for those who sell cloud computing power, this is not a big problem. They are in a business where money is exchanged for goods.

"Some cloud computing platforms have already recovered their costs before the Filecoin mainnet went online," said Li Wenxing.

A cloud computing power salesperson told TechFlow that when he sold a cloud computing power, the commission rate was about 20%, which was paid directly in USDT.

In Filcoin's industrial chain, in addition to mining machine manufacturers and mining pools, another giant is the exchange. They not only sell cloud computing power, but also launch Filecoin futures currency to stimulate market sentiment in advance.

According to statistics, 38 exchanges including Gate, BiKi, and LBank have launched FIL futures, but this behavior is not officially recognized.

In Filecoin's Slack discussion group, a miner once asked IFilecoin officials: There are many companies selling Filecoin tokens in the Chinese market, is this true?

The official staff clearly responded that it was fake and Filecoin could not be bought or sold before the mainnet was launched. Investors were strongly advised to stay away from any exchange or entity claiming to buy, sell or trade Filecoin or IPFS SAFTS, tokens or derivatives.

In other words, the domestic futures currently launched on the exchange are essentially just air or promises, and need to be purchased and redeemed after FIL goes online. However, insiders also told TechFlow that Gate and LBank participated in FIL's ICO, and the ultimate source of the currency is Coinlist.

Flowers bloom outside the wall, fragrance blooms inside the wall

The IPFS poker table is full of domestic cryptocurrency tycoons, who come and go with chips in hand.

Du Jun, the founder of Node Capital, who was once dubbed as a “banker,” revealed in a WeChat group: “We have invested nearly $5 million in IPFS, and now the team is on high alert every day.”

Guo Hongcai, who is well-known for ICO white papers and ICO event presentations, once said: The hundred-fold coin depends on FIL.

He even made a judgment: If the Filecoin token soars and drives up the prices of ETH and BTC, it will show a stronger upward trend.

Unlike Bao Erye who sells his reputation to call orders and pull the market, Wang Feng, the founder of Mars Finance, participates in IPFS with practical actions.

In addition to investing in Interstellar Bit Mining Company, Wang Feng's Consensus Lab also launched Filecoin computing power.

In addition, Distributed Capital is also an early investor in Filecoin and has also invested in IPFS mining pool 1475.

The logic behind capital, especially cryptocurrency capital, investing in a project is often growth. As for the hundredfold growth of coins mentioned by Bao Erye, who will pay for it?

IPFS is popular in China, but not so popular overseas.

Looking only at the Twitter account of Juan Benet, the founder of Filecoin, he has only 26,000 followers. In comparison, Justin Sun, the founder of Tron, has 2 million followers, and Changpeng Zhao, the founder of Binance, has 570,000 followers.

Google Trends shows that in the past three months, global keyword searches for "IPFS" and "Filecoin" have not increased much, which is almost negligible compared to the popularity of mainstream cryptocurrencies such as BTC and ETH.

According to the regional division of keyword search popularity, China is far ahead and has become the largest search source for IPFS keywords.

This can't help but remind people of another overseas project that is very popular in China - EOS.

Matthew Graham, CEO of Sino Global Capital, shared the possible reasons with TechFlow:

Protocol Labs cares about the Chinese market; the center of power in the mining world is in China, and abroad, miners are divided into different scattered communities that lack the scale of the Chinese mining community.

Second, Filecoin investors are eager to replicate the miracle of ICO.

Regarding the popularity of IPFS in China, Matthew reminded investors to be extra cautious.

“The best investments are often the ‘quietest’ ones. Filecoin is already a highly watched project, and expectations may have deviated significantly from reality. Given the popularity of the project, there will inevitably be scammers out there trying to steal wealth.”

In addition, Matthew believes that although mining is profitable, the IPFS protocol may not be able to be applied in China and there are legal risks.

"China's internet security laws are stricter than most other countries and may view an immutable, open file-sharing protocol as a threat to national security," Matthew revealed.

“I only made money in the first three months”

What is the future prospect of IPFS and Filecoin?

When people who sell mining machines and cloud computing power talk about IPFS, they always say “IPFS is the next generation of the Internet, Filcoin is the next Bitcoin, and the next 100-fold coin.”

Outside the interest chain, there are many industry insiders pouring cold water on the issue.

"I am not particularly optimistic about the development of IPFS or storage-related blockchain projects. Decentralized storage is a false demand. Decentralized storage greatly increases costs and reduces efficiency, and storage is extremely sensitive to cost and efficiency. Blockchain is essentially a database system with low capacity and efficiency and high cost. It is only suitable for storing some ledger data, not for putting everything on the chain."

Yang Haipo, the founder of ViaBTC and CoinEx, compared IPFS to EOS, believing that EOS was a failed case, but he also stated that CoinEX will still list FIL next.

“EOS tried to build an enterprise-level public chain, but it was filled with junk data. Fewer and fewer people were running its nodes, and fewer and fewer services were providing EOS data and wallets. It will eventually be crushed.”

Jiang Zhuoer, founder of Litecoin Mining Pool, gave his own more "simple and crude" judgment standard: "Try whether IPFS can store small movies. If not, just ignore it."

In mid-2019, Li Wenxing came into contact with Filecoin. “At first, we called on everyone to mine, and that idle household broadband could be used for mining.”

"But now, after several iterations, it has become cluster mining. Without professionals, ordinary people can't participate at all." Li Wenxing feels that Filecoin is not as good as the Wanke Cloud he invested in before. "Wanke Cloud costs 400 yuan per unit and can be sold for 200 yuan, while Filecoin requires tens of thousands or even hundreds of thousands of yuan of investment."

Xu Yingkai, founder of BlockVC, also said: "It is rare in history that OneCoin's economic model is so self-consistent, and it is also rare in history that Filecoin's economic model is so different."

If "whether IPFS can succeed" is still a debate of truth, then many IPFS concept peddlers have already jumped out of the standards of right and wrong and established another set of judgment logic.

“No matter how awesome IPFS is, if it can’t make money, what does it have to do with me? As long as it can make me money, I’ll be happy even if it turns out to be a false demand.” Pan Feng is not a blockchain practitioner and has no faith in Bitcoin and blockchain. He simply sees IPFS as a “money-making opportunity.”

He is full of confidence in the price of FIL after it is officially launched. He believes that FIL's economic model has its own "Ponzi scheme model", so a sharp rise in prices in the initial stage is not a problem.

“Unlike Bitcoin mining, which only requires mining machines, IPFS adds a staking link. Subsequent miners need to stake FIL for mining. The larger the storage capacity, the more they need to pay. If the rules are violated, the staked coins may be confiscated in whole or in part.”

“When the market opens, the circulating supply is small, and miners have a demand to pledge and buy coins, which will push up the price. As the price goes up, the demand for mining and buying coins will increase, until a bubble critical point is reached.”

In addition, Pan Feng also firmly believes that there is a mysterious force that will support the FIL coin price - the IPFS mining machine scam.

"Since 2017, at least tens of billions of IPFS mining machines have been sold on the market, most of which are fake. Those who sell mining machines either run away and are subject to rights protection, or buy some coins to deal with investors who buy mining machines. At least in the short term, they will take over."

Based on this logic, Pan Feng decisively went all in on IPFS, buying coins, selling cloud computing power, selling mining machines... As long as there was profit margins, he wanted to get involved. "I only made money in the first three months." Pan Feng did not intend to fight in the IPFS field for a long time.

This may also represent the mentality of most investors, "What is IPFS? What is the future of IPFS?" They don't care at all, "making money or not" becomes the only criterion for judgment. Under the stock game, it is inevitable that it will be a battle royale.

Just like EOS back then, some people returned with a lot of gains and became financially free, while others were stuck at high prices, telling the story of EOS once being priced at 160 yuan.

"The world is bustling with people, all for the sake of profit; the world is bustling with people, all for the sake of profit." A Bitcoin miner who has switched to Filecoin mining said that he will wait until he sees the test network ranking on the 20th of this month and then prepare to work hard.

This is true for all things in the world!

(To respect the opinions of the interviewees, Hu Yue, Li Wenxing, Li Xiao, and Pan Feng are pseudonyms in this article)