Bitpush Filecoin mainnet launch is approaching, distributed mining is hot, is it a wealth opportunity or a new pitfall of blockchain? -

After the third Bitcoin halving, the focus of the public chain industry has shifted to ETH2.0. On the other hand, a hot topic in the mining circle is focused on the Filecoin project. In May 2020, the Filecoin test network was launched; on June 10, Filecoin announced that it would release a reward plan for the Filecoin test network, inviting miners from all over the world to participate in running the network and obtain 4 million Filecoin tokens as rewards.

After the third Bitcoin halving, the focus of the public chain industry has shifted to ETH2.0. On the other hand, a hot topic in the mining circle is focused on the Filecoin project. In May 2020, the Filecoin test network was launched; on June 10, Filecoin announced that it would release a reward plan for the Filecoin test network, inviting miners from all over the world to participate in running the network and obtain 4 million Filecoin tokens as rewards.

So what is the Filecoin project that has recently regained its popularity? What is the specific principle of the IPFS protocol behind it? What is the relationship between the two? This mining project was launched as early as 2018, but the mainnet launch time has been postponed until this year. FIL tokens have only been futures. There have also been many mining scams that pretend to be or use the name of IPFS. Are mining projects claiming to be "distributed storage" reliable? Let's answer them one by one.

What is the relationship between IPFS and Filecoin?

Filecoin is a decentralized storage network based on the IPFS protocol and a public chain system that combines blockchain technology. FIL (filecoin) is a token based on its public chain issued by the project through 1CO. It is used to incentivize the behavior of participants in the storage and retrieval market in the Filecoin network.

IPFS, the full name of InterPlanetary File System, is an open peer-to-peer distributed file system that can connect all computing devices with the same file system. Simply put, anyone can use this protocol for free and create different types of applications based on the protocol. Through this underlying protocol, files stored on the IPFS system can be quickly obtained anywhere in the world.

The Internet protocol we are using now is the Hypertext Transfer Protocol (HTTP), which has the characteristics of hypercentralization. For example, when we download files from the Internet or browse the web, we can only get the information we need from one data center at a time. If this data center fails or is attacked, the file will be lost or the web page cannot be opened.

The original intention of developing the IPFS protocol is to supplement the HTTP protocol and solve its centralization problem. Therefore, the IPFS protocol itself is a decentralized network infrastructure. Its principle is to use content-based addresses to replace domain-based addresses. In simple terms, users are looking for content stored somewhere, not a certain address. They only need to confirm the hash of the verified content, so that they can obtain faster, safer, more robust and more durable web pages.

As for the relationship between Filecoin and IPFS, from a project perspective, the two are two independent and closely related projects launched by Protocol Lab. Filecoin combines the characteristics of IPFS and blockchain technology and is an application based on IPFS. In essence, one is an incentive system and the other is an underlying protocol. Filecoin is the incentive layer of the IPFS network, and the incentive mechanism is to use FIL tokens.

How Filecoin works

At this point, we may still be a little vague about what the Filecoin project does. To put it simply, what the Filecoin project wants to do is to utilize all idle storage resources and form an algorithm market. For example, this resource sharing model can be similar to the Airbnb model, where idle resources are put online for those who need them, and those who share resources can earn rent.

In Filecoin, users pay tokens based on demand to hire miners to store and distribute data. Miners contribute idle storage space and bandwidth and receive token rewards. Therefore, it is a network in which miners and clients participate together and each gets what they need. Next, let’s analyze its operating mode, that is, the economic model, in detail.

As a storage network, Filecoin is committed to turning cloud storage into a storage trading market. This trading market is divided into the "retrieval market" and the "storage market", with clients and miners in each market. The storage market is a verifiable market that is verified by the blockchain network. In the storage market, clients put forward the demand for storage data, and the storage suppliers are storage miners, who provide their storage space. The retrieval market is an off-chain market that provides the data required by clients for retrieval, and the retrieval service is provided by retrieval miners. Retrieval miners do not participate in the block generation process and directly obtain the corresponding service fees from the client. The purpose of the FIL token is to connect IPFS users and Filecoin miners.

1. Consensus and incentive mechanism

Filecoin uses a hybrid consensus mechanism: mainly based on expected consensus (EC), supplemented by proof of replication (PoRep) and proof of space and time (PoSt). As an incentive, Filecoin uses a blockchain token system to issue FIL tokens, with a total issuance of 2 billion. According to the official token distribution plan, 70% of them will be linearly released through block rewards and distributed to miners. The rest will be distributed to the team, investors and foundations at 15%, 10% and 5% respectively as R&D operations, investment dividends and community construction expenses.

Filecoin miners will receive block rewards based on their storage capacity. Storage capacity is measured by how many units of effective storage space the miners provide in the Filecoin network and how long they can store it. Therefore, it can be understood that the storage capacity of Filecoin miners is equivalent to the computing power of miners in the Bitcoin network. The block reward a miner receives depends on the proportion of its storage capacity to the storage capacity of the entire network. For example, if a miner provides 1 PB of storage computing power when the network size is 100 PB, he will receive 1% of the block reward in the corresponding period of time.

2. Pledge mechanism

In addition, it should be noted that participation in and mining of Filecoin does not only require mining machines, but also requires staking tokens.

In order to prevent the loss of customer data, Filecoin has set up a pledge mechanism, which can also be understood as a miner penalty mechanism. When a transaction agreement is generated, miners will store the data provided by the customer in the network. This area is called a sector. Each sector will contain the content of the stored file and the promised storage duration, ensuring that customers can freely use their stored data within the agreed storage duration.

When a miner wants to add a sector to the Filecoin network, he needs to pledge a locked fund. This locked fund consists of two parts: the FIL tokens held by the miner himself and part of the block reward. If the miner is offline within the promised storage time, he will lose part of the locked funds. If the miner stops storing completely, he may lose all the locked tokens.

Is IPFS mining reliable?

Finally, let’s go back to the issue of Filecoin mining, which is also the most concerned issue for many mining investors. Is distributed storage mining reliable?

In 2018, the IPFS protocol and Filecoin were all the rage in the mining industry, sparking a wave of mining fever, with all kinds of "IPFS mining machines" popping up everywhere. Since the launch of the Filecoin mainnet was repeatedly delayed, the mining algorithm was not announced, and mining machines and tokens were only futures, and could not actually mine. The threshold for imitating and impersonating its projects was extremely low, and it was difficult for market investors to distinguish between the real and the fake. Therefore, many IPFS mining scams occurred at the time, and many investors suffered greatly.

Now, the progress of the Filecoin project is finally on track, and the test network has been launched. According to Filecoin’s latest roadmap, the Filecoin mainnet is expected to be launched between July 20 and August 10.

Behind the project's high attention, we focus on one question: Is Filecoin mining worth participating in? After the Filecoin mainnet is launched, can ordinary people participate in Filecoin mining at home using their own storage devices?

Filco CEO (founder of Filecoin.cn Chinese community) Xie Jinbin (also known as "Xie Dapao") expressed his views on this issue in a recent interview with Lieyun Finance. He said that Filecoin mining and traditional Bitcoin mining are two completely different tracks. If Filecoin is used with traditional Bitcoin mining thinking, it is easy to suffer heavy losses.

"Filecoin mining is very different from Bitcoin mining. The first point is the mortgage coins. Traditional Bitcoin mining does not require mortgages and can be mined as soon as the machine is turned on. The premise of Filecoin mining is to have mortgage coins in hand and pledge your storage space. It has three kinds of income. One is the pledge space, the second is to store some random numbers, and invalid data can also get a part of the income. Another point is to store reliable and verifiable data provided by the official, so that you can get more income."

On May 28, Jiang Zhuoer also posted a Weibo comment on the recently popular Filecoin. He believes that the current performance of Filecoin is not enough to store small movies and the economic model is wrong. Currently, miners rely on some GPU computing rather than storage to get rewards, so he has no plans to participate in Filecoin mining.

It seems that for retail investors, Filecoin mining is different from traditional PoW mining and is a more complicated process. Before participating in Filecoin mining, you need to think carefully, learn the ins and outs of it, and don’t just follow the crowd.

Now is the time when the project is very popular, and various marketing chaos are rampant. Investors should keep their eyes open. For example, during the public beta of the Filecoin test network some time ago, major miners set off a trend of cheating the rankings, using various marketing gimmicks and piling up beautiful test data to compete for rankings.

So, for ordinary people who have planned and are ready to participate in Filecoin mining, what should they pay attention to when choosing a mining machine? Li Haotian, CEO of Diancun Technology, believes that the most critical point is to choose a reliable manufacturer and a reliable company, to look more, to compare more, and to look at the input-output ratio of the hardware. The data on the test network does not represent the actual delivery solution. Before placing an order, you must conduct actual tests to test the actual performance of these machines. In addition, it is critical to choose companies that use first-hand hardware and can deliver the hardware to you.

As for whether Filecoin’s next mainnet can be successfully launched on time, it remains to be seen. After all, the project progress and testnet launch time have been delayed many times, causing dissatisfaction among investors. Considering the epidemic, many investors are still worried that the project will be delayed again.

Finally, let's shift our perspective to the IPFS protocol, which is the so-called distributed storage. It is indeed an "invention" worthy of attention. Cao Yin said in an interview with OKEx Intelligence that IPFS is a very important infrastructure for the entire cryptocurrency ecosystem. It may replace the current ToC public cloud such as Baidu Netdisk, but it is not suitable for ToB, such as financial institutions and large Internet companies. However, it is enough for ordinary users. This alone will provide a very important storage foundation for the next generation of blockchain-based Internet applications (Web3.0).

At present, there are still many problems in the monetary economics of IPFS, but everyone still has great hopes. Even if IPFS fails, there will still be many similar projects that will develop, so I personally think this direction is worth paying attention to. However, if you are really optimistic about a certain track, it is recommended that you choose several tokens to form a basket of assets, and don't put all your eggs in one basket.

Source: OKEx Intelligence Bureau