Filecoin

  • Cryptoasset Report
  • January 4, 2019

Filecoin is a blockchain and decentralized storage network layer built atop IPFS developed by Protocol Labs using a native token to incentivize the persistent storing of data.

Overview

Filecoin is a blockchain and decentralized storage network layer built atop IPFS; both IPFS and Filecoin are developed by Protocol Labs. Filecoin provides the logic that facilitates a marketplace for the buying and selling of decentralized storage, using a native token to incentivise the persistent storing of data. Filecoin is designed to motivate numerous hardware owners to utilize their storage hardware so to globally store data in a provably secure manner via the IPFS protocol. Protocol Labs have previously created IPFS, IPLD (authenticated data model and formats) and Libp2p (modular p2p networking library) to help provide a secure and reliable decentralised internet. The original Filecoin design was heavily inspired by the Zerocash white paper, which was a precursor to Zcash.

Protocol Details

The Filecoin Decentralized Storage Network (DSN) aims to support a market with price transparency so that miners can compete with one another, providing various tiers of service along axes of speed, length, storage and price. Filecoin seek to utilise a consensus mechanism whereby the work done to determine agreement is also useful in some, perhaps more tangible, sense. Towards this end, Filecoin’s consensus mechanism determines the likelihood of a given storage provider producing the next block to be proportional to the amount of their storage currently in use by the network; meaning that when the network makes high use of a given storage provider’s capacity, the consensus mechanism favors that provider in block production, assigning her proportionally higher odds to produce the next block.

To demonstrate service quality, storage miners must repeatedly prove that they are storing data successfully. This happens through a process where the network issues challenges to them, and the miners return proofs. Filecoin offers the notion of a Proof of Spacetime, whereby data can be proven to exist in a specific place at a specific time (and so in distinct replications) and such proofs provided periodically strongly suggest permanence of the data. To complement this, Filecoin also uses Proof of Replication that combines Proof of Storage and Proof of Space, allowing for the verification of storage. Since these proofs must be stored on the Filecoin blockchain in some manner, Filecoin uses zk-SNARKs to significantly reduce their proof size. Filecoin supports two marketplaces; one storage market (on-chain) and one retrieval market (off-chain). When committing storage to the network, miners must also stake collateral, before clients can bid to access this storage with an associated deposit. Filecoin launched its initial testnet in December 2019 and is in the process of launching a phase 2 testnet with its mainnet expected in late 2020.

Asset Details

The Filecoin blockchain will have the filecoin as its native token, due for distribution upon mainnet launch. Filecoin raised ~$257 million in its 2017 token sale. The token allocation is 70% towards rewards for FIlecoin miners, 15% to Protocol labs, 10% to investors and 5% to the Filecoin foundation – for long-term network governance, grants and community building type initiatives.

Protocol labs, in collaboration with CoinList, AngelList and a leading FinTech innovation focused law firm (Cooley), introduced the Simple Agreement for Future Tokens (SAFT) framework via the Filecoin project. The motivation was to drive confidence in the token sale’s regulatory compliance in the face of a large fundraising effort prior to a live product. In a SAFT the buyer orders (and buys) tokens to be delivered at a future date (say, after the network launch). It essentially entitles buyers to future rights to tokens whilst providing the project team with funds for development efforts. The SAFT is constructed for compliance with SEC Reg D. 506(c) in addition to other securities laws whereby accredited investors can participate, exclusively so, in the fundraising event.