The business guide to Filecoin

Since the decentralised storage movement kicked off back in the 2010s, many promising new solutions have cropped up, promising to change how we live and work for the better.

One such project is the Filecoin movement, which launched its test network in 2020 and essentially offers users a decentralised, peer-to-peer digital storage network, allowing individuals the opportunity to swap their unused storage space for Filecoin tokens (FIL).

Naturally, these developments offer businesses – many of whom overspend on inefficient storage solutions – a more resourceful approach to data storage, where they can avoid the fate of spending too much resource on unused data and features.

So, what should organisations know about Filecoin?

What is Filecoin and who can use it?

Filecoin is a decentralised, peer-to-peer digital storage network (DSN), which aggregates storage offered by multiple independent storage providers and self-coordinates to provide data storage and data retrieval services to clients.

It is built on top of the InterPlanetary File System (IPFS) and has an ‘incentivisation layer’ which enables users and businesses to receive Filecoin tokens when they rent out their unused storage space. This is an altcoin, which similar to the likes of Ethereum and Bitcoin, uses blockchain technology, where nodes in the network can store core data which is guaranteed by a proof-of-retrievability component.

This may sound simple to begin with, but as with the cryptocurrency market in general, Filecoin can quickly appear complicated to users when delving into its associated jargon. In general, there are three groups of users connected to Filecoin: clients, storage miners and retrieval miners. Perhaps clients are the easiest to understand here – this refers to those who pay a fee to store and retrieve their data, by choosing from the various providers available on the market. For those who wish to store private data, they must first encrypt it before submitting to a provider.

The second group of users, storage miners, store clients’ data in exchange for FIL tokens. First, they decide how much storage space they are willing to set aside for users to purchase. Storage miners will then agree on a deal with the client, and once this is in place, they will be required to continuously provide proofs that the data is stored securely. All parties can look at the proofs to ensure that the storage miner in question is reliable.

Finally, retrieval miners are responsible for providing clients with data at their request. Put simply, retrieval miners and clients can exchange data and coins by utilising micro-payments; this means that data is divided into pieces and clients provide a small number of coins as payment for each piece. Because Filecoin is a distributed system, the security of all data is ensured by storage across multiple storage locations with end-to-end encryption. Furthermore, storage providers do not have access to the decryption keys, which further ensures the sanctity of data.

Businesses can realise the benefits of Web 3.0

In terms of the benefits offered by Filecoin storage, away from the obvious benefit of putting empty storage to good use, the main selling-point that organisations should note is that it is frequently more cost-effective, faster and secure than centralised cloud data storage solutions.

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Moreover, they are more reliable than typical centralised solutions which limit opportunities – on the other hand, IPFS powers the creation of diversly resilient networks that enable persistent availability, with or without internet backbone connectivity.

This means better connectivity for the developing world, during natural disasters and times of disruption, or just when users are stuck in an area without a good Wi-Fi signal. It can be very costly to store data on other blockchains such as Ethereum or Bitcoin – so much so, that previous estimates put the cost of tokenising data on Ethereum at 17,500 ETH per GB, amounting to around $42 million at the time.

Beyond this, by moving towards solutions like Filecoin, organisations are also endorsing a move towards Web 3.0, and therefore, a more democratic internet. By shifting out market titans such as Amazon’s AWS and Microsoft’s Azure and Google Cloud, moving towards decentralised solutions more generally opens up the potential to democratise the internet.

IPFS solutions remain true to the original vision of the World Wide Web as an ‘open’, ‘flat’ space – rather than staying locked into an inequitable contract with a market leader and paying excessively high rates for storage, the likes of Filecoin will make for a more competitive market.

As Filecoin deals are negotiated in the open market, running a storage provider simply requires a functioning internet connection and spare disk space. This essentially lowers the barriers to entry, enabling users the ability to access to better deals and the potential to make the most out of their storage.

Reliability and flexibility will be key

Users are often tempted into lengthy contracts with well-known vendors, and in many cases, these brands survive on big marketing budgets and name-power. Filecoin solutions offer a refreshing change in this regard, as storage providers can demonstrate their reliability through their track-record, which is published on the blockchain, rather than extravagant campaigns or exaggerated claims about their services.

In the open market, clients are able to choose from a booming ecosystem of vendors. Better still, businesses and users can enjoy some much improved flexibility when it comes to switching vendors.

Unlike traditional storage solutions, Filecoin providers generally offer the same services and APIs. Likewise, files are content addressed, meaning that they can be easily transferred to a new provider, if a user finds a preferable vendor, without needing to manually re-download and upload the files, which can be cumbersome work.

If the trajectory of Bitcoin is anything to go by, then it is highly possible that Filecoin could undergo a huge period of growth and surpass its Web 2.0 cloud peers. Early adopters will no doubt reap the benefits of embracing Filecoin, ensuring that all storage is put to good use and safely stored, as the World Wide Web moves along the path to becoming a more open and democratic space.