What is Filecoin?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
Filecoin is a network that creates a decentralised market for spare storage capacity. It launched in October 2020 from Protocol Labs, the team behind the IPFS distributed file system. Storage providers earn rewards by cryptographically proving, over time, that they still hold the data.
Key points
- A market that matches storage providers and clients through deals
- Providers must continuously prove they still hold the data
- They post collateral that is slashed if proofs fail
- A smart contract environment was added in 2023
Definition
A decentralised storage network that lets clients entrust data to third-party providers by requiring cryptographic proofs of storage.
Filecoin responds to the concentration of data storage in a handful of cloud providers: data can be removed at a provider's discretion, or become unreachable in a regional outage. It also starts from the observation that enormous amounts of storage capacity sit unused and could be matched to demand through a market.
It builds on IPFS, which addresses data by a hash of its contents — identifying what a file is rather than where it sits. IPFS alone, though, gives nobody a reason to keep hosting a file. Filecoin adds the economics.
Providers continuously submit two kinds of proof: that they encoded and stored a unique copy of the data, and that they still hold it. They post collateral in advance, and failing to submit proofs costs them part of it. That is what creates an economic reason to actually retain the data.
In practice it is used to archive research and public datasets, store NFT metadata and images, and distribute websites. A virtual machine added in 2023 made storage deals accessible from smart contracts.
Watch out for
- · Proof of storage shows the data is held; it does not guarantee how quickly it can be retrieved
- · Running a provider requires specialised hardware and continuous uptime, so entry is demanding
- · How much of the network's capacity holds actual client data should be checked against published statistics
Frequently asked questions
Are IPFS and Filecoin the same?
No. IPFS is the addressing and distribution layer; Filecoin is the economic layer that pays for storage. IPFS can be used on its own.