Filecoin: A Decentralized Storage Network

https://filecoin.io

Protocal Labs which owns Filecoin is a San Fransisco based startup, which plans to build next version of decentralized storage platform based on IPFS. Filecoin had first SEC regulated ICO in the United States. The ICO was held on August 10th, 2017. On its ICO, it has raised around $200 million within 60 minutes. And is recorded as the largest ICO till date. Link.  The team originally built IPFS (InterPlanetory File System), which was an open sourced decentralized file system used by decentralized apps like Akasha.world and others.

Filecoin is based on its own blockchain technology and is not based on Ethereum and thus is not a ERC-20 token.

Filecoin is still work in progress, which is being built upon IPFS. There are already production ready competitors in this space for example, Sia.tech ,Storj etc. It will be interesting to see how this eco-system evolves or is accepted by customers.

Filecoin token will be the fuel which powers this decentralized storage network.The Filecoin protocol is a Decentralized Storage Network construction built on a blockchain and with a native token. Clients spend tokens for storing and retrieving data and miners earn tokens by storing and serving data.Miners would earn Filecon token by providing storage to the decentralized network. Filecoin network has replication built in as a part of their architecture and has auto-detection of replication failures and repair.  The content has end-end encryption for the clients which they serve it for. And the decryption keys are only owned by the specific users. This is extremely critical for client side security.

The concept of Proof of Work is very different as compared to Bitcoins, where miners need to spend significant computational power to add a transaction block to their list and get incentivized. With Filecoin, there are two types of Proof of Work which decides the Filecon Token distribution 1. Proof of Replication, 2.Proof of Spacetime. A miner just needs to either provide storage with sanity checks on replication or provide proof of time that a storage has been served.

Based on white paper, there are 2 Proof of work techniques:

(1) Proof-of-Replication allows storage providers to prove that data has been replicated to its own uniquely dedicated physical storage. Enforcing unique physical copies enables a verifier to check that a prover is not deduplicating multiple copies of the data into the same storage space;

(2) Proof-of-Spacetime allows storage providers to prove they have stored some data throughout a specified amount of time.

The interesting part here, is that the influence of a miner to mine the next block of storage is based on amount to storage in use by that miner.

IPFS is already in use by several smart contracts (and protocol tokens) as a way to reference and distribute content. Adding support to Filecoin would allow these systems to guarantee storage of IPFS content in exchange of Filecoin tokens

The good:

• Filecoin has a great team with extremely relevant experience based on implementation of IPFS.
• With solid money in the bank $253 million, Filecoin has enough fire power to execute and hire silicon valley talent.
• Filecoin can disrupt the current centralized cloud based storage market with a cheaper decentralized solution where money is distributed to contributors (miners).
• Filecoin can drive a new kind of economy where companies are born with sharing resources and incentivizing its users and customers.
• This might be a great way to drive adoption of IPFS with bridging support for Ethereum and other platforms.
• This can reduce the burden on Decentralized app developers with the IPFS scalability problem.
• Other blockchain systems such as Bitcoin, Zcash and in particular Ethereum  and Tezos, allow developers to write smart contracts; however, these platforms provide very little storage capability and at a very high cost. We plan to provide a bridge to bring storage and retrieval support to these platforms.

The bad:

• Not sure how the focus on the open source IPFS be affected because of the team working on Filecoin.
• Every storage and retrieval operation will be costing consumers money. What would be the cost of this is to be determined.
• Filecoin token are obviously not based on ERC-20 or ethereum platform. And it is not clear how customers and miners will be able to buy them with fiat currency yet. This is work in progress.
• Client / Users perform a bid operation for storage of their content, which Miners have to accept if interested and this contract gets kicked in for future storage needs. If the price does not match, the storage operation is aborted. This causes variable pricing model, which might be difficult to sell to a consumer.
• If it is enterprise play, then security and compliance might be a challenge considering files are stored in a decentralized manner.
• Will this protocol be cheaper to customers as compared to other centralized solutions like Amazon S3, Dropbox, Box, Google drive etc. Most of these services are free until a certain limit.
• IPFS was the backend layer for decentralized applications. Not sure if Filecoin can be that layer. And if it can, then there is added complexity of Filecon token system, that the Decentralized application will have to deal with.
• This feels like a monetization move for an existing open source project IPFS.
• There can be increased instances of data corruption and loss which cannot be quantified with monitory remuneration.
• Interesting to see how Filecoin differs from existing competitors which already are out in production , for example, Sia.tech ,Storj.
• Storage Miners will need commit a collateral and might be penalized for any data corruptions.

References

IPFS White paper – August 4, 2017