Editor’s Note: This blogpost is a summarised repost of the original content published on 25 April 2025, by HQ Han from Ansa Research. Ansa Research is a research firm focused on distributed infrastructure. The firm covers digital networks aiming to rebuild how internet infrastructure operates.
Executive Summary
Filecoin has now entered the next phase of development, focusing on users, demand generation and adoption.
In this regard, Filecoin is not alone – while DePIN networks have now proven very successful at bootstrapping supply, the focus of this sector has also now turned towards demand.
There has been some exciting progress on Filecoin’s demand story:
Growth in the underlying demand for Filecoin’s services
We are seeing data clients in both Web2 and Web3 paying for storage on Filecoin. In some cases, Filecoin has been chosen in parallel or over Web2 providers.
The storage provider landscape is reflective of this – whilst capacity and # of SPs have dropped, there has been an increase in quality and data utilization on the network – showing a shift in network resources towards demand
There is a pathway to scale
Filecoin is still expanding its core services to cater to demand with important protocol level upgrades – F3, PDP, and Filecoin Web Services (FWS)
New Filecoin-powered storage solutions have come to market (Akave, Storacha, Recall etc) – and all already charging for deals within their target markets
DeFi continues to scale on FVM – notably, FIL-backed stablecoins coming online
Storing more data on the network and creating multi-service APIs creates the building blocks to bring compute needs to the data
Filecoin is at an inflection point as its services mature to meet the demands of AI, enterprise & nation state focus on data locality, and global cost-cutting driving orgs away from costly Web2 cloud providers.
This blog post examines Filecoin’s adoption, including milestones and use cases, its scaling path via infrastructure, tooling, and coordination, and cryptoeconomics, covering incentives, token dynamics, and network sustainability.
Adoption & Client Demand
Over the past year, Filecoin has seen a rise in paying customers, with projections suggesting over 1 EiB of paid storage deals could close in 2025. This would raise the network’s utilization from its current 29% to nearly 100% with fully paid usage.
The number and quality of leads are growing, driven by efforts from teams like Ansa Research and the Filecoin Foundation, who are actively sourcing paid deals for on-ramps and Storage Providers. Business development has also shifted focus toward high-potential DePIN categories, particularly those collecting large volumes of consumer data as well as Web2 clients with archival and hot/cold storage needs.
Filecoin’s network utilization has risen to around 29%, signaling increased demand. A growing number of large-scale clients (storing over 1,000 TiB) possibly in the enterprise and/or long-term archival space, demonstrates that efforts by on-ramps and Storage Providers (SPs) are on the right path.
After earlier declines as the network shifted its focus from generating supply to generating demand, average daily new deals have recently increased by over 10% from Q3’24 to Q4’24.
The Storage Provider (SP) landscape is shifting from a focus on raw capacity to delivering useful, client-driven storage. In its early phase, the network prioritized onboarding as much storage as possible, often without regard for actual usage or retrievability. Now, as Filecoin emphasizes demand generation and adoption, SPs are adapting by pursuing paid deals and ensuring robust data retrieval. This marks a clear move from quantity to quality, with incentives increasingly aligned to real-world client needs – reflected in a 388% year-over-year surge in the number of SPs achieving successful retrievals.
The network’s path to scale is envisioned along three main lines:
Expanding core protocol capabilities with the introduction of Proof of Data Possession (PDP), Fast Finality (F3), and Filecoin Web Services (FWS)
Launching new on-ramps and Layer 2 solutions to support vertical-specific adoption
Improving economic efficiency through decentralized finance (DeFi)
1. Expanding Core Protocol Services
Filecoin will go through key protocol updates, primarily;
Proof of Data Possession (PDP) – that has shipped as of 8th May 2025, and Storage Providers can participate in PDP SPX, a short-term initiative to onboard select Storage Providers to test, validate, and demonstrate Proof of Data Possession (PDP).
Fast Finality (F3) – that has arrived early and went live on Filecoin Mainnet as of April 2025, bringing 100x improvement on transaction speeds
Filecoin Web Services (FWS) – a composable service marketplace for offering multi-service deals
Introduced last year as part of Filecoin’s broader vision, Filecoin Web Services (FWS) marks a major step toward expanding the network’s capabilities beyond storage. At its core, FWS is a composable service marketplace that enables users to bundle multiple services—such as cold and hot storage, retrieval, compute, and encryption—into a single deal.
FWS aims to offer a more flexible and integrated alternative to traditional Web2 cloud platforms. It also opens the door for other DePIN networks to offer and resell their services within the Filecoin ecosystem. With integrated payments and escrow, FWS supports the creation of customizable service combinations, enhancing utility for both consumers and enterprises.
A key part of Filecoin’s scaling strategy is the emergence of new storage on-ramps, functioning like Layer 2s – that are launching mainnets and targeting specific verticals. These startups tailor Filecoin’s storage stack to meet the needs of niche markets, helping to establish beachhead use cases. Notable examples include:
Akave: Focused on Web2 enterprises, Akave offers a hot storage layer on top of Filecoin, supporting archival, hot/cold storage, and S3 integrations. They’ve also integrated with Snowflake.
Storacha: Targeting Web3 applications in social, AI, and identity, they specialize in storage solutions for decentralized platforms.
Recall: Aimed at the AI sector, specifically towards AI agent storage and data processing.
Filecoin’s DeFi ecosystem is growing, playing a key role in improving economic efficiency across the network. A major focus is on stablecoins, which help retain economic activity within the ecosystem. Secured Finance has introduced USDFC, a FIL-backed stablecoin that allows FIL holders and Storage Providers to use their tokens as collateral instead of selling them—similar to MakerDAO on Ethereum.
The central forecast: FIL’s circulating supply growth is expected to slow and may turn negative or deflationary by late 2026. This shift stems from a combination of reduced token issuance and increased demand sinks that lock or remove FIL from circulation.
Supply-Side Pressures Easing
Several key developments are reducing new FIL issuance:
Vesting Completion: Token vesting from early stakeholders, including Protocol Labs and the Filecoin Foundation, ends in October 2026 – removing a major source of new tokens.
Decreasing Block Rewards: FIL block rewards follow a declining emission schedule by design.
FIL-Backed Stablecoins: Stablecoins like USDFC by Secured Finance allow FIL holders to use tokens as collateral instead of selling, keeping more value within the network and reducing sell pressure.
Demand-Side Sinks Growing
At the same time, FIL demand is increasing through new utility and locking mechanisms:
Rising Collateral Requirements: Storage Provider collateral is set to increase in 2025, partly due to a fix under FIP-81 that enhances locking behavior.
Increased Protocol Revenue: FIP-100 is projected to boost FIL-denominated revenue, much of which is burned or otherwise removed from circulation.
Together, these trends suggest a pivotal moment in Filecoin’s economic evolution: a potential transition to a deflationary supply model, signaling a tighter and potentially more valuable FIL economy.
[Disclaimer: Circulating supply analysis is based on a 3rd party model: https://mechafil-jax-web-levers.streamlit.app/ These models are based on many assumptions, and should not be relied upon as the source of truth. There are many factors that can and will affect the actual numbers. Simulations should not be relied upon and are for illustrative purposes only. DYOR and adjust the model yourself, or build your own models in Dune.]
For those looking to dive deeper into the Filecoin ecosystem, Ansa Research has compiled a curated directory of key metrics and data sources. These resources provide essential insights into network health, development trends, and adoption signals – making them useful for both regular monitoring and deeper research.
Whether you’re tracking protocol upgrades, storage deals, or adoption patterns, this data directory is a valuable starting point for your own analysis.
Filecoin is entering a new phase centered on demand, adoption, and long-term sustainability. With supply successfully bootstrapped, focus has shifted to real usage – evidenced by rising paid storage deals, potentially exceeding 1 exabyte by 2025, and a shift toward higher-quality, retrievable data.
Key upgrades like Proof of Data Possession (PDP), faster finality (F3), and new Layer 2 solutions are unlocking capabilities across data and DeFi, including FIL-backed stablecoins that help retain value within the network.
At the same time, token issuance is set to slow, with vesting ending in late 2026 and block rewards declining – while demand sinks like collateral locking (FIP-81) and protocol revenue (FIP-100) increase. Together, these trends suggest a potential shift to a deflationary FIL supply and a more mature, sustainable network economy.
To listen to the entire talk by HQ Han (Ansa Research) at FDS-6, watch here on YouTube:
Disclaimer: This information is for informational purposes only and is not intended to constitute investment, financial, legal, or other advice. This information is not an endorsement, offer, or recommendation to use any particular service, product, or application.
2024 has been a pivotal year for Filecoin, with significant progress in the Filecoin Virtual Machine (FVM), Storage, Retrievals and Compute. In this blogpost, we’ll recap the key milestones of 2024 and take a look at the major growth drivers shaping Filecoin’s path into 2025.
Accelerating Paid Deals: Boosting paid services (storage, retrieval, compute) on Filecoin to generate cashflow for service providers. This helps to support more sustainable hardware funding beyond token incentives.
Growing On-Chain Activity: Increasing activity through programmable services, DeFi, and new use cases.
Becoming Indispensable: Establishing Filecoin as an integral component of other projects and businesses.
These priorities are not mutually exclusive – they layer onto each other and are all signs that the Filecoin ecosystem is growing increasingly valuable.
So how did we fare across these priorities in 2024?
1. Accelerating Paid Deals
Paid Deals is an ecosystem-level metric that reflects the volume of paid services within the Filecoin network. FilecoinTLDR is currently tracking this metric here.
In 2024, Filecoin made significant strides in accelerating paid deals by reducing friction for businesses entering the ecosystem, with key advancements like the development of Proof of Data Possession (PDP) and the emergence of Layer 2 solutions.
Enabling Efficient Hot Storage with PDP
Projected for Q1 2025, Proof of Data Possession (PDP) introduces a new proof primitive to the Filecoin network, marking the first major proof development since Proof of Replication (PoRep) and Proof of Spacetime (PoSt). Unlike PoRep, which excels at cold storage through sealed sectors, PDP is designed for “hot data”, which is data that needs fast and frequent retrieval.
This new proof type enables cost-effective “cache” storage on Filecoin without sealing and unsealing, enabling rapid data onboarding and retrieval. PDP opens the door for a new class of storage providers focused on hot storage and fast retrievals, benefiting onramps like Basin, Akave, and Storacha.
Scaling Filecoin with L2s
In 2024, we saw a rise in Layer 2 solutions built on top of Filecoin (We also covered this in our earlier blogpost “State of L2s on Filecoin”). L2s like Basin, Akave and Storacha enable both horizontal and vertical scaling with secure, customizable subnets. These L2s enhance Filecoin by unlocking new use cases: including managing data-intensive workloads, supporting AI and unstructured data, powering gaming and privacy-focused applications — all of which create more opportunities for paid deals.
2. Growing On-Chain Activity
Filecoin has made notable progress in accelerating on-chain activity through the FVM, which spurred growth in its DeFi economy. The proposed Filecoin Web Services (FWS) and launch of FIL-collateralized stablecoins are set to further boost this momentum.
As of December 16 2024, more than 4,700 unique contracts have been deployed on FVM, enabling over 3 million transactions. DeFi activity on FVM saw average net deposits exceeding 30M FIL ($200M), driven by staking, liquid staking, and DEXs, with GLIF leading at 62%, followed by FilFi (10%) and SFT Protocol (9%). Net borrows averaged 26M FIL ($173M), highlighting strong growth in Filecoin’s DeFi ecosystem.
FIL-Collateralized Stablecoin for the Filecoin Ecosystem
USDFC is a FIL-backed stablecoin launched by Secured Finance in Q4 2024 to address key challenges in the Filecoin ecosystem. It introduces stability to a network previously lacking stablecoin options, reducing volatility and enhancing value storage, much like DAI did for Ethereum.
By allowing FIL holders and SPs to collateralize their assets for USD, USDFC helps cover operational costs without selling FIL, preserving asset value and network support. It also boosts liquidity in lending markets by providing FIL-backed stablecoin liquidity, driving more efficient capital flows within the Filecoin ecosystem.
3. Becoming Indispensable
DePIN gained prominence, with Filecoin strengthening its position through key partnerships with AI and compute projects. Meanwhile, on-chain archival received significant recognition through major on-ramp partnerships.
“…thanks to Filecoin for building an awesome decentralized archive layer. “ –Anatoly (Solana Co-Founder)
Notable On-Ramps of 2024
At Solana Breakpoint this year, Filecoin founder Juan Benet highlighted how Filecoin’s zero-knowledge (ZK) storage is securing the entire Solana ledger.
Similarly, Cardano apps now have the opportunity to boost data redundancy and decentralization through the Blockfrost integration with Filecoin.
SingularityNET’s integration with Filecoin (via Lighthouse) emphasizes the growing need for scalable and cost-effective storage in the AI-driven era, where managing vast amounts of data efficiently is critical.
These meaningful partnerships help signal Filecoin as a key player in both the Chain Archival and AI narratives.
This year, Filecoin has positioned itself as a key player in the growing field of Decentralized AI. The onset of projects within the ecosystem like Ramo (network participation), Bagel (AI & cryptography research), Swan Chain (AI training and development), and Lilypad (distributed compute for AI) highlight Filecoin’s expanding role in powering AI innovation.
2024 Filecoin Challenges
Despite the immense progress, we noted some challenges that the community faced. Though bearing in mind that Web3 products are still very early, and the problem statement of forming a credible alternative to the centralized cloud is a huge one.
Product Market Fit:
Roadblocks like limited retrievability and high costs (driven by data replication), challenge the efficiency of the Filecoin network.
There is a need to make payments easier by allowing transactions directly on the Filecoin network, using methods like stablecoins or flexible payment options.
Improving visibility into the onboarding process and using customer data can help refine strategies and boost performance in key areas.
Building a Sustainable Economic Model + Stronger Economic Loops:
Viewing Filecoin as an island economy highlights its focus on accruing value by exporting goods and services while also keeping as much value as possible within the network by minimizing outflows.
A key challenge lies in reducing external outflows while finding ways to boost exports and capture more demand within the ecosystem.
Ensuring that transactions remain on-chain is equally crucial to strengthening this economic model and creating stronger economic loops.
Filecoin’s 2025 Outlook
Looking ahead to 2025, Filecoin’s evolution continues. Here are three key themes that could drive transformative growth for the network while addressing the 2024 challenges outlined above.
1. Accelerating Filecoin by 450x with Fast Finality (F3)
Fast Finality (F3), is one of the most impactful upgrades to Filecoin’s consensus layer since the launch of its mainnet. By drastically reducing transaction finality times, F3 overcomes a key limitation of the network’s original consensus mechanism. This enhancement is scheduled to go live on the mainnet in Q1 2025.
Old vs. New Finality:
Before F3, Filecoin’s consensus mechanism ensured secure block validation but required 7.5 hours (900 epochs) to finalize transactions, which was too slow for applications like smart contracts or cross-chain bridges.
With F3, transactions can now optimistically finalize in minutes—a 450X improvement.
What this means for Filecoin:
Enhanced Speed & UX: Transactions finalize within minutes, enabling low-latency applications and eliminating the long waits previously experienced.
Expanded Use Cases & Accessibility: L2 subnets like Interplanetary Consensus (IPC), Efficient smart contracts and decentralized applications, Blockchain bridges for interoperability with other chains.
Ultimately, this allows Filecoin to improve its usability across a wider variety of applications.
2. Moving Beyond Storage with FWS
Filecoin Web Services (FWS), emerged this year as a pivotal concept. It represents a strategic shift for Filecoin, expanding its scope from primarily a decentralized storage network to a broader marketplace for blockchain-based cloud services. This diversification can attract a wider range of users and use cases, potentially creating more positive economic loops within the network. Here are some pointers on why FWS should be on your radar:
Strengthening Filecoin’s Competitive Edge: FWS will introduce features like Programmatic SLAs (which automate and enforce service agreements through smart contracts, ensuring clear performance expectations and penalties) and Verifiable Proofs(which provide cryptographic evidence of service delivery, allowing clients to independently verify service execution).
Expands Filecoin’s Capabilities: Goes beyond Proof of Replication (PoRep) by adding Proof of Data Possession (PDP), enabling robust hot storage use cases. PDP will help improve data retrievability, a crucial factor in achieving product-market fit that has been widely discussed within the Filecoin community this year.
Positions Filecoin as a leading platform in the decentralized web: FWS will facilitate the integration of multiple networks and protocols, creating a cohesive marketplace for storage, compute, bandwidth, and other services. This could make Filecoin a key player in the growth of the decentralized web.
FWS is currently a concept in development, with a new storage service featuring PDP (v0) underway. Following this milestone, the development of the FWS marketplace will begin with its expected launch in Q1 2025.
3. Unlocking new value streams in Filecoin
As a Layer 1 blockchain, Filecoin primarily generates revenue through gas fee burns (which happen when chain resources are used or when faults arise). However, relying on gas fee burns as a main source of revenue is not scalable and more importantly increases operational expense costs as well as service costs.
A sustainable approach involves value returning to the Filecoin economy through the use of services in the FWS marketplace, fostering a more scalable and balanced revenue model. A proposed value accrual mechanisms includes:
FWS Fees: Commission (%) charged based on the transaction volume in the marketplace.
Service Fees: Applied when a user accesses a service or a vendor provides one
SLA Penalties: Imposed on service providers who fail to meet agreed-upon performance standards
This shift promises a more robust and diversified revenue stream, ensuring Filecoin’s continued relevance and profitability in the evolving market.
Final Thoughts
As data grows in value, we expect advancements in privacy-preserving machine learning, data-driven business models, and the increasing role of AI agents in unlocking decentralized storage’s potential.
Looking towards 2025, with the upcoming Fast Finality (F3) launch on the mainnet and the continued development of Filecoin Web Services, Filecoin is set to play a central role in shaping the future of data and AI within decentralized ecosystems. We expect to see these advancements positioning Filecoin beyond storage and unlocking a sustainable economic model through new revenue streams generated by FWS.
To stay updated on the latest in the Filecoin ecosystem, follow the @Filecointldr handle or join us on Discord.
Many thanks to HQ Han and Jonathan Victor for reviewing and providing valuable insights to this piece.
Disclaimer: This information is for informational purposes only and is not intended to constitute investment, financial, legal, or other advice. This information is not an endorsement, offer, or recommendation to use any particular service, product, or application.
The Filecoin community celebrated the first anniversary of the Filecoin Virtual Machine (FVM) launch on March 14, 2024. The FVM has brought programmability to Filecoin’s verifiable storage and opened up a unique DeFi ecosystem anchored around improving on-chain collateral markets. Liquid Staking, for example, as a subset of Filecoin DeFi, has hit over $500 million in TVL. As the network grows, several critical infrastructures across AMMs, Bridges, Oracles, and Collateral Debt Positions (CDPs) are coming together to propel DeFi expansion in 2024.
In this blog post, let’s take a look at the latest DeFi projects launched on top of FVM and provide a view into future areas of activity.
DeFi Developments on FVM
Automated Market Makers
Automated Market Makers (AMMs) connect Filecoin with other Web3 ecosystems, enabling on-chain swaps, deeper liquidity, and fresh LP opportunities.
Decentralized Exchanges: ✅
Recently, leading Decentralized Exchanges Uniswap v3 (via Oku.trade) and Sushi integrated with Filecoin by deploying on the FVM. Oku Trade’s interface enables Uniswap users to easily exchange assets and provide liquidity on Filecoin. With this, FVM developers can effortlessly access bridged USDC and ETH assets natively on the Filecoin network, broadening Filecoin’s reach. As a foundational DeFi primitive, DEXes also opens the floodgates for non-native applications to leverage Filecoin’s robust storage and compute hardware.
Interoperability Networks
Bridges: ✅
Bridges help bring liquidity into DEXs and AMMs on FVM. For developers building on FVM, Bridges connects Filecoin’s verifiable data with tokens, users, and applications on any chain, ensuring maximum composability for DeFi protocols. For this purpose, messaging, and token bridging solutions by Axelar and Celer were added to the Filecoin network immediately post-FVM launch.
Today, AMMs Uniswap v3 and Sushi along with several other DeFi applications are natively bridged to Filecoin with the help of cross-chain infrastructure enabled by Axelar and Celer.
Liquid Staking
Liquid Staking protocols have been the prime mover within Filecoin DeFi. They’ve played a vital role in growing and improving on-chain collateral markets. Today, nearly 17% of the total locked collateral (approx. 30 million FIL) by storage providers comes from FVM-based protocols such as GLIF (52%), SFT Protocol (10%), Repl (9%) and the rest (29%). These protocols have increased capital access to storage providers while simultaneously enabling better yield access to token holders. Read more to learn how Filecoin staking works.
GLIF Points: 🔜
GLIF, the leading protocol on Filecoin, has a TVL of over $250 million. To put this into context, this surpasses the largest Liquid Staking protocols on L1 chains like Avalanche. As of writing this (March 06, 2024), 32% of all FIL stakes into GLIF liquidity pools were deposited shortly after its announcement to launch GLIF points (on Feb. 28, 2024), a likely precursor to a governance token.
Typically, to participate in the rewards program, GLIF users will have to deposit FIL and mint GLIF’s native token, iFIL. Similarly, the SFT protocollaunched a points program in 2023 based on its governance token to incentivize community participation.
Overall, we look forward to how the gameplay of points, popular among DApps in Web3 ecosystems, will act as a catalyst to decentralize governance and incentivize participation for Filecoin’s DeFi DApps.
New Staking Models: 👀
The influx of protocols experimenting with new models to inject liquidity into the ecosystem hasn’t slowed down. Two projects worth mentioning are Repl and FILLiquid.
Repl.fiintroduces the concept of “repledging.” Under repledging, SP’s pledged FIL are tokenized into pFIL, Repl’s native token, and used for other purposes including earning rewards. Repleding essentially increases the utility of locked assets thereby reducing opportunity costs for SPs. In just a few months after launch, Repl’s TVL has soared past $30 million.
FILLiquid, currently on testnet, models the business of FIL lending for SPs on algorithm-based fixed fees instead of traditional interest rates. The separation of payouts from the duration of deposits is expected to nudge long-term pledging and borrowing activities from token holders and SPs respectively, saving costs and increasing efficiency.
Price Oracles
Oracles, services that feed external data to smart contracts, are critical blockchain infrastructure essential for DeFi applications to grow and interact with the real world.
Pyth Network: ✅
Pyth recently launched its Price Feeds on the FVM. The integration allows FVM developers to access more than 400 real-time market data feeds while exploring opportunities to build on top of Filecoin’s storage layer. DeFi apps benefit from Pyth’s low-latency, high-fidelity financial data coming directly from global institutional participants such as exchanges, market makers, and trading firms.
Filecoin is also supported by Tellor, an optimistic oracle that gives FVM-based applications access to price feed data.
Collateralized Debt Positions
As DeFi activity on Filecoin is climbing, Collateralized Debt Positions (CDPs) will add more dimensions for other decentralized applications to build on FVM.
Chymia.Finance: 🔜
Chymia is an upcoming DeFi protocol on FVM. With a growing number of Liquid Staking Tokens (LST) on Filecoin, CDPs will extend the utility of locked tokens by generating stablecoins. Through Chymia, holders of LST can generate higher yields while using it as collateral for deeper liquidity.
Ajna: 🔜
Ajna is a noncustodial, peer-to-pool, permissionless lending, borrowing, and trading system requiring no governance or external price feed to function. As a result, any ERC20 on the FVM will be able to set up its own borrow or lend pools, making it easier for new developers to build a utility for their protocols.
Payments
Adjacent to storage offering on Filecoin, the FVM allows developers to bind DeFi payments to real-world primitives on the network. Built intuitively, Filecoin’s core economic flows enable paid services to settle on-chain. Station and Saturn are two notable Filecoin services to have successfully leveraged FVM for payments.
Filecoin Station: ✅
Station is a downloadable desktop application that uses idle computing resources on Station’s DePIN network to run small jobs. Participants in the network are rewarded with FIL earnings. Currently, Station operates the Spark and the Voyager modules, both aimed at improving retrievability on the network. In February, roughly 1,900 Station operators were rewarded with FIL for their participation.
Filecoin Saturn: ✅
Saturn, a decentralized CDN network built on Filecoin, also leverages FVM for disbursing FIL payments to retrieval nodes on the network. In 2023, Saturn averaged over 2,000 earning nodes (retrieval providers on the network receiving FIL) for their services.
Decentralized Options
With growing liquidity, options are yet another emerging product in DeFi. Options facilitate the buying or selling of assets at a predetermined price on a future date, giving token holders protection against price volatility and an opportunity to speculate on market moves.
Thetanuts:✅
Currently, Thetanuts Finance, a decentralized on-chain options protocol supports Filecoin. The platform allows FIL holders to earn yield on their holdings via the covered call strategy. Thetanuts FIL-covered call vaults are cash-settled and work on a bi-weekly tenor.
Wallets
To use dApps on the FVM, users would be required to hold FIL in a f410 or 0x type wallet address. Over time, many Web3 wallets such as MetaMask, FoxWallet, and Brave have started supporting 0x/f410 addresses. MetaMask also supports Ledger. With this, it is possible to hold funds in a Ledger wallet and interact with FVM directly.
In addition, exchanges like Binance natively supporting the FEVM drastically reduce complexities for FVM builders. To learn more about the most recent wallet upgrades, visit the Filecoin TLDR webpage.
What’s Next?
The obvious near-term impact of various integrations across AMMs, Bridges, and CDPs is a fresh influx of liquidity into the Filecoin ecosystem. Liquidity begets deeper liquidity with an increase in the number and diversity of DeFi protocols on Filecoin. DeFi’s growing economy clubbed with more services coming on-chain and utilizing FVM for payments will overall increase the revenue and utility of the network. We expect this strong DeFi traction to scale Filecoin as an L1 ecosystem, with core services of storage and compute becoming the backbone of the decentralized internet.
To stay updated on the latest Filecoin happenings, follow the @Filecointldr handle.
Many thanks to HQ Han and Jonathan Victor for reviewing and providing valuable insights and to all the ecosystem partners and teams for their timely input.
Disclaimer: This information is for informational purposes only and is not intended to constitute investment, financial, legal, or other advice. This information is not an endorsement, offer, or recommendation to use any particular service, product, or application.
2023 marked significant shifts in technology and adoption for the Filecoin network. From the launch of the Filecoin Virtual Machine, to other developments across Retrievals and Compute, 2023 lay the foundation for Filecoin’s continued expansion. This blogpost will provide a summary of the notable milestones the Filecoin ecosystem reached in 2023, and in the later portion, growth drivers to watch for 2024.
TL;DR
2023 Retrospective:
Storage: Active deals reached 1,800 PiB, and storage utilization grew to 20%
FVM: FVM launch in March 2023 enabled FIL Lending (Staking) which supplied 11% of total collateral locked by Storage Providers; TVL broke USD 200M
Retrievals: Retrievability of Filecoin data improved, alongside notable releases from Saturn (3,000+ nodes, sub 60ms TTFB) and Station
Compute, AI and DePIN networks: Synergistic growth of Filecoin together with physical resource & compute networks
Web2 Enterprise Data Storage: Led by strengthened offerings by teams such as Banyan, Seal Storage, and Steeldome
Continued DeFi growth: DEXes, Oracles, CDPs, spurred by service revenue coming on-chain
2023 Retrospective
To recap, Filecoin enables open services for data, built on top of IPFS. While Filecoin initially focused on storage, its vision includes the infrastructure to store, distribute, and transform data. The State & Direction of Filecoin, Summarized blog post shared an initial framework for Filecoin’s key components. This framework will serve as an anchor for discussing 2023’s traction.
1) Storage Markets: Active storage deals reached 1,800 PiB with storage utilization of 20%
In 2023, Filecoin’s stored data volume grew dramatically to 1,800 PiB, marking a 3.8x increase from the start of the year. Storage utilization grew to 20% from 3%. Currently, Filecoin represents 99% market share of total data stored across decentralized storage protocols (Filecoin, Storj, Sia, and Arweave).
Growth in Active Storage Deals was driven by two factors:
1) Storing data was easier in 2023. Continued development across on-ramps such as Singularity.Storage, NFT.Storage, and Web3.Storage increased Web3 adoption. Singularity alone onboarded 180 plus clients and 270 PiB of data. This growth was enabled by advances in its S3 compatibility, data preparation, and deal making.
2) Large dataset clients grew exponentially in 2023. Over 1,800 large dataset clients onboarded datasets by the end of 2023, from an initial base of 500 plus clients. 37% of these clients onboarded datasets exceeding 100 TiB in storage size.
2) Retrievals: Greater reliability for Filecoin Retrievals, alongside releases from Saturn & Station
Filecoin’s retrieval capabilities were bolstered by improvements both in its tooling and offerings. Several teams, such as Titan, Banyan, Saturn and Station, are laying the groundwork for new use cases to be anchored into the Filecoin economy, including decentralized CDNs and hot storage.
Saturn: A Decentralized CDN
Saturn is a decentralized CDN network built on Filecoin, that seeks to address the need for application-level retrievals. The Saturn network currently has over 3,000 nodes distributed across the globe, enabling low-latency content regardless of location.
Distribution of Nodes: 35% in North America, 34% in Europe, 24% in Asia, 7% RoW Source: Saturn Explorer as of January 08, 2024
Across 2023, Saturn reduced its effective Time-to-First-Byte (median TTFB) to 60 milliseconds. This makes Saturn the fastest dCDN for content-addressable data, with TTFB remaining consistent across all geographies. Saturn was also capable of supporting 400 million retrieval requests on its busiest day of the year.
At the end of 2023, Saturn launched a private beta for customers (clients include Solana-based NFT platform Metaplex).
Station: A Deploy Target for Protocols (Enabling Spark Retrieval Checks)
Station, a desktop app for Filecoin, was launched in July 2023. Station is a deployment target for other protocols allowing DePIN networks, DA layers, and others to run on a distributed network of providers.
Station’s first module, Spark, is a protocol for performing retrieval checks on Storage Providers (SPs). Spark helps establish a reputational base for SP data retrievability, and supports teams looking to provide a hot storage cache for Filecoin. Since launch in Nov 2023, Spark has grown to 21 million daily jobs on 10,000 active nodes as of January 2024.
3) Filecoin Virtual Machine: The FVM launch introduced a new class of use cases for the Filecoin Network. Early DeFi adoption broke $200 million in TVL.
The Filecoin Virtual Machine (FVM) launched in March 2023 with the EVM being the first supported VM deployed on top. FVM brought Ethereum-style smart contracts to Filecoin, broadening the slate of services anchoring into Filecoin’s block space. Two areas of early adoption have been in liquid staking services (led by GLIF and other DeFi protocols) and micropayments via the FVM.
Liquid Staking
One of the core economic loops in the Filecoin economy is the process of pledging, where SPs put up collateral to secure capacity and data on the network. Prior to the FVM, borrowed Filecoin collateral was sourced through managed offerings from operators like Darma Capital, Anchorage, and CoinList. Post-FVM, roughly a dozen staking protocols have launched to grow Filecoin’s on-chain capital markets.
In aggregate, FVM-based protocols supply almost 11% of the total locked collateral (approx. 19 million FIL) on the network, giving yield access to token holders, and increasing the access to capital for hundreds of Filecoin SPs. From Filecoin’s collateral markets alone, the ecosystem has broken past 200 million in TVL.
Payments
Adjacent to the core storage offering on Filecoin, new services are being built that anchor into Filecoin’s block space. As mentioned in the Retrieval Markets section, two notable services (Station and Saturn) have actually started leveraging FVM for payments in 2023.
To date, Station users have completed 161 million jobs with more than 400 addresses receiving FIL rewards. Saturn averaged over 2,000 earning nodes in 2023 with 448,905 FIL disbursed to date.
4) Compute: Traction for Decentralized Compute Networks
Filecoin’s design enables compute networks to run synergistically on Filecoin’s Storage Providers. Sharing hardware with compute networks is also valuable to the Filecoin network: (1) sharing allows Filecoin to offer the cheapest storage by running side-by-side with compute operations, and (2) it brings additional revenue streams into the Filecoin economy.
Two key developments made running compute jobs on Filecoin nodes:
Sealing-as-a-service: Sealing-as-a-service is the process by which Storage Providers (SPs) can outsource production of sealed sectors to third-party marketplaces. This gives SPs greater flexibility in operations and reduces costs of sector production. One marketplace, Web3mine, has thousands of machines participating in its protocol offering cost savings to SPs of up to 70%. On top of the cost savings, the infrastructure built may also eventually benefit SPs by allowing them to leverage their GPUs for synergistic workloads (e.g. compute jobs)
Reduced Onboarding Costs:Supranational shipped proof optimizations reducing sealing server cost by 90% and overall cost of storage by 40%
On top of these developments, 2023 saw emerging compute protocols building in the Filecoin ecosystem. Two notable examples:
Distributed compute platform Bacalhau demonstrated real-world utility among Web2 and DeSci clients. Most recently, the U.S. Navy chose Bacalhau to assist them in deploying AI capabilities in undersea operations. Bacalhau is a platform agnostic compute platform intended to run on Web3 and Web2 infrastructure alike. Launched in November 2022, Bacalhau’s public network surpassed 1.5 million jobs and in some cases slashed compute costs by up to 99%
Source: Bacalhau
Up-and-coming compute networks likeIo.net allow ML engineers to access a distributed network of GPUs at a fractional cost of individual cloud providers. Io.net recently incorporated 1,500 GPUs from Filecoin SPs — positioning Filecoin providers to offer their services to Io.net’s customer base. Io.net has over 7,400 users since its launch in November 2023, serving 15,000 hours of compute to users.
2024 will be a critical growth year for Filecoin as groundwork laid in 2023 comes to fruition. Native improvements to storage markets, greater speed of retrievals, new levels of customizability & scalability brought by FVM and Interplanetary Consensus (IPC), all expand the universe of use cases that Filecoin can address.
In a Web3 climate where there is substantial attention on DePIN (and the tying of real world services with Web3 capabilities) these changes will be critical building blocks for even better services. Here are three themes to look for in 2024:
1) Synergies with Compute, AI and other DePIN networks
In 2024, foundational improvements to the network will substantially improve Filecoin’s ability to compose with other ecosystems.
Fast finality allows better cross-network interactions with app chains in other ecosystems (e.g. Cosmos, Ethereum, Solana).
Customizable subnets allow for novel types of networks to form on top of Filecoin such as general purpose compute subnets (e.g. Fluence) and storage pools (e.g. Seal Storage).
Hot storage allows for broader use case support including serving data assets for physical resource networks (e.g. WeatherXM/Tableland), caching data for compute networks (e.g. Bacalhau), and more.
This is all scratching the surface. As the Web3 space and DePIN category grows, Filecoin is well positioned to support new communities that form given its 9 EiB of network capacity and flexibility. There exists a sizable opportunity within physical resource networks producing high amounts of data, such as Hivemapper (over 100M km mapped), and Helium (1 million hotspots globally). Compute networks are also a likely growth area, given the backdrop of a GPU shortage (particularly for AI purposes) in traditional cloud markets.
Source: Messari
2) Focused Growth in Web2 Enterprise Data Storage
Web2 enterprise storage is a unique challenge for decentralized networks – requirements from these customers are not easily supported by most networks. Typical requirements from enterprise clients can include end-to-end encryption, certification for data centers, fast retrievals, access controls, S3 compatibility, and data provenance/compliance. Crucially, these requirements tend to differ across segments and verticals, which means that a level of adaptability is required. Filecoin’s architecture enables it to layer on support for the features these customers need.
A few teams worth keeping an eye on:
Banyan: Banyan simplifies how enterprise clients integrate with decentralized infrastructure by bundling hot storage, end-to-end encryption, and access controls, on top of a pool of high-performing storage providers. With the Filecoin network, Banyan provides content-addressable storage, which it plans to complement with hot storage proofs by utilizing FVM. This implementation makes Banyan compatible not only for enterprise, but DePIN and compute networks.
Seal: Seal has established itself as one of the best storage onramps in the Filecoin ecosystem, and is responsible for onboarding several key clients onto the network, such as UC Berkeley, Starling Labs, the Atlas Experiment, and the Casper Network. The team has been one of the driving forces in enterprise adoption to date, and most recently has achieved SOC 2 Compliance. In 2024, they plan on launching a subnet to enable a market for enterprise deals. On the back of their enterprise deal flow, they are positioned to bring petabytes of data into the network over the coming year via their new market.
Steeldome: Steeldome offers enterprise clients seeking data archival, backup and recovery with an alternative that is cost-competitive, efficiently deployed and scalable. It does so by combining Filecoin in its stack with Web2 technologies, allowing a fuller feature set to complement Filecoin’s cost-effective and secure archival storage. The Steeldome team has succeeded in onboarding clients across insurance, manufacturing, and media. In 2024, they plan to continue that trajectory, while offering a managed service for Storage Providers.
3) Greater On-chain DeFi activity
There is likely to be continued activity in the on-chain economy with an increase in the number and type of DeFi protocols on Filecoin.
The first protocols will increase service revenues (from Storage, to Retrievals, and Compute) coming on-chain. As previously described, more services are coming online in the Filecoin network, and are utilizing FVM for payments (e.g. Saturn, Station).
Key releases in 2023, including SushiSwap going live in Nov 2023, and the UniSwap community’s approval of integrating on FVM will lead to more diverse DeFi services coming on-chain. This will include CDPs (Collateralized Debt Positions), and Price Oracles (e.g. Pyth), among others.
Final Thoughts
In 2024, the Filecoin network will experience greater adoption, particularly by Compute, AI and DePIN networks, as well as targeted enterprise verticals. This adoption brings on-chain service revenue and supports the growth of DeFi activity beyond collateral markets. Continued improvements on storage markets, retrievability driven by hot storage proofs and CDN networks, as well as releases by FVM and IPC will enable the teams building on Filecoin to drive this next stage of growth.
To stay updated on the latest in DePIN and the Filecoin ecosystem, follow the @Filecointldr handle.
This blogpost is co-authored by Savan Chokkalingam and Nathaniel Kok on behalf of FilecoinTLDR. Many thanks to HQ Han and Jonathan Victor for reviewing and providing valuable insights and to all the ecosystem partners and teams for their timely input.
Disclaimer: This information is for informational purposes only and is not intended to constitute investment, financial, legal, or other advice. This information is not an endorsement, offer, or recommendation to use any particular service, product, or application.
Editor’s Note: This blog is a repost of original content from IOSG Ventures. IOSG Ventures is a community-friendly and research-driven early-stage venture firm. This blog post represents the independent views of the author, who has given permission for re-publication.
The programmable layer on FIL, the FVM, allows for trustless marketplaces to be built
This calls for a need for a marketplace that currently exists off-chain, i.e. FIL borrowing to be brought on-chain, where FIL token holders lease their FIL to Storage Providers (which some call “miners”) who borrow FIL from the pool(s)
FIL borrowing is essentially taking cash forward on the future block rewards accrued by the Storage Providers, and this makes FIL block rewards from data storage more capital-efficient
There are obvious trade-offs to be made between centralization-capital efficiency- and security in protocol design
The market size for borrowing FIL is reducing over time but the introduction of stablecoins, etc. Can unlock unique projects to be built on top of these protocols
The launch of a programmability layer on a seasoned blockchain generally comes with a lot of excitement. The launch of Stacks (STX) on the Bitcoin blockchain brought a new paradigm of thinking amongst the community built around it.
A very similar narrative happened with the launch of the FVM on Filecoin. The robust Filecoin community now has to see its vision through a completely different lens. A lot of open problems that the ecosystem had could now be addressed. Creating trustless marketplaces via programmability was a key piece of the puzzle.
Liquid staking on Filecoin was the first “Request-for-build” from the Filecoin ecosystem during the launch of FVM and was given high importance. To understand why this is, let us first understand how the economics of Filecoin work.
How Filecoin Incentives Work
Unlike an Ethereum validator, there is no one-time staking in Filecoin. Every time a Storage Provider (SP) provides services, they need to put up a pledge amount in FIL. This pledge is required to seal the sectors and store the sealed sector in the SP. Such a structure ensures that the SP is going to store data for their clients for the period of the deal that they agree to, in exchange for rewards. Rewards are distributed via PoSt (Proof of Space-Time), where the SPs are rewarded for proving that they have the right client data stored.
SPs are selected via a leader selection mechanism called DRAND. DRAND chooses the leader with some initial requirements and also the % of raw byte power of the network controlled by the SPs.
SPs will have to keep ramping up raw byte power (RBP) to be chosen as the leader to “mine” a block and receive incentives. This helps the SP subsidize their storage costs.
Although there are many more factors that govern the supply rate of these incentives, the baseline is that for storage providers/miners, to maximize their bottom line will have to try to maximize RBP and onboard (and renew) more deals.
This creates a positive loop for the Filecoin network
Economics of a Storage Provider
When an SP receives block rewards, these rewards are not liquid. Only 25% of the rewards are liquid, and the remaining 75% of the block rewards vest linearly over 180 days (~ 6 months). This poses a problem for SPs. The rewards, which are supposed to be an SP’s operating income, are now delayed payments for as long as the SP onboards/renews deals.
Let us look at the SP balance of the top miner in the network (as of 6th August 2023)
When you look at the graph, one can see that only about 1% of the rewards (or operating income) of the SP is actually liquid. If this SP now wants to either:
Pay for operating income
Upgrade hardware
Pay for maintenance
Or onboard/ renew deals
The SP will have to either borrow fiat currency or borrow FIL from third parties just to make up for these “delayed” payments.
At the moment many storage providers (miners) in the network rely on CeFi lenders such as DARMA Capital, Coinlist, and a few others. As these are loan products, storage providers will have to go through KYC and a strict audit process to be able to borrow FIL. When we look at the map below, we can see a very high concentration of Filecoin SPs in Asia, and with centralized providers being mostly in the West, it is very hard for them to underwrite FIL loans to Asian miners with favorable terms, and most Asian miners/ SPs don’t have access to such providers.
This becomes a hindrance for new SPs to come in and participate in the system, and existing SPs can scale their business only as much as the total FIL pool size of these CeFi lenders
So why not just borrow fiat currency from a bank? With FIL being a volatile asset, it will pose additional capital management challenges for SPs who borrow.
To solve this problem, there needs to be a marketplace for FIL lenders (who could be holders of FIL) and FIL borrowers (SPs)
Filecoin Staking
With the launch of the FVM, this marketplace idea can come to fruition. FIL lenders/stakers can now put their FIL to work and SPs can borrow from this pool (either in a permissioned or permissionless manner) all governed by smart contracts.
There are many players in the ecosystem who are already building this and waiting to launch in the coming months.
More than calling such marketplaces staking protocols, it is a lot closer to a lending protocol by the nature of this business.
Some base features of such a FIL lending product would be:
Lenders deposit idle FIL and receive a “liquid staking” token
Borrowers (SPs) can borrow from the pool against collateral that exists in the SP actor (Essentially Initial Pledge + Locked Rewards)
Borrowers will make interest payments every week, or any specified time period, by signing over the “OwnerID” of the SP to a smart contract
Lenders receive the interest (minus protocol fees) as APY either via a rebase token or a value accrual token
Different liquid staking protocols have different schools of thought when it comes to borrowing:
Over/ Fully collateralized vs. Undercollateralized
In Over-collateralized or fully collateralized models, the debt-to-equity ratio is always going to be less than or equal to 100%. This means that if my SP balance is say 1000 FIL, I can only borrow up to 1000 FIL (depending on the protocol rules as well). This can easily be coded into smart contracts and default risk is built in. This allows for greater transparency and also security to the stakers (lenders). Another advantage of such a model is that it allows for permissionless borrowing as well. This is where the product blocks more like Aave/ Compound rather than a Lido or RocketPool.
In an uncollateralized model, the lenders are bearing risk while the risk is being managed by the protocol. In such a model, risk modeling is complex math that cannot be baked into smart contracts, and needs to be off-chain which sacrifices transparency. But, since there is leverage involved, it makes the system a lot more capital-efficient for the borrower. The more permissionless a leveraged system will get, the more risk the lenders bear and this would call for a very robust and dynamic risk management model that is run by the protocol developers
The trade-offs being made are:
Capital efficiency vs. staker risk
Capital efficiency vs. transparency
Lender risk vs. borrower entry to the system
Single Pool vs Multi-Pool
Protocols can also opt to build a multi-pool model where lenders can choose to stake FIL in different pools with different risk parameters. This allows for risk to be managed on-chain, but liquidity will be fragmented. In a single-pool model, risk will have to be maintained off-chain. Overall the trade-offs will still remain the same as the ones mentioned above.
Trade-off: Liquidity fragmentation vs Risk management transparency
Risks
In an overcollateralized model, even if the miner gets slashed multiple times, as soon as the Debt-to-equity ratio hits 100% the miner will get liquidated and the stakers will be comparatively safe
In an undercollateralized model, the borrowers can be penalized for failing to prove sectors. There are many more faults in failing to prove data storage rather faults in the consensus itself. This is more common in Filecoin than in other general-purpose blockchains because there is an actual commodity that is being stored from an off-chain entity. This will affect the collateral value and lever the borrower more. Liquidation thresholds will have to be set very carefully in such a model.
What about Ethereum Staking/Lending protocols entering the market?
In the Filecoin ecosystem, unlike the Ethereum ecosystem, the nodes (Miners/Validators/SPs) are responsible for much more than general uptime. They are supposed to market themselves to be chosen as SPs, and regularly upgrade their hardware to support more storage, seal, store, maintain, and retrieve data. Filecoin storage and reward mining for SPs is a full-time job.
Unlike an Ethereum validator, there is no one-time staking in Filecoin. Every time an SP provides storage to a client, they need to put up a pledge. This pledge is required to seal the sectors and store the sealed sector in the SP. Storage provision on Filecoin is a very capital-intensive process and this discourages many new SPs from participating in the network and existing SPs from staying and contributing to the network.
Since the participants on the borrow side are SPs only it is also going to be intensive for newcomers in the Filecoin ecosystem to bootstrap borrower trust.
The mechanics of Filecoin alone don’t allow Ethereum staking or even lending protocols to deploy easily on the FVM.
Economics of the Protocol
Is there enough FIL in the market to supply for lending?
As of August 6th, 2023, there are about 264.2 million FIL circulating that are not committed as sector pledges or rewards that are to be released. This can be counted as the total amount of FIL that can be staked by the lenders into the pool
While FIL borrowing is essential to SPs, what are they actually borrowing? They are taking a forward payment on their locked-up rewards in an overcollateralized model, and in the undercollateralized model, they are taking a forward payment on future rewards.
Looking at the graphs above, we can see that the total locked rewards are about 223M FIL, and the supply can match the demand. The demand-to-supply ratio is almost 84%. This shows even power dynamics on either side, and either side cannot squeeze the other on interest rates/ APY.
What does the future look like?
Estimating the market for future demand of FIL for borrowing is essentially the amount of FIL that will be released in the future as rewards.
The good folks at Messari ran a simulation of FIL circulating supply with a 3-year and a 50-year forecast using different cases.
According to the top left graph, considering a conservative scenario where there is low onboarding of data and only 10% of the total deals are renewed, the new reward emissions over 3 years are close to around 100M FIL and in an aggressive scenario where there is a high amount of data onboarding and 70% of existing deals renewed, the extra rewards come to about 200M FIL
So one can expect a market size of somewhere between 100M — 200M FIL over the next 3 years. At the current price of FIL (Aug 6th), which is $4.16, there could be a borrowing TAM of about $400M — $800M. This could be counted as the TAM of the product’s borrow side.
On the supply side, in the conservative estimate, there can be about 300M FIL that will be emitted, and in a more aggressive scenario, the circulating supply is simulated to be around the same as it is today. Why? It is because if more deals are being onboarded and renewed, there will be a lot more FIL locked-in sector pledges.
In the more aggressive scenario, the demand is going to outweigh the supply and the interest charged can be higher in this competitive market.
Where I think this can go
Amongst the different designs, there need not be a winner-takes-all type of model. Intuitively, the long-term winner (by TVL) is generally the protocol that is built most safely. Very much like Lido in the Ethereum ecosystem. I for one am biased towards safer structures more than optimizing for 2–3% more yield, and I think FIL whales would also prioritize capital safety over a slightly higher yield.
This is after considering the amount of penalties miners pay for not being able to prove space-time.
From the borrower (SP) end, the SP could borrow from different protocols for different purposes. If the SP already has a lot of collateral and doesn’t need to lever up to pay for opex, then the safer, overcollateralized model will work better, since it is safer. Whereas if I am a newer SP with a lot of sectors to be pledged I would borrow with leverage from an undercollateralized pool.
After studying the above models, we can see:
Staking in Filecoin is important to bridge the supply and demand for FIL in the ecosystem. The FVM has recently been released allowing for a lending marketplace to exist. Although the problem is real, the FVM release was probably too late for most FIL staking/lending protocols as the pie (mining rewards) is decreasing over time making it a niche market.
However, a few fascinating use cases can emerge on top of these staking protocols. With the introduction of stablecoins, the rewards can be taken as cash forwards. Something similar to what Alkimiya is building on Ethereum. This can result in the injection of new capital into the Filecoin ecosystem and also increase the TVL in these protocols.
Ethereum’s and Filecoin’s tech is different, their miners are different, their developers are different, their apps are different, and hence their communities. And for staking in particular, with every miner being “non-fungible” bootstrapping the demand side becomes a BD exercise and the success of it is directly proportional to the protocol’s reputation in the community.
Filecoin staking is a critical solution that needs to be built to get more SPs in the system, for retail to put their capital to work, create greater economic incentives as an ecosystem to attract more developers, and build useful products to build a positive flywheel. To know more beyond staking in the Filecoin ecosystem and the criticality of the FVM you can read this previous piece we published.
There are many more open problems to be solved in the Filecoin ecosystem, but we are positive that the Filecoin Ecosystem is working in the right direction to achieve its vision of storing humanity’s data in an efficient system.
Unlike proof-of-stake cryptocurrency protocols that directly provide rewards for locking staked tokens, “staking” FIL is much more akin to a lease.
You may have heard of services or applications that enable “Filecoin staking.” However, “staking” on the Filecoin network is different from proof-of-stake cryptocurrency protocols like Ethereum. Filecoin “staking” allows storage providers (SPs) to borrow FIL which they use as collateral to provide storage on the Filecoin network.
Unlike proof-of-stake cryptocurrency protocols that directly provide rewards for locking staked tokens, “staking” FIL is much more akin to a lease. SPs borrow FIL to use as collateral and may pay a fee. Applications facilitating this may also take a fee.
You can think of a FIL lease to a storage provider like a car being leased to an Uber driver who makes money providing rides through the Uber platform. During the lease term, the car owner receives lease payments from the Uber driver; when the lease is over, the car is returned to the owner.
Why do storage providers need FIL collateral?
Filecoin storage providers (SPs) contribute data storage capacity to the Filecoin network.
In order to ensure that files are stored reliably over time, SPs are required to post FIL as collateral. If an SP fails to meet their responsibilities (perhaps they go offline or stop storing certain files) their collateral is slashed, meaning that they lose a portion of the FIL they posted as collateral.
A storage provider can buy or earn FIL to provide the collateral they need to run their data storage business, or they might borrow/lease FIL from existing token holders.
Centralized vs decentralized applications
Third-party centralized programs enable storage providers to borrow FIL to use as collateral. In the centralized model, token holders transfer custody of their FIL to centralized intermediaries for set periods of time. These intermediaries allow SPs to borrow FIL, and distribute fees collected to token holders.
This model requires that token holders trust the centralized intermediary with custody of their FIL. Some centralized programs rely on multi-sig transactions. Multi-sig is short for ‘multi-signature’, which means a transaction has two, or more, signatures before it is executed. However, multi-sigs still rely on human intervention.
Using any third-party application carries risks, and it is critical to thoroughly research any application to understand all these risks. Some areas to consider are:
Audits: Has a third-party audited the code and are the results published publicly?
Open Source: Is the code available to inspect publicly?
Bug Bounty: Does the program provide a bug bounty to incentivize anyone to report/fix possible vulnerabilities?
Trustless: Can you use the application without relying on an intermediary; is there a single point of failure?
Disclaimer: This information is for informational purposes only and does not constitute investment, financial, legal, or other advice. This information is not an endorsement, offer, or recommendation to use any particular service, product, or application.
