Filecoin is a cryptocurrency with the goal of creating a computer network in which its operations provide file sharing and storage services on a global scale.

Its founders claim that if adoption becomes massive, Filecoin may just become the fastest and cheapest way of data storage on the internet, all of which without relying on a central authority or any other potential entity or actor capable of censorship.

Filecoin is maintained by its miners whose computer power is used to provide the computation required for it to work. By making storage space available to its users, miners get paid. Other users must pay miners if they require storage, retrieval or distribution of data.

Filecoin’s network operates over the Interplanetary File System (IPFS), a decentralized file handling protocol.

Filecoin raised around $205 million USD in its 2017 initial coin offering (ICO).

Filecoin Explained

Filecoin to put it simple is a storage system, very much like to Dropbox, but powered by a blockchain.

Filecoin users pay miners for data storage in what Filecoin calls an “hypercompetitive” market. Payment is determined via open market, which, in turn, makes miners compete against each other in terms of price for storage.

On the other hand, miners are incentivized to provide storage space as they can receive rewards from the network (Filecoin tokens) for doing so. These chance of getting one of these rewards is correlated with the amount of storage one offers the network.

In order to receive the reward, a miner must perform different proofs, which are intensive processes that attest the network that they are in fact storing the data which they claim to be storing. These proofs also attest the storage space’s reliability over time.

After a miner goes through this process, they are entitled to create new blocks on the blockchain and receive their reward.

Proof-of-Replication and Proof-of-Spacetime

Filecoin employs two different proofs in order to perform its miner’s verification.

Proof-of-replication attests that a miner has in fact stored the number of data copies he or she claims to be holding.

Proof-of-spacetime, on the other hand, will attest that the miner has done so over an agreed period.

Mining Filecoin

In reality, anyone with a hard-disk and the capability to run Filecoin’s software, can join the market. These users are known in the community as Storage Miners.

The History of Filecoin

Filecoin is the vision of Protocol Labs, a company founded by Juan Benet. Which was later acquired by Yahoo.