Filecoin Releases Cryptoeconomic Structure Ahead of Mainnet Launch
After being previously announced at least twice, the Filecoin storage network has revealed the details of its cryptoeconomic structure in a report titled Engineering Filecoin’s Economy ahead of the expected launch of its mainnet on a yet-to-be disclosed date.
The report addresses specific incentive mechanisms and economic stimuli provided by the protocol as it seeks to align incentives and pragmatically reward useful and reliable storage with less rules.
With the amount of data stored globally growing rapidly and the top five storage providers controlling 77% of the global Infrastructure as a Service (IaaS) market thus making it difficult for new market entrants to compete, Filecoin wants to be the world’s largest decentralized storage network that is set to fill the void left by the lack of a single platform that coordinates and collaborates the space for small entities to effectively compete with the capacity, scale, reputation and potentially network effects of existing providers.
The report provides all the necessary information needed by anyone seeking to participate in the network as an alternative to costly cloud storage with its competitive prices, minimized financial barriers, and unmatched network capabilities.
The eventual launch will see Filecoin’s permissionless market – with its cryptographically verifiable goods and design constraints – being only satisfied with a native token, the filecoin (FIL) act as a medium of exchange to facilitate transactions and production activities like in-game currencies and as a store of value whose minting must be tied to adding utility to the network.
The report states:
Within the Filecoin Economy, there are three distinct markets, and participants in the network exchange different goods or services. In the storage market, storage miners offer to rent out digital storage that will be verified by the Filecoin Network. Conversely, storage clients offer filecoin to have their data stored. This storage is priced based on the amount of storage space used and the duration of the contract in time. There is a retrieval market, where clients pay filecoin to retrieval miners to provide them with a copy of the data. Lastly, token exchanges could enable participants to trade to put filecoin in the hands of clients, miners, and other token holders.
To encourage consistent storage onboarding and investment in long-term storage, and not just rapid sealing, Filecoin is also introducing the concept of a network baseline – allocating 30% of Storage Mining Allocation in Simple Minting and the remaining 70% in Baseline Minting. This differs from minting tokens based purely on elapsed time but block rewards rather scale up as total storage power on the network increases to preserve the shape of the original exponential decay model and is meant to soften it in the earliest days of the network.
Once the network reaches the baseline, the report states, the cumulative block reward issued becomes identical to a simple exponential decay model – though a portion of block rewards are deferred if the network does not pass the pre-established threshold – giving an overall result of Filecoin rewards to miners being closely matching the utility they, and the network as a whole, provide to clients.
As one of the blockchain world’s most highly anticipated projects with a promise to decentralize data storage, Filecoin is reported to likely fail and become worthless or be Google-scale huge if it works out and trounce an ongoing investor revolt – which has led to a legal mediation – as well as the delay of its launch. Filecoin is a popular blockchain protocol among Chinese miners and 70% of its nodes are reportedly in China.