Filecoin (FIL) Basics 101 & Release Drama
Ever wish there was a decentralized way to store data without having to rely on a company such as Google, Amazon, or Apple? Well that dream became more of a reality in 2017 when Protocol Labs announced the release of Filecoin, a manner of renting space on unused hard drives with a cryptocurrency being used to measure these transactions. The ICO launched in August of the same year, and raised the needed $200 million dollars of funding within 30 minutes.
In the Years Since
Although they met their funding needs almost immediately, it has been a long road to launch for Filecoin, with the scheduled mainnet launch slated for October 15th, 2020. From the start in 2017, the revolutionary idea was quickly jumped on by scammers who created fake accounts on multiple platforms claiming to be looking for miners of the pending token. Not only that, but many exchanges were accepting purchases of the token which didn’t yet exist in exchange for an IOU once the coin was mined. This is all fine if you understand the process, however, it is very risky to purchase an unmined coin and many people who did just that did not understand that they actually did not yet own the desired coins. Besides announcing the scams after the initial fundraising round, the twitter for the official coin, @Filecoin, goes dark for over six months after the process until the early months of 2018. Even then, there is very little research announcements until the early months of 2019. It’s hard to say exactly what the company did during this time but presumably they were busy producing their platform. In February 2019, the developers launched the opening of the Filecoin devnets and repos to the public in order to allow developer and researcher testing. Regular updates on the beta version of the platform are then posted on their twitter, and website, through the remainder of the year.
As the date of the launch of the mining of Filecoin came and went, it unfortunately was met with a lot of backlash from miners—which resulted in a number of them taking their machines offline. On October 17th, just two days after the launch, the Mining behemoth Zhihu Cloud was only running 276 out of 8000 available mining machines which were planned to use to mine Filecoin. And it wasn’t just the one mining company, in fact, five of the networks biggest miners took Filecoin off their systems entirely. When asked why, the miners have stated that this is not a protest (though it may seem a bit like one) but rather just the result of the amount FIL tokens required to begin mining being much to high. There were also complaints about the lack of liquidity on the newly mined coin as miners must stake a large number of Filecoins and wait almost six months to receive the full amount as the rewards are released linearly.
As a result of the issues, and the number of miners who shut off their systems, the Filecoin developers announced a new deal on October 17th, where miners will receive 25% of what they mine up front, and the other 75% on the linear release plan stated above. This boosted the number of miners actively mining however the numbers have still not yet been reported to be at their full potential or back to what they were pre-launch.
Will Filecoin be Profitable?
Just like any altcoin on the market, it’s difficult to predict if Filecoin will ever bring profitable returns. One of the main issues is that as cool as Filecoin is, it is not the first coin to be in the data storage space and it is certainly not the fastest in development. In fact, Filecoin is proceeded by a number of coins such as MaidSAFE, Storj, and Sia. Storj is the current market leader, mostly because it’s been around the longest but that doesn’t necessarily mean it’s the best. Storj’s current platforms do not support mining and users pay to use the network with fiat currency as they go. It is decentralized, and reported to be user friendly, however as a user you are putting quite a lot of trust in Storj’s backing company when you use their service. Because if they go under, you could lose your data forever. Although Storj does not have its own blockchain, their main competitor Sia does, perhaps making it more of a threat to Filecoin than Storj. Unlike Storj however, Sia does not accept fiat currency as payment and rather you have to pay for their services using only Siacoin which you can acquire on a number of exchanges. This does create an extra step and lowers the user ease of use. MaidSAFE is the smallest of the four competitors, but certainly not the least as they plan to offer solutions not just for decentralized storage but also for decentralized computing. Although, with this diversified view MaidSAFE seems to be taking quite a long time to accomplish very little putting them perhaps behind Filecoin in terms of development.
Either way, Filecoin has a shot at overcoming all three of these coins, as their backed by a better company, with their own blockchain, and reportedly easy to use user interface, that is, if they can overcome these mining issues. Whenever a company takes a long time from initial funding to launch a product, it lowers the initial belief in the product just a bit. And even though Filecoin (through Protocol Labs) has a huge following, it’s definitely faltered a bit over the three years waiting for the product to launch. And now the big question is, will it deliver on everything it’s promised? That’s the question everyone is starting to ask. And as of the writing of this article, there is no answer.
Should I Invest?
Investing in a newer, unproven coin like Filecoin is always a risky option. And as always it is recommended you discuss with a financial advisor or someone you trust before investing in cryptocurrency at all. However, if you truly believe in the product (and perhaps plan to use it yourself) this could be the coin for you and it could be to your benefit to invest early. It is important to note though that many exchanges are still only selling IOU’s of this coin. So, if you do decide to invest, do your due diligence and know exactly what you are buying and what it means for your future as an investor.