Demystifying Filecoin – What Do Businesses Stand To Gain?

Chris Starkey, founder and director at NexGen Cloud  explores…

Nowadays, users and organisations are creating more content than ever – and as the decentralised movement takes off, the likes of non-fungible tokens (NFTs) blockchain transactions are making way for new and innovative storage solutions to store this plethora of data. 

Stepping up the mark is Filecoin (FIL), a peer-to-peer digital storage network which launched its test network back in 2020. In short, this allows users and businesses the ability to store their data in decentralised networks, as well as rent out their unused storage space in exchange for Filecoin tokens. Not only does this provide a much more efficient means of storing data, but also a refreshing shift away from the dominance of big-industry players like Amazon’s AWS and Google Cloud. 

With this in mind, how does Filecoin storage differ from standard cloud storage, and what do organisations need to know before taking the leap? 
 

A storage solution for tomorrow 

 
Filecoin is similar to Bitcoin in that it is powered by blockchain technology; nodes in the network are used to store files, which are guaranteed by a proof-of-retrievability component. Jargon aside, users can choose from myriad independent storage providers for all their data storage and retrieval needs, and what’s more, they can do so with an added bonus.

The Filecoin network is built on top of the InterPlanetary File System (IPFS) and has something called an ‘incentivisation layer’ – all this means is that users are incentivised to swap their unused storage space in exchange for Filecoin tokens – this is an altcoin comparable to the likes of Ethereum and Bitcoin. 

Of course, as with the cryptocurrency market in general, the technical terminology used to describe Filecoin storage can sound complex. All organisations need to remember that there are generally three groups of users associated with Filecoin: clients, storage miners and retrieval miners.

Generally, the client group is the easiest to get to grips with – this simply refers to individuals who pay a fee to store their files, and who opt to do so with one of the various providers on the market. Any private data stored must first be encrypted before sending over to a Filecoin provider. 

From there, storage miners – as the name would suggest – agree on a deal with a client and work to store their data in exchange for Filecoin tokens. Thereafter, storage miners are required to continuously provide proofs ensuring that all files are secure, and all parties can revisit these proofs to certify the reliability of the miner.  

The last group of users, retrieval miners, are accountable for retrieving clients’ data at their request. Data is typically exchanged between retrieval miners and clients using ‘micro-payments’, where data is divided into pieces and clients pay a small fee for each piece.  
 

A fairer, more democratic storage solution 

 
In terms of how organisations can benefit from choosing Filecoin over a run-of-the-mill storage solution, perhaps the clearest advantage is that firms can put their unused storage to work, by renting it to other clients. This means that they are unlikely to fall victim to over-spending on storage space, as many organisations do, or paying over the odds for unused features. 

Beyond this, organisations will be able to store their precious data more reliably on the Filecoin system, than if they were using traditional centralised platforms – thanks to the power of IPFS, users can benefit from resilient networks that enable persistent availability, which functions well with or without internet backbone connectivity.

This is a huge benefit to businesses when business continuity is required at times of disruption, as well as working towards improved connectivity in the developing world. Other blockchains, such as Ethereum or Bitcoin, are much more costly. Past estimates have put the price of tokenising data on Ethereum at 17,500 ETH per GB, which amounted to around $42 million at the time – a huge fee, which will only grow in line with Ethereum prices, as the market surges in popularity. 

In essence, by moving towards decentralised storage solutions like Filecoin, businesses will be investing in a future that builds towards a more equitable internet. Away from the monopolisation of tech giants like Amazon, Google and Microsoft, Filecoin imagines the World Wide Web as an ‘open’ space where they can truly look after the sanctity of their data. Instead of entering into lengthy and expensive vendor contracts, organisations will be able to pay fairer prices for their storage, while also ensuring that they are not paying for more than they require.  

Likewise, as these solutions gain in status, the storage market will become a more competitive place, with access to better deals. Given that Filecoin storage deals are negotiated in an open market, this would fundamentally lower the barriers to entry, allowing those with a spare storage space and a well-functioning internet connection the ability to participate. 
 

More than just marketing – and flexibility is paramount 

 
It’s important to acknowledge the place that marketing and advertising currently plays in the storage market. In the current state of play, well-known brands are able to dominate the market by investing in slick campaigns that come with big assertions about their solutions.

On the other hand, Filecoin vendors run on their track-record alone – this is published on the blockchain for users to see, offering a refreshing alternative that goes beyond exaggerated claims and advertorials.  

What’s more, the concept of being ‘locked in’ to a contract should be a thing of the past. If a user finds a preferable Filecoin storage provider, then shifting their data should be a much simpler process, without the need to manually re-download and upload their files to a new network. Instead of operating in this arduous process, Filecoin providers offer the same APIs and services, making flexible storage a much more realistic prospect. 

Right now, Filecoin is a nascent storage solution, but if the ascent of Bitcoin is anything to go by, then the sky is the limit for Filecoin – firms would do well to bear this in mind.