Demystifying Filecoin – what can companies gain?

Chris Starkey, Founder and Director of NexGen Cloud examines…

Today, users and organizations are creating more content than ever before—and as the decentralized movement gathers momentum, blockchain transactions using non-fungible tokens (NFTs) are making way for new and innovative storage solutions to hold this wealth of data.

Filecoin (FIL), a peer-to-peer digital storage network that launched its test network back in 2020, is bolstering the brand. In short, this enables users and companies to store their data on decentralized networks and rent their unused storage space in exchange for Filecoin tokens. This not only offers a much more efficient way to store data, but also a refreshing departure 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 companies need to know before taking the plunge?

A storage solution for tomorrow

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

The Filecoin network is built on top of the InterPlanetary File System (IPFS) and has what is called an “incentive layer” – this simply means that users are incentivized to exchange their unused storage space for Filecoin tokens – this is comparable to altcoins with people like Ethereum and Bitcoin.

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

Usually, the customer group is the easiest to pin down – it simply means people who pay a fee to have their files stored and choose to have them stored with one of the various providers in the market. All stored private data must first be encrypted before being sent to a filecoin provider.

From there, storage miners – as the name suggests – agree on a deal with a client and work to store their data in exchange for Filecoin tokens. Thereafter, storage miners must continuously provide evidence that ensures all files are safe, and all parties can review this evidence to confirm the reliability of the miner.

The final group of users, the retrieval miners, are responsible for retrieving customers’ data at their request. Data is typically exchanged between retrieval miners and customers via “micropayments,” where the data is split into pieces and customers pay a small fee for each piece.

A fairer, more democratic storage solution

In terms of how businesses can benefit from choosing Filecoin over an ordinary storage solution, perhaps the most notable benefit is that businesses can leverage their unused storage by renting it out to other customers. This means they are unlikely to fall victim spend too much on disk space, as many companies do, or overcharging for unused features.

In addition, companies can store their valuable data on the Filecoin system more reliably than if they were using traditional centralized platforms – thanks to the power of IPFS, users can benefit from robust networks that enable permanent availability that works well or without an internet backbone -Connectivity.

This is a tremendous benefit for companies when business continuity is required in times of disruption, as well as for those working towards improved connectivity in developing countries. Other blockchains like Ethereum or Bitcoin are much more expensive. Previous estimates put the price of tokenizing data on Ethereum 17,500 ETH per GBwhich was around $42 million at the time — a massive fee that will only grow with Ethereum prices as the market gains popularity.

In essence, by moving to decentralized storage solutions like Filecoin, companies will invest in a future built on a fairer internet. Away from being monopolized by tech giants like Amazon, Google, and Microsoft, Filecoin envisions the World Wide Web as an “open” space where they can truly take care of the integrity of their data. Instead of entering into lengthy and expensive supplier contracts, companies can pay fairer prices for their storage while ensuring they are not paying more than they need.

Likewise, as these solutions rise in status, the storage market becomes a more competitive place with access to better deals. Since Filecoin storage contracts are negotiated in an open market, this would fundamentally lower the barriers to entry and allow those with a free storage space and a working internet connection to participate.

More than just marketing – and flexibility is very important

It is important to recognize the importance of marketing and advertising in the storage market today. As things stand, well-known brands can dominate the market by investing in slick campaigns that come with big claims about their solutions.

On the other hand, Filecoin providers are based solely on their track record – this is published on the blockchain for users to see and offers a refreshing alternative that goes beyond exaggerated claims and advertorials.

In addition, contractual obligations should be a thing of the past. If a user finds a preferred Filecoin storage provider, moving their data should be a much easier process without having to manually re-download and upload their files to a new network. Instead of working in this tedious process, filecoin providers offer the same APIs and services, making flexible storage a much more realistic prospect.

For now, Filecoin is a nascent storage solution, but if Bitcoin’s rise is to be expected, then there’s no limit to Filecoin – companies would do well to keep that in mind. Demystifying Filecoin – what can companies gain?

Fry Electronics Team

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