What is FIL? Why has it suddenly caught fire recently?

What is FIL? Why has it suddenly caught fire recently?

The most popular project on the market recently is the much-anticipated Filecoin. According to Feixiaohao’s market data, so far, the unit price of FIL has exceeded the $234 mark, setting a record high, with an increase of more than 700% within 30 days.

The continuous rise of the currency price, coupled with the excellent practical application value and fundamentals of the project itself, has led to a rapid rise in popularity, almost occupying the top position in the hot search list of various exchanges and market platforms.

Even BTC, which has occupied the first place in the transaction volume list for many years, has also been robbed by FIL, and the transaction volume of FIL far exceeds the total transaction volume of BTC+ETH. This is a picture that has never appeared in the history of the digital currency market.

Obviously, the popularity of FIL has ignited the fomo sentiment in the market, and even the aunt on the bus has begun to buy FIL on the exchange.

Affected by FIL, the distributed storage sector broke out collectively, and concept coins such as BTT and STORJ hit record highs one after another, becoming the most dazzling scenery in the volatile market.

Data source: OKEx

What exactly is FIL?

Filecoin is an incentive layer token on IPFS. It is a way to reward miners by contributing idle hard disks. The more storage and bandwidth participants provide, the more FIL rewards they get.

1. What is IPFS?

The full name of IPFS is Inter Planetary File System, generally translated as "Interplanetary File System". It was proposed by Protocol Lab and is a peer-to-peer (P2P) distributed file system.

Although it is a file system, a technology used to store data, IPFS is more precisely a network transmission protocol. IPFS benchmarks HTTP, currently HTTP (Hypertext Transfer Protocol) is our most commonly used network transmission protocol. For example, if we want to find the content we want on the Internet, we need to enter the URL, and almost all URLs start with HTTP. HTTP transfers through domain name, IP and multiple central servers, and then uploads and downloads files.

The achievements of HTTP are irreplaceable, but HTTP also has some problems, such as not very high performance efficiency, over-reliance on central servers and backbone networks, weak security, stability and privacy, and so on.

In contrast, IPFS is a multi-centralized solution. Content addressing is not through domain names and IPs, but through unique HASH keys to search for data. File data is not stored in a centralized server. is stored on all eligible computers on the network.

2. What is the relationship between IPFS and FIL?

In essence, IPFS transforms the original on-demand download of P2P software into long-term storage of resources. Long-term storage requires service quality assurance, otherwise no user is willing to store their valuable data or resource content that requires service quality assurance in IPFS. . So for a loose IPFS network, users' random withdrawal, uncertainty of network quality, uncertainty of storage location, uneven performance of hardware resources, and performance jitter of hardware resources all make IPFS unable to store Resource storage that has a strong demand for quality of service, in other words, there is no way to use it in the commercial field.

Therefore, IPFS uses Filecoin's incentive mechanism to attract a group of professional storage service providers to provide more professional, secure and stable storage services.

Filecoin is a decentralized storage network based on IPFS, the only incentive layer on IPFS, and a token issued based on blockchain technology. Miners in the FIlecoin network can acquire FIL by providing storage and retrieval services for clients, and conversely, clients can hire miners to store or distribute data by spending FIL.

Filecoin promotes the development of IPFS through the mechanism of economic incentives, and the Filecoin network also needs IPFS to provide ecological support for the development of its market.

The more the IPFS network is used, the greater the demand for Filecoin; the more Filecoin miners, the greater the support for the IPFS network. So IPFS and Filecoin form a symbiotic relationship.

Why is FIL suddenly popular recently?

In fact, the FIL mainnet was launched in October 2020. Although FIL soared to $220 on the day of the launch, it quickly fell back to around $30, followed by a few months of sideways.

So why have the popularity and prices suddenly risen recently?

To sum up, there may be the following reasons:

1. Institutional promotion

On March 17th, Grayscale officially launched five trust products: BAT, LINK, MANA, FIL and LPT, of which the number of FIL positions does not exceed 500, and the average price is $50. Affected by this news, the unit price of FIL once hit a high of $97.

Grayscale Fund FIL position history (source: bybt)

After that, Grayscale gradually added FIL. According to bybt statistics, Grayscale currently holds a total of 16,000 FIL, worth about 2 million US dollars.

Only in terms of quantity, Grayscale's position size is not large, but it reflects the investment trend of institutions to a certain extent.

Before and after Grayscale entered the market, more and more institutions announced their involvement in the field of distributed storage:

The Ninth City (NCTY.US), a large domestic game manufacturer, announced that it has signed a cooperation framework agreement of US$10 million with a Filecoin mining machine service provider to purchase Filecoin mining machine server clusters and technical services in cash. It is reported that the Ninth City has purchased a group of Filecoin mining machines and started mining work. At present, the company has independent nodes in the Filecoin network, and the computing power is continuing to increase.

On March 15, the A-share listed company Xinyuan Technology invested US$580 million to deploy the IPFS track, which is the first case among domestic A-share listed companies.

On March 23, Hisaishi Capital announced the official launch of special funds for BTC, ETH, FIL, and Defi digital assets. The special fund will be used for Bitcoin, Ethereum ecology, distributed storage (FIL) and decentralized finance (DeFi) and other tracks around the world.

On March 24, Fenbushi Capital announced that it had completed the raising of the Filecoin Ecological Special Fund. The fund was over-raised as a whole, with a final management scale of 300,000 FIL (equivalent to about $23 million at the current market price).

2. Application landing

As the incentive layer of IPFS, Filecoin aims to use the token incentive system to build a faster, safer and lower-cost distributed storage network. Since the beginning of the year, many institutions have taken the initiative to access the network.

On February 19, open internet website and app hosting startup Fleek announced that it will enable Filecoin automated archiving/backup for all sites and storage on Fleek. Everyone who uses Fleek now will immediately benefit from the ability to store data on a distributed network at no additional cost, making the project better for Web 3.0.

On March 9, China's leading photography service agency Tao Paipai announced its access to the Filecoin storage network. Wang Chong, founder of Taopaipai, said: "We appreciate the unique privacy and security of the Filecoin network. Secondly, storage on Filecoin saves the cost of storage to a large extent. I think Filecoin storage is a boon for the photography industry. ."

In addition to being used for traditional data storage, Filecoin is also expected to be combined with NFTs.

Filecoin founder Juan previously tweeted: "The NFT that is not on IPFS is not your NFT." The core developer Why posted on the Slack channel the idea of adding NFT to the Filecoin network, which aroused heated discussions in the community.

3. Ecological construction

The data on the chain shows that since October last year, Filecoin’s entire network computing power, storage scale, and the number of pledged coins have grown steadily, which objectively reflects the ecological construction of Filecoin. According to the COO of Space Cloud Technology, more than 400 major institutions around the world are currently developing ecological projects based on IPFS and Filecoin.

The industry's most recent concern is the FIP-14 proposal and the looming production cut on April 15.

Specifically, the FIP-0014 proposal allows miners to extend the lifetime of any V1 proof sector to a maximum of 540 days. On March 28, the community vote on the proposal closed and 1.19 EiB (98%) of storage miners approved the proposal. The core implementers will make the final decision on whether to accept the FIP in the network based on the voting results and a final security audit.

According to official news, Filecoin will reduce production on April 15. The original output is about 648,000 pieces per day, including the release of SAFT, foundation, team and ecology. On April 15, the semi-annual SAFT release will be completed linearly, and then circulated to the market. The number of Filecoins will be reduced by 280,000 per day, which is a 43.2% reduction in daily production.

In view of the continuous expansion of the amount of pledge and destruction of Filecoin ecology every day, the actual circulation of Filecoin will become smaller and smaller. This has become an important basis for many industry people to be bullish on FIL.

4. Industry cooperation

Since March, Filecoin has frequently promoted industry cooperation.

The first heavyweight partner is Chainlink. On March 24th, Filecoin announced that Chainlink is integrating with Filecoin, enabling the link between the Filecoin network and Ethereum and other blockchain networks that support smart contracts.

Chainlink is known to be the leader in the decentralized oracle race and is widely used in DeFi, insurance, gaming, and other blockchain-based markets. The combination of Filecoin and Chainlink can be described as a win-win situation: the former can be combined with more on-chain applications with the help of the other, while the latter can play a better role based on the massive data provided by Filecoin.

Filecoin’s second partner is live streaming protocol Livepeer (LPT). Also on March 24th, Filecoin announced a joint mining pilot with Livepeer, which will enable Filecoin miners to become Livepeer video miners while continuing to mine on the Filecoin network by storing transcoded video data.

Towards Web3.0

On March 25, People's Daily Online published an article "Distributed Storage Opens up a Market of 100 Billion Levels, Deeply Promotes the Digital Transformation of the Industry". Citing survey data, the article stated that by 2023, China's data volume will reach 40zb, of which more than 80% are unstructured data. In 2024, the global data storage market will exceed the $100 billion mark.

The article also pointed out that distributed storage and decentralized cloud computing, as important infrastructure of Web 3.0, will accelerate the process of digital transformation of related industries, build new business scenarios, and promote profound changes in the economy and society.

What Web3.0 brings to us is not only a change in the business model of the Internet, but also an all-round change in the way of daily life. It will enter our life in a more digital and intelligent way, and IPFS will serve as a distributed data storage in the future. The underlying infrastructure is bound to play a greater role.

Looking at the essence through the appearance, it is precisely because of the great prospects of the bottom layer of FIL that it attracts many institutions, capital and investors to enter the market, thus becoming the "meat eaters" in the early layout.

As for whether FIL is really worth the price, when you enter the URL on the Internet in the future, it is already IPFS:// instead of HTTP://, you may find that this is just the beginning.