The Filecoin Economy
The protocol underlying Filecoin pushes network participants toward behavior that is beneficial for the network.
For most blockchain protocols, miners are incentivized to do work that record ledger transactions and do the proof of work required to move the blockchain forward. Filecoin is different in how it requires providers to do both this, as well as provide immutable storage for the network, which is why we call them Storage Providers instead of miners.
The Filecoin network will have multiple types of providers.
The Engineering Filecoin’s Economy Paper) digs deep into how the Filecoin protocols are designed and behave, for those who want to deep dive into the token.
Proofs and Sealing
Sealing is the process of formatting and storing data in sectors on Filecoin.
Since Filecoin exists to incentivize storage on the network, there are certain proofs that storage providers must verify to meet the requirements for Proof of Storage (PoS). The first is called Proof of Replication (PoRep), done at the beginning of the deal when the data is first stored. Then Proof of Spacetime (PoSt), which is done continually over the lifetime of a deal to verify that storage space is dedicated to a piece of data.
While that data is being sealed and stored, several content identifiers are produced such as CommR, CommD, and more, which you can read about in the ProtoSchool tutorial.
Proofs-of-Replication | Filecoin Research – Ben Fisch, Nicola Greco, & Juan Benet
In this 6 minute video, understand how Filecoin proves both replication, retrievability, and proof of used (useful) storage space.
- Anyone with the minimum required hardware can be a storage Storage Provider
- Storage Providers do not earn rewards until they onboard a minimum amount of sealed storage to the network
- Deals are made trustlessly between a client and a provider
- There are incentive structures such as power that allow providers to earn Filecoin through storage fees and block rewards. More on provider rewards
There are several special mechanisms that the Filecoin blockchain implements, such as rewarding storage providers with a power value that increases their chance of being a block provider. The network also empowers clients through Filecoin Plus, a community-governed notary program that allows approved clients to make special storage deals that give their providers additional power.
Proof-of-Stake and Storage
The Filecoin network uses upfront token collaterals, like those used in other proof-of-stake protocols, proportional to the storage hardware committed. Storage providers are give something called power which increases their likelihood of winning block rewards, and their contribution to consensus. There are three types of collateral that Filecoin providers must provide in order to participate in the economy:
- Initial Pledge Collateral – This consists of a storage pledge and a consensus pledge. The storage pledge provides tokens as a collateral that will be slashed if storage sectors are terminated, and the consensus pledge provides a mechanism for preventing consensus takeovers.
- Block Reward as Collateral – Filecoin penalizes Storage Providers that fail to store files for the promised duration, balancing it with an overly high cost to join the network. Block rewards earned by a Storage Providers are slashed if a sector is terminated before its expiration.
- Storage Provider Deal Collateral – Storage Providers can offer a higher deal collateral to data providers (above the minimum specified by the protocol), implying a higher level of service and reliability. Given the increased stakes, clients may associate collateral beyond the minimum with an increased likelihood that their data will be reliably stored. This is returned to storage providers once sectors expire.
Verified Data Providers
Using a network of verifiers, those who are storing data can apply to have their data categorized as verified (valuable) data. Once a data client is verified, they are given DataCap for a certain amount of approved data, that, when stored, rewards the storage provider with more power.
Filecoin Economy Deep Dive | Filecoin Foundation – ZX Zhang
In this video, Zixuan Zhang explains how filecoin mining is like Airbnb for the data on the internet. Get a better understanding of the industry, the economy, the storage services, power, Filecoin content delivery, and more.