Filecoin | A currency for spacetime

The rise of the internet has allowed mankind to connect on a different level. We get to share and learn a lot about ourselves and others through a click of a button. Our internet, however, is extremely centralised, with single-points of failure everywhere. These points of failure lead to censorship, hacks, data loss, server downtime, and so forth.

Several efforts to redesign the way we access and store information and content are currently being made. The InterPlanetary File System (IPFS), an alternative protocol for decentralised and resistant file sharing, is one of these efforts. Each file submitted to an IPFS network and its blocks are given a unique hash which allows IPFS to automatically remove duplicates and track version history for every file.

Coupled with blockchain technology, the IPFS can be used to store large amounts of data that can then be referenced and time stamped on the blockchain. This potential mutualistic symbiotic relationship is acknowledged on the IPFS website itself, which reads:

“IPFS and the Blockchain are a perfect match! You can address large amounts of data with IPFS, and place the immutable, permanent IPFS links into a blockchain transaction. This timestamps and secures your content, without having to put the data on the chain itself.”

Although several blockchain projects are now looking to leverage the IPFS for data storage, one of these projects is actually being developed by Protocol Labs, the “research, development, and deployment lab” that is responsible for the creation of the IPFS itself. We are talking about Filecoin, a blockchain-based Decentralised Storage Network (DSN) that will run on a “Proof-of-Storage” system. The whitepaper reads: “Filecoin works as an incentive layer on top of IPFS”

Proof of Storage is the combination of two novel proof systems dubbed Proof of Replication and Proof of Spacetime. While the former allows storage providers to prove that “data has been replicated to its own uniquely dedicated physical storage”, the latter allows them to prove that the data has been stored during a predetermined amount of time.

The aforementioned proof system is important for users that want to leverage the Filecoin network for file storage, allowing them to pay for data on a “pay what you use” model, rather than an inefficient subscription model, where the user ends up paying for storage space/time that is not used.

While this proof system allows the work performed by storage nodes to be verified, two decentralised verifiable markets ensure that the payments are made when the node has performed a task correctly. These markets are known as the “Storage Market” and the “Retrieval Market”.

These two markets function as decentralised exchanges where clients and miners make buy or sell orders, setting the prices they want to pay or be paid for services provided. The Storage and Retrieval markets allow clients to pay storage miners to store data and retrieval miners for delivering the data to the client, respectively.

In the Filecoin system, miners are paid for their services according to the payments made by clients looking to store or retrieve data. However, these miners are also rewarded through what is called a useful Proof-of-Work system in which computational power is replaced by storage space, allowing miners to recycle the work done generating Proof-of-Spacetime to earn newly created coins.

In the future, Filecoin plans to provide a bridge that will allow storage and retrieval services to be available on other blockchain platforms, allowing these systems to have access to IPFS storage in exchange for Filecoin tokens.

To learn more about Filecoin, make sure to visit the whitepaper for more information.