Launched in October 2020, Filecoin protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data). Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System.
Understanding decentralized data storage
Launched in October 2020, Filecoin brought one of the latest addition to the growing cryptocurrency industry to the limelight. Since Filecoin mainnet’s launch last year, it has made a considerable buzz among crypto enthusiasts as the FIL token became public across popular exchange platforms. Consequently, securing FIL tokens became more convenient and would take just a few minutes to do.
As we’ll see the whole protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data).
Filecoin (⨎) is an open-source, public cryptocurrency and digital payment system. Built on the InterPlanetary File System, Protocol Labs created Filecoin as an effort to provide a blockchain-based unified digital storage and data retrieval mechanism that enables users to lease new and unused hard drive space.
Before its launch, Filecoin’s ICO already raised an estimate of $257 million as early as 2017. As an open-source, public cryptocurrency allowing virtually anyone from all over the globe to be part of the network, Filecoin is set to create a huge source of data storage. Thus, Filecoin holds excellent potential in catering to the increase of demand for file storage as the world is increasingly and gradually shifting to a more digital world.
Value Model
Filecoin offers adaptable data storage solutions to individuals and organizations at a much lower price than established industry competitors’ services. With Filecoin, users can access and opt for a more flexible service plan that enables them to pay a FIL fee that reflects the exact storage space they need. Furthermore, through the Filecoin network, data can be made more accessible and available to users.
Blockchain Model
As pointed out in its White Paper “Filecoin is a decentralized storage network that turns cloud storage into an algorithmic market.”
The whole protocol is based on a “useful work” consensus, where the miners are rewarded as they perform useful work for the network (provide storage and retrieve data).
Filecoin has its native token, “Filecoin,” which miners can earn as they provide storage to clients. Whereas on a blockchain protocol, like that powering up Bitcoin, mining is a process that helps maintain and ensure consensus. Filecoin’s mining process helps provide the service itself. Therefore, the Filecoin’s protocol incentivizes miners to “amass” and provide as much storage as possible to the network, thus improving the service for final clients.
Thus, the Filecoin protocol relies on other algorithms like proof-of-storage and proof-of-replication, to prove to the network the availability of new data storage. As highlighted in its White Paper, then the measure of power is given by proofs-of-replication.
The main algorithm that powers up the network is called Proof-of-Spacetime, where as miners store the data, this helps them create new blocks and get rewarded.
The workflow is straightforward:
- clients look to store and retrieve data, and thus pay for that.
- Storage Miners will earn tokens as they amass and offer storage.
- Retrieval Miners will earn tokens as they serve the data.
The whole protocol is built on top of four main components:
- Decentralized Storage Network.
- Novel Proofs-of-Storage.
- Verifiable Markets.
- Useful Proof-of-Work.
Below a representation of how the network functions based on the Filecoin White Paper:
Image Source: Filecoin White Paper
Therefore, the network consists in two main marketplaces (storage and retrieval). The storage sits on-chain, where storage providers need to prove they stored the client’s data which they got paid to store. This happens via a proof-of-storage (PoS) that the network or the clients verify. Usually proof-of-storage happens via other schemes such as Provable Data Possession (PDP) and Proof-of-Retrievability (PoR), where the clients can more efficiently check whether the data is stored without having to download it (perhaps by automatically checking a random sample of blocks or transmit small amounts of data to test the storage receiver).
While simple scheme like PDF and PoR work as an initial guarantee, a stronger mechanism is needed to prevent Sybil attack (miners pretend to be storing more data by simply creating multiple sybil identities) , outsourcing attacks (providers pretend to be able to store more data by fetching that data from other storage providers), generation attacks (where miners claim to be storing more data by simply generating on-demand using a small program and taking advantage of the network’s rewards).
To prevent those attacks, Proof-of-Replication kicks in, as a more solid scheme, where to convince the user that the data has been stored, “the data has been replicated to its own uniquely dedicated physical storage.”
As pointed out in the White Paper “Proof-of-Storage schemes allow a user to check if a storage provider is storing the outsourced data at the time of the challenge.” In short, that is the mechanism through which “a verifier can check if a prover is storing her/his outsourced data for a range of time.”
These schemes are possible because the decentralized storage network (DNS) is auditable, publicly verifiable and designed on incentives. Thus, the client’s cycle looks like that:
- A client submits a bid order to the Storage Market (under the Put protocol).
- This bid order is matched with a ask order from a miner, and once agreed the deal is closed through the Storage Market.
- To retrieve the data, clients can pay retrieval miners via Filecoin tokens.
- From there retrieval miners will submit a bid order to the Retrieval market, and as the ask order is found, the client receives the data.
- The deal is then submitted as the parties sign in.
It’s important to notice that the retrieval market sits off-chain. Thus, retrieval deals are agreements between clients and retrieval miners (which in some cases might also be storage miners) fulfilled using payment channels (these off-chain transactions are used then to submit bit orders by retrieval miners on-chain to provide the data requested by the client).
More precisely, while the Storage Market is an on-chain protocol consisting of two phases: order matching (where clients and storage miners submit their orders to the storage market) and settlement (where storage miners “seal their sectors” thus generate the proof of storage).
The Retrieval Market is an off-chain also consisting of order matching (retrieval miners submit their orders and establish a micropayment channel) and settlement kicks in as the retrieval miner sends small pieces of data back to the client who signs them off.
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