Filecoin enables you to rent your spare computer storage space like Airbnb lets you rent your home! Find out how early miners, institutional investors, and a roaring Chinese involvement has bumped the crypto’s price northwards.
- Filecoin is a decentralized file-sharing protocol, FIL is its token.
- Filecoin sees a lot of attention from Chinese miners, shown by crypto exchange Huobi.
- Filecoin plans to cut its production supply in half on April 15th—FIL could appear more affordable, and demand could rise.
- Grayscale Investments poured cash into Filecoin (and four others) last month, which boosted demand for the crypto-currency and thrusted the price to an ATH of $237.
- Filecoin could see yet more growth from a growing NFT marketplace as it begins to support more NFT video storage needs.
- The cryptocurrency's momentum has recently slowed, but somewhat stabilized—it faces rough competition not just from Big Tech cloud providers, but from rival Theta, a video protocol blockchain.
What is Filecoin exactly?
Filecoin runs a decentralized file cloud sharing and storage operation that rewards miners with FIL (Filecoin’s token) for offering their excess storage. This means that users like you and I may use Filecoin’s protocol to store our files on storage units other than our own computer and storage providers, those organizations that run miners, can sell their cloud storage space in exchange for FIL.
The end goal of this project is to provide a cheaper and more efficient method by which to store sensitive files. The idea builds on top of the major Web3 movement, a movement whose philosophy is to undercut big tech’s overwhelming control over user data to give back data ownership to the people.
This means Filecoin competes head-to-head with Amazon S3, and Google Cloud Storage, and to an extent Bitcoin. Compared to big tech giants, Filecoin offers hypercompetitive prices, is priced by an open market not profit maximizing corporations, has an automated customer support protocol, and the barrier to entry for new storage providers is low.
Compared to Bitcoin, and while Filecoin is not just a store of value, the mainnet is new as of 2020 versus Bitcoin’s 2009 version, and it is efficient at storing large amounts of data inexpensively compared to Bitcoin who can store data on blockchain, but only at a significantly higher cost.
Filecoin garners institutional interest.
FIL’s top ten ranking amongst the best cryptocurrencies was short-lived, but according to coinmarketcap.com, its fully diluted market capitalization is $350 billion after hitting a high of $450 billion—mind you that Bitcoin is just north of $1 trillion. In the past month, Filecoin showcased some remarkable gains nearing +450%, and climbing to an all-time high of $237.24. While the price is now down 26% from its ATH, the 52-week range is between $3.24 and 235.20!
Figure 1: Filecoin’s FIL price performance
Investments led by Grayscale, who earlier last month announced the inclusion of Filecoin in its portfolio, saw FIL boom 40% in only 48 hours—the reason why institutional investors like Grayscale may continue to keep an eye out on Filecoin is because of the nature of the protocol namely, that data is becoming the most valuable commodity in tech today.
Cameron Winklevoss reiterated this idea saying that projects like Filecoin bring enormous value to network storage power and data transfer. Companies such as The9 Limited, and New Universal have both also made million-dollar investments in Filecoin mining.
The recent $1 billion of 24-hour trading volume suggests there is more at play than institutional investors.
China shows Filecoin love…
A lot of momentum for Filecoin is coming directly from China. The day FIL reached its all-time high, it saw high volumes coming from China’s largest trading exchange, Huobi, with 24-hour trading volumes reaching $24.2 billion, or a volume about three times the one seen for ETH and BTC!
Filecoin mining seems to have become an attractive alternative for many miners in China. According to OKEx Insight (OKEx is a cryptocurrency exchange), Chinese miners make up more than 95% of Filecoin’s nodes! That is because mining Filecoin is that much cheaper to mine than Bitcoin and Ethereum.
More encouraging still for the Chinese market, are the government announcements made last August regarding new internet infrastructure plans. The government aims to make 5G, AI and IoT more accessible to the broad Chinese population and Filecoin’s decentralized cloud storage solution could see itself fitting in well with China’s vision goals, especially as it offers an alternative ot large American tech groups.
Filecoin and NFTs…
In the past few months, Non-Fungible Tokens (NFTs) have taken a center stage position in the worlds of Art and Sport. Another blockchain project called VideoCoin is designing a solution that reliably creates, stores and trades video based NFTs that circumvent the difficulties and expenses of storing data on a DeFi platform like Ethereum. The video NFT platform will make use of Filecoin as proof of ownership (video file ownership), great news for the token.
Filecoin announced it had exceeded 2.5 billion GB of storage capacity through its global decentralized networks which is ideal for a VideoCoin partnership. As NFTs become more mainstream and accessible in the coming years, Filecoin could continue to see the demand for its services rise.
Filecoin’s scheduled production cut…
We could see trading volumes rise again as Filecoin readies a production cut on April 15th from 648,000 FIL per day to 365,000 FIL per day. A drastic fall in daily production could lead to a perception of scarcity for the token hence pushing retail investors and miners to purchase additional FIL.
Another important aspect of the token FIL is that miners are forced to buy more FIL tokens to mine more of the crypto. This acts as a utility and governance token for the protocol and prevents FIL from being dumped in the open market (hence seeing a price crash). FIL owners are incentivized to hold their crypto in exchange for more mining power.
Risks involved with Filecoin…
The recent price fall could be linked to a natural price correction stemming from an overbought asset trading far above RSI. This fall could be due to the recent over-excitement and trading momentum seen in China. According to Filfox, a Filecoin blockchain explorer, gas prices to run the protocol have started picking up too which is harder on miners looking for a more affordable alternative solution to mining crypto.
Another risk is related to competitors Theta, one of the most discussed blockchain projects of 2021. Theta is a decentralized video streaming platform built on top of a blockchain foundation. The platform mitigates many of the problems seen in streaming around relaying high-quality video content at low costs and could steal market share from Filecoin.