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The game between miners and project parties, Filecoin's ambitions encountered the first problem



After three long years, Filecoin's ambition to challenge Google Cloud has encountered its first difficulty.

Filecoin hopes to compete with technology giants such as Google and Amazon to popularize cloud storage. It raised 250 million US dollars through IC0 that year, and became famous in the domestic market.

However, the huge Filecoin has gradually revealed its shortcomings. Expectations were too high, coupled with a general lack of patience among investors, to turn a once united community against each other.

Not long ago, due to insufficient mining rewards and severe penalties, Filecoin miners began to shut down. Although Protocol Labs, the parent company of Filecoin, said that these allegations are wrong, it still cannot hide the problems of Filecoin.

On the one hand, the hype in the early stage has attracted a large number of professional miners. These miners need to reap huge profits to recover the high initial investment cost; on the other hand, Filecoin must adopt some restrictions to ensure that miners can stay on the network in the next few years. , to provide services to users.

In December 2020, the income of Bitcoin miners was close to US$700 million: According to The Block data, in December 2020, the income of Bitcoin miners reached US$692.32 million, of which US$68.3 million came from transaction fees. [2021/1/5 16:26:24]

The two forces colliding with each other, coupled with such a huge scale, put a lot of pressure on both sides.

On October 15, shortly after Filecoin went online, there were rumors that miners were not motivated enough to pay back their capital. Some media said that some miners began to shut down and shut down the mining platform.

Although the Filecoin team denied the outage, it is clear that miners have been struggling to raise operating funds, mainly due to the high cost of hardware up front and the slow distribution of miner rewards.

Before the mainnet was released, Filecoin's token economic model was criticized, and the contradictions have not been completely intensified until now. To better understand Filecoin's economic model, let's first look at its value proposition.

Foreign media: Anonymous miners capture 55% of BSV network's hash rate: The BSV network has been a topic of conversation recently, as anonymous miners currently hold more than 55% of the total hash rate in the past seven days. There is a lot of anonymous mining happening on the BSV blockchain and no one is quite sure where the hash rate is coming from. At press time, anonymous miners hashing the BSV chain accounted for 55% of the total hashing over the past seven days. Most bitcoiners believe that if an entity controls more than 51% of the network, then it is possible to perform double spending and chain reorgs. (News.bitcoin)[2020/3/25]

The ultimate goal of Filecoin is to store files such as photos, videos, music, books and other media formats. Many companies now provide this kind of service, such as Google Drive and iCloud, and users can subscribe to the service by paying a monthly fee. Now, imagine storing that same valuable data on a lesser known network, namely Filecoin.

In traditional cloud storage servers, files are stored in one or several data centers, while Filecoin stores these data in miners' local servers. Miners are rewarded for maintaining and protecting this data, and are even incentivized to continue expanding their storage capacity as the data grows, which is a core function of Filecoin's design.

News | Iran Considers Annual Registration of Cryptocurrency Miners: On Sept. 20, Cointelegraph reported that the Iranian cabinet is studying a proposal to register cryptocurrency miners annually. A draft to register crypto mining operations has received official approval in Tehran, Coindesk reported Sept. 19. The proposed license requires information about employment, lease agreements and other business activities. [2019/9/20]

However, the incentive for miners to continue to expand depends entirely on the demand for Filecoin services. Obviously, if the device is sitting idle all the time, there's no need for a massive storage boost.

More importantly, Filecoin must ensure that these miners can continue to stay in the network after the early rewards end. It is not uncommon for miners to switch rapidly between various project networks as new opportunities arise, which can be disastrous for the long-term development of the project. After all, for Filecoin users, the loss of miners means that users also have the risk of losing network storage data.

FCC: Bitcoin Miner Suspected of Interfering with T-Mobile Network: The Federal Communications Commission (FCC) has issued a warning to a New York City resident whose bitcoin mining equipment has interfered with the broadband network operated by T-Mobile. T-Mobile, a well-known mobile network operator in the United States, has complained to the Federal Communications Commission that its network has been interfered with. Therefore, on February 15 local time, the Federal Communications Commission of the United States issued a "harmful interference notice" to this person named Victor Rosario, which stated that using "lateral technology", the Law Enforcement Bureau under the Commission has identified the residence of the suspect , and basically confirmed that the mining equipment he used, the S5 Antminer, was the source of "spurious radiation". The notice clearly states that if Victor Rosario continues to mine, he may face penalties. [2018/2/18]

Another dissatisfaction with miners is the mortgage mechanism designed by Filecoin to prevent possible failures or malicious behavior.

A sector refers to the disk space provided by storage miners to the network. Once miners have received all data from a user, they will encapsulate that sector. Once the data is encapsulated, storage miners generate a proof of space-time and submit it to the blockchain. If the miner fails to perform this duty, the storage miner who provided storage for the sector will be penalized, losing part of the collateral, and the storage computing power will also be reduced.

From a business perspective, Filecoin's economic model makes sense. This staking mechanism protects the integrity of the algorithm and is also critical to protecting user data.

However, the initial mortgage cost for miners is high, which is equivalent to more than 20 days of block rewards. Miners are important participants in the ecosystem, and without user demand, their hardware equipment and upfront staking will be meaningless. This is also the crux of the storm.

The strong speculative atmosphere in the market and insufficient circulating supply have brought challenges to Filecoin miners.

FIL rose by more than $200 on the day of the mainnet launch, and although the price later fell to around $30, this is still expensive for miners who need to stake.

A large portion (70%) of the total FIL supply is reserved for miners, and the remaining 30% belongs to ICO, the team, and the foundation. However, the circulation of FIL on the market was much more than expected shortly after it went online. Under the doubts of the community, the Filecoin team claimed that the extra supply was to provide support for market makers.

To complicate the issue, many projects using the PoW consensus mechanism are very generous to early contributors, but Filecoin does not just let early contributors simply verify blocks.

Filecoin sets a baseline for the cumulative storage capacity of the network. Once the baseline is reached, the mining rewards will be much richer. The current network computing power is still lower than the baseline, so the mining rewards are much lower in comparison.

One of the ways to solve the problem of miners is to increase user demand, but for a newly established network, this is too difficult, and Filecoin at this stage is not very friendly to user experience.

Miners are therefore faced with a situation where they have to invest a lot of costs before the project starts to generate profits and stick to it, which is very painful for miners who used to get stable income as soon as they participated in mining.

Amid the hustle and bustle, Filecoin decided to make a change.

First of all, on October 18, the project party accepted the community proposal FIP-0004, that is, 25% of the block rewards for storage miners will be released directly, and the other 75% of the rewards will still be released on a 180-day basis. Second, the project will provide miners with a micro-loan program to ensure that the network can grow at a healthy rate.

This is a positive sign. Miners are the core role of the Filecoin ecosystem, and only with the support of the project party can they remain in the network. However, there are also concerns that some miners will cash out their rewards instead of staking them, which will negatively impact the price given the lack of liquidity in the market.

The launch of the Filecoin mainnet was not smooth. A large amount of funds, a long development process, and a huge community put pressure on the emerging technology from the very beginning.

The blockchain project is still a social experiment, and the era in 2017 when a single white paper can issue coins is a thing of the past. Right now, only a few projects are slowly starting to provide users with something of real value. The market has also begun to realize that it is very important whether the project can be put into development for a long time. I hope that Filecoin can prove this to everyone in the future.


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