As the crypto market cools down, the market's expectation on Filecoin has shifted from "short-term benefit" to a "long-term growth". The intrinsic value Filecoin ecosystem and the explosion of applications are attracting people's attention again.
Less than one year after the mainnet was launched, the Filecoin ecosystem has begun to take shape, and more and more developers are building applications on Filecoin network. As of July 8, the Filecoin network has 2597 active miners, providing 7.0208 EiB effective computing power, and it is growing at a rate of nearly 50 PiB per day, surpassed any cloud service provider. Filecoin's extremely fast computing power growth has attracted many institutions to deploy and invest in the ecology, including Huobi, Fenbushi Capital, and Ti Capital has also established a 100,000 FIL eco-fund to help Filecoin ecosystem grow.
But when we put aside all the hustle and bustle, calm down and think: what kind of applications do Filecoin need? Where will the ecosystem go in the future? In this way, the intrinsic problem will come to our mind.
For an ecosystem to develop, it must first be the construction and supplement of the fundamental infrastructure and underlying network, and then the applications will emerge. The benefit of the early network development is very high, and with the emergence of applications, the fundamental infrastructure applications will benefit sustainably.
Therefore, in the early stage of an ecosystem, we pay more attention to projects which could supplement underlying infrastructure and form network effect. These projects are more suitable for the current development stage of the Filecoin ecosystem than other application projects.
As a matter of fact, this rule applies not only to the Filecoin ecosystem, but also to other blockchain ecosystem, and even to the entire blockchain industry. At present, there are still sufficient valuations for the public blockchain projects. The development of fundamental network as a base, after ETH ecosystem developed to application stage, it in reverse supplement its infrastructure (ETH2.0). The benefit of infrastructure construction in the early stage of network development is very high, and with the emergence of later applications, the benefit will continue to grow.
We categorized Filecoin ecosystem projects in the following ways:
Looking at the entire Filecoin ecosystem, we can sort it out in two angles: on one hand, Filecoin ecosystem needs many related fundamental service layouts such as miners, mining machine service, Filecoin value-added asset management, Filecoin lending&borrowing, and Filecoin escrow; on the other hand, Filecoin includes mainly distributed cloud storage service architecture, the fundamental technology of which is IPFS network itself; the second layer is Filecoin, which is the IPFS incentive layer; the third layer is related to tools, which are some user-friendly applications and storage technology services.
Combining above information, we summarized three kinds of projects which are needed most at current stage in Filecoin ecosystem:
(1) Defi in Filecoin serving miners
(2) Applications mainly as storage applications which combine Filecoin and NFT, might be the first to be implemented
(3) Applications which match users and storage miners
1. Defi in Filecoin
At current stage, the best developed Web3.0 application is decentralized finance. It can even be said that Defi can give a glimpse of the future Web3.0 form, but there are two reasons which have been restricting the Defi applications on-chain expanding:
(1) On-chain data storage and (2) On-chain transaction costs.
In short term, one of the most realizable situations for Filecoin + DeFi could be the storage of Defi data in Filecoin. According to a survey published by cloud service provider Chainstack, most of Ethereum network data is stored in centralized cloud service, and 61.6 % Of Ethereum nodes are run on the centralized cloud. According to the report, Amazon Web Services (AWS) indirectly operates nearly 25% of Ethereum nodes.
With the release of Filecoin, some storage load of Ethereum network can be transferred to Filecoin network, such as massive transaction records and historical status information. The most important thing is that DeFi applications can share access to these data. There are complementary benefits between the Filecoin storage network and the Ethereum DeFi ecosystem.
The Ethereum smart contract development tool Truffle also announced on Twitter that it has reached a cooperation with Filecoin to help developers around the world create and deploy fully decentralized applications. Through this cooperation, Truffle will integrate the Filecoin network into its tool suite to help users deploy directly to Filecoin. Then, Truffle will add new features to Ganache so that developers can easily simulate the Filecoin network during developing and testing (Truffle is the developing framework for the Ethereum using Solidity programming language).
The Filecoin network is in great need of smart contracts and developing tools at the current stage. The Ethereum ecosystem developed in this way a few years ago. Without these tools, It was very difficult to create applications. So I suggest creating more tools to help other developers and users.
On the other hand, Defi in Filecoin makes the ecosystem future greater imagination.
Ti Capital’s mining fund is also deeply involved in Filecoin mining. We understand all the challenges, difficulties and needs encountered by miners. Because the Filecoin economic model requires release delay of miners’ earning and pre-staking, which are funding threshold for many miners. And moreover, the utilization ratio of FIL will also be very low.
The current solution is to map FIL tokens to the Ethereum network through a transfer bridge, and then pledge BTC or ETH in the Defi network on Ethereum. In this case, the miners actually step over from Filecoin ecosystem to ETH ecosystem to deploy defi. Moreover, it also requires excessive pledge. The whole process is relatively complicated.
At present, there are some FIL lending&borrowing and mapping protocols based on Ethereum chain, such as HFIL and renFIL; as well as DeFIL, a protocol based on Ethereum chain. It in fact relies on smart contracts based on the Ethereum. It has some innovative services in terms of loan interest rates, which supplements FIL liquidity problem caused by excessive pledges.
However, in Filecoin network, miners have a lot of assets, such as pledge tokens, computing power, data, machines etc. If Defi in Filecoin can easily verify these assets, then miners could borrow without pledge, thereby lowering the participation threshold for miners.
For example, the HashMix project, through its own powerful on-chain database and algorithm design, can provide FIL borrowing with only miners providing owner information of the pledged node. Projects which utilize on-chain information for borrowing&lending and floating interest rate are very suitable for defi in the future Filecoin ecosystem. (Strictly speaking, HashMix is not defi in Filecoin.)
Not only that, Defi in Filecoin could also provide versatile functions for the Filecoin ecosystem. In addition to borrowing&lending, there are futures and insurance, as well as the transfer of earning rights between computing powers.
These will all flourish based on the rise of Defi in Filecoin network. We look forward to the launch of smart contracts in Filecoin as soon as possible. Fortunately, Juan Benet has stated on Github that a Filecoin-based virtual machine may be launched by the end of 2021.
2. No Filecoin, no NFT
Juan Benet, the founder of IPFS, once said: "NFTs that are not stored on IPFS are not your NFTs." NFT is a radical new form of digital ownership, trying to get rid of the control of centralized companies, but NFT now is stored on centralized storage.
The reason why NFT is so popular is that NFT represents ownership. However, most NFT projects use traditional centralized storage services. For example, if you purchase an NFT, the token itself is decentralized and exists on-chain. However, because of the high cost and difficulty of storing files on the chain, large files especially videos in platforms such as Nifty Gateway, SuperRare, Rarible, and Opensea etc. are usually stored off-chain. This means that the NFT assets do not belong to their own, and are even forced to belong to the storage service providers, which means that the NFT projects are fragile under the cover of "ownership".
(1) You may lose access to your NFT assets;
(2) Your NFT token points to the HTTP URL storage location off - chain, which relies on the HTTP based addressing method. Your NFT is actually at risk of being tampered with.
Therefore, NFT has a strong demand for the storage of data on-chain. And with the introduction of "Metaverse", the demand has become even stronger. The IPFS official - Protocol Labs officially launched the NFT.Storage project, which can store NFTs on-chain safely and reliably. Users can store NFT or metadata in IPFS and Filecoin for free. With the advantages of decentralized data backup and tamper-proof, Filecoin solves the biggest problem - NFT data ownership, which provides strong data supply chain support for decentralized data property rights verification.
But in order to store more NFT projects on IPFS, Filecoin ecosystem require fundamental infrastructure for NFT projects, such as allowing users to mint NFTs on IPFS directly, and destroying NFT in centralized storage & generate an identical one on IPFS with one click.
Therefore, at the beginning of an ecosystem, the network effect must be formed first, a high quality of network infrastructure is required. Therefore, fundamental infrastructure projects are crucially needed. We are also extremely positive about projects facilitating saving NFT on IPFS.
3. Filecoin Storage Service Infrastructure
As can be seen from the above figure, in the Filecoin storage market, as of July 8th, 932,047 real storage transactions have occurred, and an effective storage volume of 24 Pib has been completed (Source: https://filecoin.tools/). The Filecoin whole network computing power is 7.208 Eib, and the ratio of effective data to the total data storage is only 0.33%.
It can be seen that the proportion of real data storage in Filecoin network is very low. That is because the storage matching mechanism of the Filecoin network requires users to find miners in a certain way to store the data, which is relatively complicated. And moreover, it is necessary to screen and judge the stable and reliable miners.
There are currently 569 users who use the Filecoin network for storage. The number of miner nodes participating in mining also exceeds more than 2,000. The increase number of participants in the network have a higher requirements for the ecosystem service providers. Who can provide high-quality storage services? How to store a file quickly and easily? How to retrieve stored files quickly?
This requires transaction matching platforms in the network (similar to Didi and Airbnb), so that users with storage needs can quickly find trustworthy storage providers (miners). And on the other hand, a sound system must be established for the screening and selection of orders for miners.
In the current Filecoin ecosystem, FileDrive, Filswan, and Slate projects provide basic distributed storage network services. But among those three, only Filswan provides miner - user storage matching service, the other two- FileDrive and Slate more provide retrieval services. (Although retrieval service is an important part of the IPFS and Filecoin ecosystem, it will not be discussed further in this article as the service is still in early age and the direction is unclear now.)
One of FilSwan's current main business is to provide matching and computing services for storage orders in Filecoin network. On FilSwan, you can easily search for and discover global storage nodes, make orders, and storage providers can also be automatically matched by the platform. But now there is no function for nodes scoring and matching suggestions in the platform, which is in its initial stage, and the use is still unsmooth.
However, we learned from FilSwan official that FilSwan will improve the matching system as soon as possible, and will also establish a complete evaluation system for the storage miner sorting. Not only that, Fileswan will also provide computing power matching services in the future, expanding from a storage matching platform to a computing power matching platform. In addition to storage resources, the Filecoin network also contains a large number of computing resources, which contains huge business opportunities. This part contains huge potential.
IPFS distributed storage is obviously more fragmented, more decentralized, and more uncertain than centralized storage. As an intermediate, the storage matching platform should ensure the storage of a large amount of commercial data be safe, stable, and efficient. The requirement for the platform is very high.
To sum up, the storage service infrastructure is necessary to improve storage efficiency, reduce the risk of data loss, and realize commercially available storage systems in large-scale application scenarios. It is also an important task for IPFS storage service before its commercialization.
After the mainnet was launched for nearly a year, we are grateful to see a large number of ecosystem projects. There are filscan and filscout teams that focus on browsers, Texile team that focuses on online forwarding services, the Livepeer team, and a large number of teams in Longhash and Tachyon incubators. They continuously improve and complete the entire storage, computing, and financial ecosystem on Filecoin protocol.
In addition, the Filecoin ecosystem is not a static, but constantly evolving consensus protocol. So don’t be stuck in a certain “inherent impression”, such as smart contract. Filecoin will have its own smart contract in the future， which will be comparable to Ethereum. So it is recommended to be involved in advance for related ecosystem teams.
In general, the Filecoin ecosystem is still at its early stage, which is full of opportunities and challenges. But it is also one of the most anticipated and potential ecosystem in the entire industry.
*[Disclosure] Interests parties: At the time of this report, Ti Capital has already invested in the HashMix and FilSwan.