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Filecoin: Understanding the Complex Crypto System Meant to Rival AWS

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Filecoin might be the most complex thing the blockchain industry has ever brought to market.

The Web 3.0 data-storage project, funded by a $257 million initial coin offering that closed in September 2017, has been building out its technology ever since. 

While Filecoin has been quieter than most over that time, Filecoin is currently wrapping up a very active incentivized testnet called Space Race. There are 1.5 million FIL tokens allocated to testnet participants, though it’s hard to assess the value of that offer when the company has refused to discuss details that might inform FIL’s underlying price. Nonetheless, this testnet has been quite popular. 

“Miners are learning a ton,” Filecoin’s Ian Darrow told CoinDesk. More than $100 million worth of hardware has come online to serve the testnet, he said. More than 200 pebibytes of data capacity has been proven. “Overall, it’s exceeded expectations,” Darrow said.

There are futures markets for the forthcoming token, too. Gate.io is currently trading futures at $18.50 in USDT as of this writing. In a recent investor letter, Pantera Capital said that Filecoin futures were “trading well above our cost basis.” 

Filecoin’s creator Juan Benet has a bright vision for the future of the web, and thus the Filecoin network aims to be a next-generation marketplace for data storage and retrieval, potentially competing with the web giants that control the data storage space – Amazon, Microsoft and Google – and content delivery networks like Cloudflare.

Sept. 15, 2020 | 4 p.m. ET

We’re hosting a conversation with Filecoin founder Juan Benet, Filecoin project lead Colin Evran, Ethereum co-founder Joe Lubin and CoinDesk senior reporter Brady Dale.

Watch it live on CoinDesk.com, Twitter or YouTube.

While it’s true that the cost of storage has only trended down and selling storage has effectively made it a commodity product, the Filecoin thesis is two-fold: 

  • Demand for data storage will soon skyrocket. 
  • There will be demand for a new kind of storage, one that can prove redundancy and accessibility.

The last Filecoin roadmap update that addressed mainnet launch said it would happen in mid-to-late September. When we spoke to Darrow he said that this was still on track. 

“Unlike centralized cloud storage services, which back up data in ways clients can’t change or verify, Filecoin allows clients to easily express their own preferences for reliability and cost,” a new document released ahead of the network launch, Engineering Filecoin’s Economy, explains. It goes into several key elements of the new system.

Here are some of the main takeaways.

1. Miners will need to post considerable collateral in order to participate

“One thing that I don’t think was super well-understood before this came out is the mechanics and the rationale around how miner collateral works in Filecoin,” Darrow said.

Mining on Filecoin is largely about providing storage space using traditional storage systems. This is commodity hardware. Almost anyone with an internet connection can participate. A quality one-terabyte hard drive can be purchased for around $50, though most entities participating will put up vastly more than that.

The point being that Filecoin does not enjoy the expensiveness of specialized hardware (such as Bitcoin or Ethereum ASICs) as a way to discourage unserious participants, so it needs to require a slashable stake in order to prevent malicious actors from accepting deals for terms they don’t honor.

The Filecoin system requires upfront collateral. Block rewards are also subject to vesting, in order to help ensure participants stick around long enough to honor commitments.

2. There are ‘nasty’ incentives for expanding capacity

Filecoin wants the storage capacity of the network to grow, so it’s hardwired with a very strong incentive to do so, and rapidly.

“There’s this really nasty incentive for people to pile in early,” Darrow said. “Mining rewards are the highest early, total mining power is the lowest, so you attract a lot of people who are bouncing from project to project.”

Filecoin has a pre-set growth schedule for storage capacity and 70% of the mining rewards are tied to that baseline. If the network hasn’t hit that target, then block rewards are reduced to the proportion it has achieved. “The overall result is that Filecoin rewards to miners more closely match the utility they, and the network as a whole, provide to clients,” the “Economy” document argues.

Filecoin increases the baseline 200% annually, only giving the community an option to slow its growth down once the network reaches over 1% of global storage.

Based on the experience with the Space Race, Darrow said, “It seems like we won’t have trouble hitting pretty gaudy numbers in the first year.”

3. The main concern is launching a network that’s ready for business

One of the features that might seem strange about Filecoin at the outset is that participants can earn rewards for storing nothing.

This is referred to as committed capacity. It’s effectively empty space that has nevertheless received the Filecoin cryptographic treatment and is getting logged and rewarded on the system.

At first blush, this might not make any sense, but it’s a matter of having some room in the system.

“What you don’t want is a network where there’s no extra capacity available or you don’t know extra capacity is available,” Darrow said. Further, because all nodes are also participating in securing the Filecoin blockchain, they are contributing to consensus.

That said, Filecoin doesn’t want that many participants to commit empty blocks, so an incentive system has been created to push folks to find real clients.

4. “Verified clients” are a key incentive

Serving verified clients earns significantly higher block rewards. These are real companies with real needs making real deals for data. The idea is it won’t be that hard to become a verified client, but its business should be significantly more attractive to those on the network.

“Verified clients are certified by a decentralized network of verifiers,” the new document explains. 

This will be a set of large, recognizable entities in the ecosystem, Darrow said, though the list is not public. It will be groups such as: nonprofits that do a lot of data storage, academic entities and the major foundations of the blockchain world.

Storing verified client data will receive higher block rewards than unverified data or empty blocks (since it is encrypted, the Filecoin network cannot tell the difference between the two). In fact, Filecoin has already been seeding the world with verified data. 

Because verified data is so attractive, Darrow said the team expects miners will do business-development work to try to secure deals with verified clients, helping to improve overall competitiveness across the system.

5. AWS isn’t the only thing Filecoin might unseat

Filecoin is usually described as entering the space of Amazon Web Services or Dropbox, but it’s a bit more disruptive than that. 

Filecoin also seeks to account for content delivery network (CDN) services as well.

The most famous CDN is probably Cloudflare, and these networks fulfill a surprising role on the internet.

Data moves fast but the world is big, and it’s still true that a file closer to a user gets there noticeably faster than one that’s further away. Most stored data never gets touched and so will never need these services, but some stored data becomes very popular.

For such popular data, companies can provide retrieval services, meaning they would get paid for serving the data to customers. An example Darrow gave was when a certain video goes viral. A CDN could cache copies of that video all over the world and bid for the chance to serve it to viewers.

These additional copies would not count toward the copies the client had paid to keep securely on Filecoin, but they could be used in a retrieval market.

In many if not most cases, Darrow said, the storage providers will also provide the retrieval services, but there are likely to be cases in which it makes sense for CDN-like entities to step in for certain files.

6. Everything in the Filecoin system has an upfront cost

Clients pay for storage in FIL, which is volatile. The Filecoin system requires storage clients to commit their payments upfront over the life of a deal, though miners will only get paid if they meet their commitment. The “Economy” document illuminates the advantages of this arrangement:

“In addition to collateral commitments from both parties, there’s also a deal payment from client to miner. This payment is initially locked by the client when the deal is incorporated into the blockchain; as a result, the client’s exposure to Filecoin price volatility ends the moment they enter into a storage deal. Payment is released to the miner as some fraction of the total deal fee per payment period.”

On the other hand, many storage clients may be accustomed to paying as they go rather than paying a lump sum at the beginning. Darrow said the trade-off here is they only pay for what they need.

As money on the internet becomes more complex, this will also likely present an opportunity for third parties to finance upfront payments for companies that want to use Filecoin but pay at flexible regular intervals.

7. Filecoin treats every chunk of data like it’s special

One of the most important facets of Filecoin to understand is that it relies on a concept called content addressing.

Most addressing on the internet relies on locations. Go to a URL and see the thing you want there. As the internet ages, more and more of these links are dead. Called “link rot,” there’s a growing push among bloggers to link to archives rather than the original sources.

Filecoin points to content, not location, though, which means it might be found in any number of places.

Filecoin takes this a step further and also cryptographically proves the uniqueness of each copy. So if a client wanted to know there were 101 copies of file all around the world, they could use proofs to verify both that each copy was unique and that they were well distributed around the globe.

This is Filecoin’s $257 million bet: Storage customers will make considerably more nuanced demands of storage providers as the internet becomes vastly more important than it already is.





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MicroStrategy Buys Additional 13,005 Bitcoin for $489 Million

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With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion.

MicroStrategy Inc (NASDAQ: MSTR) has continued its Bitcoin acquisition spree as it has purchased another $489 million worth of BTC. As of the 21st of June, the Nasdaq-listed business intelligence company holds 105,085 Bitcoins.

The company announced its latest Bitcoin acquisition earlier today. According to the company, the newly acquired BTC totaled 13,005 at an average price of about $37,617, fees and expenses included. The purchase came after MicroStrategy generated $500 million in cash from the sale of debt to fund the purchase of BTC.

Before MicroStrategy purchased the most recent Bitcoin, the company had unveiled plans to buy Bitcoin in a filing with the US Securities and Exchange Commission (SEC). In the filing, MicroStrategy said it would be selling up to 1 billion of its class A common stock through an “Open Market Sale Agreement” with Jefferies LLC. The company added that proceeds from the stock sales would be used to buy more Bitcoin. MicroStrategy explained:

We intend to use the net proceeds from the sale of any Class A common stock offered under the prospectus for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.

MicroStrategy Focuses on Bitcoin Acquisition

In addition, MicroStrategy has made Bitcoin acquisition a focus for the company. The company said that it mainly pursues two corporate strategies. Apart from growing its enterprise analytics software business, a major strategy for the company is to acquire and hold BTC.

In the SEC filing, the Nasdaq-listed company added that it is currently seeking opportunities to implement Bitcoin-related technologies like blockchain analytics into its software offerings. Also, the company intends to hold its Bitcoin holdings long-term and not engage in regular trading.

MicroStrategy became the first publicly-traded company to buy Bitcoin in August 2020. At the time, the company bought 21,454 BTC worth $250 million, making BTC its primary treasury reserve asset. When MicroStrategy made its initial Bitcoin purchase, BTC was trading at $11,653 per coin. This means that the price of Bitcoin has surged about 5 times since the first purchase.

After debuting into the crypto space in August last year, MicroStrategy had purchased more and held more than 90,000 BTCs before its latest acquisition, announced on the 21st of June.

At the time of writing, Bitcoin is hovering around $33,000. With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion. According to MicroStrategy, its new subsidiary – MacroStrategy, manages about 92,079 BTC of its coins.

MSTR stock is currently at $595.79, a 7.64% decline over its previous close of $646.46. The company has grown nearly 403% in the last twelve months and 53.57% in its year-to-date record. In addition, MicroStrategy stock has gained more than 26% over the past month. However, MSTR has shed 17.65% over the past three months and has dropped 0.30% in the last five days.

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.



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Wise Fintech to Go Public via Direct Listing on London Stock Exchange

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In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company.

British fintech Wise, formerly TransferWise, announced Thursday its plans to go public via a direct listing on the London Stock Exchange (LSE). The money transfer company said it had sufficient funding and therefore, did not require underwriters or issuing of new shares.

Wise will pioneer direct listing in London, a deal which will be finalized on July 5. Sources speculate the listing could value Wise at anywhere between $6-7 billion, up from its latest $5 billion valuations. This would also make it one of the biggest floats this year.

Founded in 2010, Wise has managed to accumulate 10 million customers who use its services to send £5 billion ($7 billion) every month. Its rivals include Western Union and MoneyGram in addition to startups like WorldRemit and Revolut.

Since 2017, Wise’s track record shows consistent profitability with a 54% annual growth rate. The latest 2021 fiscal year report shows it made £30.9 million in profits out of the £421 million ($589 million) sales revenue. This year, the company’s payments app registered £54.4 billion of international transfers for 6 million clients.

Wise Listing on LSE

Listing the giant company is a great accomplishment for London as it competes with “The Big Board”, New York Stock Exchange Group (NYSE), to attract more high growth and Blue-chip firms. As of 2020, the NYSE had 2800 company stocks and its market cap as of June, 2021 was $24.68 trillion. LSE, on the other hand, has listed over 1300 companies and its market cap is at 40.08 from today’s MarketWatch data.

To further this development, the British government is considering increasing leniency in firm enlisting guidelines to encourage issuing of dual-class shares. However, European stock markets have been hit with a lot of volatility this year, with at least two IPO cancellations in recent weeks.

The dual share structure is what Wise is opting for as it allows them to retain voting control while accommodating investors and customers into their shareholder base. At present, however, it locks them out of the lucrative Financial Times Stock Exchange (FTSE) indices.

Nevertheless, the company intends to issue both class A and class B shares with the latter holding the privilege of 9 votes per share. The expiry for Class B shares is in the fifth year following Wise’s IPO. It is likely for concerns to arise over this structure as it may give executives excessive influence on shareholder votes.

In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company. Financial endeavors for the company are advised by Goldman Sachs, Morgan Stanley, Barclays and Citigroup.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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JPMorgan Acquires Nutmeg Robo-Advisor, Furthering UK Retail Banking

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Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs).

JPMorgan Chase & Co (NYSE: JPM) said Thursday it has closed a deal to purchase Nutmeg, an online investment management service, for an unnamed price. US biggest bank hopes the agreement, which awaits regulatory approval, will complement its launch of a standalone digital bank brand in the UK during the year.

Using the latest technology from Nutmeg will help boost JPMorgan’s retail and institutional push since the company aims at establishing as many branches as it can outside the US.

With over £3.5 billion (4.9 billion) worth of assets under management, the decade-old Nutmeg is one of the UK leading and award-winning robo-advisors. The company offers various investment accounts including Individual Savings Accounts (ISAs), general investment, and pensions accounts.

Additionally, its competitors include Wealthsimple, Moneybox, and Moneyfarm. Before the take-over, Nutmeg had raised over $150 million in investments from Goldman Sachs and the British venture capital firm – Balderton Capital.

JPMorgan CEO Jamie Dimon stated last year that the banking giant would be “much more aggressive” in adding assets by conducting more acquisitions. The bank may also be stepping up to competition from adversary Morgan Stanley (NYSE: MS) which, in recent years, has spent $20 billion in merger agreements with E-trade and Eaton Vance.

Dimon also mentioned leveling up against blue-chip tech firm Alphabet Inc (NASDAQ: GOOGL) and other fintech firms such as PayPal Holdings Inc (NASDAQ: PYPL).

JPMorgan Stock Market and Nutmeg Acquisition

Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs). This is not the first time the bank has partnered with a company then acquired it later. In October 2020, JPMorgan partnered with 55ip, a tax-smart fintech start-up, then bought it a couple of months down the line.

Differing regulatory guidelines in Europe and the UK made it necessary for JPMorgan to purchase the robo-advisor, rather than use investment technology available in the US. However, its US-based investment service You Invest is currently doing well, with assets valued at about $50 billion, as Dimon states.

JPMorgan’s tech initiative marks one among many happening in Britain’s retail banking sector. Banks such as Revolut, Starling, and Monzo manage digital-only checking accounts which have attracted a host of clients. Going by data from Innovate Finance, FinTechs in the UK probably make up the world’s largest markets, having pulled in $4.1 billion investment from venture capitalists as of last year.

JPMorgan Securities served as financial advisor in the JPMorgan-Nutmeg transaction, while Freshfields Bruckhaus Deringer acted as legal counsel. Arma Partners was Nutmeg’s financial advisor and Taylor Wessing was legal counsel.

As of June 17, 2021, at 7:59 p.m. EDT, JPMorgan stock closed at $151.76, down 2.89%. In the after-hours session, it was trading at $151.48, down 0.18% in 24-hours.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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