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The Bithumb Blog

[Insight] Filecoin, Mainnet in Difficulties from Launching… with Suspected Dumping and Scam

Filecoin, a storage sharing platform based on InterPlanetary File System (IPFS), has been involved in rumors just before and after the launch of its Mainnet. The declaration of miners that they will not operate their businesses on the Mainnet as the beginning, Filecoin is in trouble with various rumors, including scams, and its community is in total chaos. What has exactly happened to Filecoin, which attracted the attention of the public with such an innovative concept of storage sharing?

Miners’ Strike Back: “We Will not Mine This”

On the 14th day of this month, just before the launch, the incident began Nonentropy Technology, a Filecoin’s miner company, declared suspension of sales, mentioning that “Since the rules of the Filecoin’s Mainnet is unclear, we have no choice but to stop all our business activities.” Later, ST Cloud, another miner company, has reduced the number of their operating mining machines from 8,000 to 276 units, and their clouds from 11,000 to 1,870 units.

The main problem was that Filecoin’s security mechanism and unlocking tool incurred the anger of miners. And the rumor saying that if Mainnet is launched, all miners should buy 350 Filecoins as collateral in advance, and if they do not oblige, their monthly mining amount would be less than one coin, cause bitter reaction from the miners.

However, the rumor was a partially distorted one. In fact, the miners had to make collateral of 350 Filecoins within 90 days after the launch of Mainnet and can receive 0.5 Filecoin every day for 180 days. Nevertheless, miners are still expressing their frustrations. The mining rewards created every day on the network at the moment are only 124,000, and the unlocking process is proceeding gradually over six months, and that will cause a significant shortage in volume over several months after the launch of Mainnet.

“Now, Filecoin miners’ grievance is gradually increasing,” Yanzi Tong, CEO of Linden, a Chinese IPFS service provider, said in an interview with local media. He also pointed out, “If the project team keep their arbitrary actions and fail to pay attention to miners, they would see a surprising result.”

In the aftermath, the price of Filecoin based on the coinmarket cap has been fell by more than 23 percent, which was quite a severe blow.

Mainnet Launching Followed by Token Dumping

However, the launching of Filecoin Mainnet was relatively smooth. On the 16th of this month, Filecoin posted a notice on their blog, saying, “The Filecoin network is now running stably”, and “We are monitoring it for its proper operation’s sake.” Due to this news, the price of Filecoin is pulled up by 170%.

But, sometimes later after the launch, the rumor related to dumping occurred. Only 20 minutes after the listing of Filecoin on Huobi, a Chinese web-platform for cryptocurrency exchange, half of the distributed assets flowed into Huobi. The trade volume was around 27.09 million USDT. Some from the industry cast doubt about token dumping, saying, “One anonymous address secured 1.5 million Filecoins on the 15th day of the month, and remitted 800,000 to Huobi.” And Filecoin replied, “The volume was not remitted only to Huobi, but also to several exchanges, and its purpose was to create an independent market maker.”

However, the impact did not go away. Justin Sun, the founder of TRON, a cryptocurrency platform, accused Filecoin team of pulling off an exit scam. “If we estimate the value of Filecoin as USD 200 each, 1.5 million Filecoin means USD 300 million. And yet, they did not even notify this to the community, and the value went 70% down. How much did you sell, Juan Benet, founder of Filecoin?” he posted sarcastically on his Twitter on the 16th day of the month.

Community About to Be Divided… Even Suggesting Hard Fork

With the uneasy moves Filecoin has shown since the launch of Mainnet, even the community became more and more disgruntled. Some even took a harsher stance, saying that they will proceed with Hard-fork if Filecoin does not implement any measure. If they enforce the hard fork, the community will be divided, and Filecoin itself would be seriously threatened.

To avoid the worst situation, they are trying out various measures. On the 18th of the month, Molly, a core member of Filecoin, announced that the FIP-0004 proposal for the improvement of the liquidity has been passed, receiving wide support from the community. The proposal is about distributing 25% of storage miners’ block rewards immediately and directly with no lockup period of 180 days after the launch of Mainnet. They intend to take care of the urgent issue first and turn miners’ minds.

Filecoin Maliciously Used by Pyramid Scheme Companies in South Korea

Filecoin is controversial, even in South Korea. Some pyramid scheme companies are selling Filecoin mining machines, and this causes continuous damages. They are openly and actively working on YouTube, portals, and social media to attract customers. Most of the victims who have been trapped by them are ignorant about Filecoin. And it is possible that they still do not know about the series of incidents happening now. If the information does not circulate, damages will continue to grow.

Despite of all the complaints and troubles, Filecoin Mainnet has started to run its operation, and they will try their best in order to minimize the issues. Though the anxiety still remains, it is necessary to keep our focus on Filecoin’s afterward.

*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.

*The document has reflected the individual’s opinion and it may not be consistent with the company’s official point of view.

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