Exploring FDV (Filecoin Diluted Value 😉)

Key Takeaways

• If maximum historical onboarding and renewal rates are sustained (an aggressive raw-byte onboarding growth scenario), the total projected supply of Filecoin that will enter circulation by 2040 is 1.27B FIL.
• The total supply will be lower if onboarding is weaker than the historical daily maximum, a likely scenario because sustaining this level consistently for the next 16Y is difficult. For instance, if current onboarding rates are sustained, the total projected supply of Filecoin that will enter circulation by 2040 is 1.05B FIL.
• In conclusion, far less Filecoin will enter circulation by 2040 than the theoretical maximum token supply of 2B.

Introduction

Filecoin uses a hybrid minting model to encourage consistent and long-term storage provisioning. The hybrid minting model combines simple and baseline minting to align block reward emissions with storage targets. This enables the Filecoin network to reward storage providers proportional to the utility (i.e. storage power) they provide to the network.

In the hybrid minting model, a portion of minting rewards come from exponential decay (simple minting) and the remainder from network baseline minting. Baseline minting decays exponentially when RBP is above the baseline but can slow down to polynomial decay when below the baseline. This mechanism enables the network to disburse the maximum possible rewards when network raw-byte power (RBP) meets or exceeds the baseline storage target. The baseline storage capacity is targeted to double the network storage capacity annually.

Visualizing Adaptive Minting

Because minting is adaptive, it is helpful to visualize how much Filecoin has already been minted, and how that compares to the upper and lower bounds of what could be minted. The upper bound would be reached if RBP meets or exceeds the baseline function. The lower bound occurs if only simple minting is taking place. Fig. 1 visualizes these bounds:

Fig 1: Minting Trajectories for various onboarding configurations. The pink line indicates the amount of FIL that would be mined if only simple minting were activated going forward (a lower bound). The dark blue line indicates the total amount of FIL that would be mined if RBP matched the baseline going forward (theoretical upper bound). The light blue line indicates how much FIL would be mined if network RBP onboarding and renewal rates were sustained at their historical maximum, ~62 PiB/Day and 100% renewals, respectively (high growth rate). Finally, the hashed red line shows the forecasted amount of FIL that would be mined for if current onboarding and renewal rates are sustained (4 PiB/Day and ~50% renewals, respectively).

Remember that because minting is adaptive, the total amount mined in the future depends on some assumed onboarding behavior¹. This web calculator can be used to explore different scenarios of future onboarding and renewals and how that affects the total amount of FIL expected to be minted by the Filecoin network. Try exploring this interactively to see different scenarios for Filecoin’s minting.

Implications for FDV

What are the implications of this? For one, we see that of the 1.1B FIL tokens allocated to be minable, the actual number of tokens that can be mined by 2040 is, at most, 0.953B FIL tokens¹. The exact amount will depend on future onboarding behavior, but is upper bounded at 0.953B. Current RBP onboarding is roughly 4 PiB/day, and SPs renew around 50% of their sectors. If this trajectory is maintained, only 62% of the possible 0.953B minable tokens will be mined by 2040. Alternatively, if onboarding increases to its historical maximum of 62 PiB/day and SPs renew 100% of their sectors, 85% of the possible minable FIL tokens will be mined by 2040². This effect is starker if we compare it to the total 1.1B FIL tokens available for mining. In that case, if the current onboarding trajectory is maintained, only 54.3% of the total tokens allocated for mining will be mined by 2040. If onboarding increases and sustains its historical maximum, 73.9% of the total 1.1B tokens will be mined by 2040.

We can also view this from a total supply perspective. The table below shows forecasted total supply by date in three cases where all future minting is: a) simple minting, b) based on current onboarding and renewals being sustained, and c) based on historical maximum for onboarding and renewals being sustained. Here, we define Total Supply = Minting + Vesting — Burning. Note the contrast to circulating supply, which is defined as: Circulating Supply = Total Supply — Locking

Table 1: Forecasted Total Supply of Filecoin under various minting scenarios (values are in units of Billions of FIL) (as of Apr 10, 2024).

What does this mean for Filecoin’s circulating supply? A maximum of 2B FIL can ever be minted, but the practical amount of FIL that will ever be in circulation will be far lower than that. If current onboarding trajectories remain, a maximum of 1.05B tokens will be in circulation by 2040. If RBP onboarding and renewals increase to their historical max and this level is sustained, a maximum of 1.27B FIl tokens can enter circulation by 2040³.

Conclusions

In this post, we explored Filecoin minting mechanisms and their implications on circulating supply. Using some bounds as a point of comparison, we found that a practical limit for the total number of FIL tokens that will ever be in circulation by 2040 is likely between 1.05B and 1.27B FIL, which is lower than the 2B FIL stated in the specification. This implies the total token supply is between 47.5% and 36.5% less than the theoretical maximum, for ‘status-quo’ and ‘aggressive’ raw-byte growth scenarios by 2040, respectively.

Footnotes

1 — Regardless of whether network power is above or below baseline, the total amount mined will asymptotically reach 1.1B in the infinitely far future. However when below baseline this asymptotic value is reached much more slowly. It is more informative to choose some finite time in the future instead as a target, like 2040 in our examples, where the two forecasts vary significantly. See this note for more details on the importance of focusing on finite future times.

2 — The possible number of tokens minable by 2040 is ~0.953B tokens. This is less than the 1.1B tokens stated in the specification, because the baseline minting mechanism has already been in effect for the time-periods during which the network’s RBP was less than the baseline.

3 — These forecasts take into account gas burn, which is linearly extrapolated across the simulation window. Potential future changes in gas burn trends or changes to the protocol will alter these forecasts.