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FileCoin and IPFS – reinventing storage

Juan Benet — the founder of FileCoin — has big ambitions: He wants to create a decentralized storage network (DSN) and a vivid marketplace on top of it. Think of Amazon S3 or similar services. The difference is that you don’t have to trust a central cloud vendor like Amazon who could dictate the pricing of its service. Instead anybody with available storage can join in and become a FileCoin storage provider. In Blockchain terms these are the “miners” of FileCoin. They gain influence in the network with the amount of storage they provide to their users.

The big advantage for FileCoin’s end users is that their files might be stored at a FileCoin provider near-by instead of a central cloud storage, which might be far away — especially if users live in a developing country. FileCoin wants to offer options to replicate and encrypt your data according to your needs. The storage and retrieval of your files will happen transparent from the physical address.

FileCoin tokens are used to create a storage marketplace: Users will pay for the service with FileCoins. Storage providers will get paid with FileCoins. This video helps to understand the basics:

Introduction video to FileCoin, found on

It is not yet clear where FileCoin see the limit of their service. They could stay focused on their technology and their marketplace. But they could also go one step further and offer higher-level applications and try to compete with services like DropBox or OneDrive.


FileCoin builds heavily upon IPFS — the Interplanetary File System, which itself wants to replace HTTP. Yes you read that right.

The creators of IPFS see many problems in the basic design of HTTP and want to create a superior protocol that doesn’t rely on central instances and URLs as basic components to retrieve data. The basic ideas are fascinating. I highly recommend to watch this TED talk of IPFS’s creator Juan Benet who is also deeply involved with FileCoin:

TED Talk about the motivation to create IPFS

IPFS can be seen as a compelling foundation for Blockchain technologies. It has some impressing characterics to replicate and address files based on their content instead of their location. It also can be used to circumvent address-based censorship — as you can read in this interesting article from The Observer. One idea is to mirror Wikipedia with IPFS. This was used during the recent crisis in Catalonia.

FileCoin builds heavily upon the achievements of IPFS. It adds its FileCoin Token (FIL) and Blockchain elements on top of IPFS in order to create a storage marketplace that keeps all participants motivated to store and retrieve files of end users.

An interesting part is FileCoin’s consensus algorithm. It differs heavily from existing Blockchain strategies: FileCoin uses Proof-of-Storage instead of Proof-of-Work as we know it from Bitcoin or Ethereum. FileCoin’s whitepaper talks a lot about how its Proof-of-Storage methods (there are two of them: Proof-of-Replication and Proof-of-Spacetime) work in order to serve its main use cases and make sure that storage providers really store what they claim to do. The authors also explain FileCoin’s motivation to find a consensus algorithm that is useful to its network and produces reusable results (chapter 6 of the whitepaper). This should help to avoid the huge energy consumption problems we know from Bitcoin.

The whitepaper is also quite honest and sees a lot of open research work to accomplish in order to make the ideas a reality and verify some of the new strategies (see chapter 8).


FileCoin is driven by Protocol Labs. They define themselves as a research, development, and deployment lab for network protocols. They want to create new markets with their protocols as you ran read here. Protocol Labs are very focused on open source software and backed by several well-known investors like Y-Combinator.

FileCoin was one of the biggest ICOs in 2017 and collected 257 million USD. Yet it is one of those extremely ambitious projects that will need some time to fulfil its promises. I would judge it as a long-term investment.

Impact on society

FileCoin might have a big positive impact on society — especially for users in developing countries with limited or slow access to cloud providers. These users should have cheaper and faster access to relevant data if FileCoin’s plan work out as intended.

It’s also very open by design. In theory everyone with free space on a harddrive could join in as a storage provider.

FileCoin might also help against fake news since files are identified via a hash of their content. Changes in files will create new instances of these files, so the original content won’t get lost.

FileCoin’s offering might also lead to the founding of small local storage providers who act as FileCoin miners — thus driving local economies instead of global players. Bit this hope might turn out wrong — as we can see in the Bitcoin ecosystem with its few but huge mining companies.

Will FileCoin create a new world-wide storage bazaar with smaller players? Photo by neosiam, found on Pexels


FileCoin and IPFS are courageous projects for sure. FileCoin is also a nice example how Blockchain technologies strive to not only create new decentralized use cases, but also new markets. It remains to be seen if these new markets can get established with the necessary balance between users and providers.

I will definitively keep an eye on these amazing projects.

Disclaimer: This article is not intended to be an investment advice of any sort. Do your own research and search for professional support if you intend to invest in one of the projects mentioned in this article.

If you liked this story you might also like my new one about “The hidden power of Utility Tokens” or my “Blockchain vNext series” in general.

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Stefan Grasmann

Stefan Grasmann


Working at the intersection of New Work and New Tech. IoT veteran. Blockchain enthusiast. Driving @zuehlke_group to the next level.