Filecoin Investment: Worthwhile Or Worthless?

Filecoin is a decentralised Blockchain network that supports peer-to-peer storage of files. Users can rent or buy storage space from another computer, and those who provide storage services are incentivised with FIL tokens. The platform was introduced in a white paper written by Juan Benet in 2014, but it didn't appear on the market until October 2020. Filecoin is currently ranked within the top 30 cryptocurrencies, but its price has declined recently. So, is it a good investment?

Filecoin's price history and future predictions

Filecoin is a decentralised blockchain network that supports peer-to-peer file storage. Users can rent or buy storage space from another computer to store their files. The storage broker who sells the space is rewarded with FIL, Filecoin's native token.

The Filecoin project started in 2014 but didn't appear on the market until October 2020. After its launch, the price of Filecoin was pretty stable, trading between $20 and $30. However, during the crypto bull run in the first quarter of 2021, Filecoin's price started to rise. It reached an all-time high of $237.24 at the beginning of April 2021 but soon entered a bearish movement, trading below $55 by the end of September.

In November 2021, Filecoin was trading at $54 and was ranked as the 30th overall cryptocurrency with a market cap of over $7 billion. Since then, Filecoin's price has been on a downward trajectory, affected by the crypto crashes of 2022. In June 2022, the Filecoin crypto lending platform Celsius Network cancelled withdrawals, confirming the bear market, and Filecoin's price fell to a low of $4.82.

Filecoin's price has continued to fluctuate, and as of August 2024, its price is around $3.89. Despite the downward trend, some analysts remain bullish on Filecoin's future prospects. WalletInvestor predicts Filecoin's price will be around $87 by December 2022, while DigitalCoinPrice estimates it to reach $97.15 by the end of 2022 and rise to $116 in 2023.

Other predictions for Filecoin's price in the future include:

• CoinPedia estimates a maximum price of $10.12 by the end of 2024.
• CoinCodex predicts a price of $8.60 by 26 February 2023 and a potential drop to $7.74 by 24 March 2023.
• CryptoPredictions.com forecasts a closing price of $9.94 in 2023 and a price of $19.17 by the end of 2025.
• Longforecast predicts a price of $65 by the end of 2021 and $82 in five years.

It's important to remember that cryptocurrency markets are extremely volatile, and price predictions can often be wrong.

The pros and cons of investing in Filecoin

Pros

• Filecoin is a decentralised blockchain network that supports peer-to-peer storage of files. This means that users do not have to trust a single entity to store their information.
• It is censorship-resistant and has no single point of failure.
• It is very similar to Dropbox but is decentralised. It uses a cloud storage blockchain where users store their files, which are then divided and stored in numerous computers around the world.
• It has a strong support team, with venture capitalists looking into its blockchain technology.
• It does not need hard forks to meet the needs of rising transactions.
• It makes optimal usage of available resources.
• It is safe, as it is a decentralised system and is not prone to hacks or attacks.
• It has the potential to become the fastest and cheapest way to store data on the internet.
• It is currently ranked within the top 36 cryptocurrencies.

Cons

• It is slow, as it divides files and stores them on different storages, requiring access to multiple servers around the world.
• It has competition from other storage cryptocurrencies like Siacoin and Storj.
• It is a high-risk investment option.
• It has a history of volatile price fluctuations.
• It has a complex process for becoming a storage miner.

How Filecoin works

Filecoin is a peer-to-peer network that allows users to rent out their spare storage space on their computers. Users can also buy available storage listed on the network. Filecoin's worldwide network is free to join, and anyone who wants to store their files or get paid for storing other users' files can join.

The Filecoin network is built on the InterPlanetary File System (IPFS) protocol, which allows for the storage and retrieval of files using a unique cryptographic hash rather than a traditional file path or address. This means that files are broken into smaller chunks, and a hash of each chunk is used as the address for that chunk on the network. These chunks are then distributed across the network, with each peer responsible for storing and sharing a certain subset of the chunks. When a user wants to retrieve a file, they provide the hash of the file to the network, and the network returns all of the chunks that make up that file.

Users store files on the Filecoin network by creating a storage contract with a miner, who is responsible for maintaining and verifying the files on the network. Miners are incentivized to provide storage and retrieval services by earning Filecoin (FIL) for each successful transaction. FIL is the native cryptocurrency of the Filecoin network, and users need to hold FIL to list or access storage listed on the network.

Filecoin uses a proof-of-work (POW) model, and it uses two proof-of-work models to prove that work has been completed: proof-of-replication and proof-of-spacetime. Proof-of-replication allows the network to confirm the replication of data to a unique location, while proof-of-spacetime verifies that the data is stored for a specific period of time. These POW models are combined to form large-scale storage networks spanning multiple independent parties, eliminating the possibility of forgeries in the network while increasing mining rewards.

The Filecoin blockchain records transactions to provide verification of file storage. It also uses a validation system that serves as the core protocol of the network, including proof of replication and proof of spacetime, to ensure that data storage, data retrieval, and other functions of the network remain valid.

How to buy Filecoin

Filecoin (FIL) is a cryptocurrency that powers the Filecoin network, a decentralised peer-to-peer file storage network. It was founded by Juan Benet, who also created the Interplanetary File System.

• Create a Coinbase account: Download the Coinbase app and start the sign-up process. You will need a valid ID and may be asked for proof of address in order to transact, so be sure to have those ready. Verifying your ID may take longer than a few minutes, depending on where you live.
• Add a payment method: Connect a payment method. You can use a bank account, debit card, or initiate a wire.
• Select "Buy & Sell": On Coinbase.com, select "Buy & Sell". On the Coinbase mobile app, tap the "+ Buy" on the Home tab.
• Select Filecoin from the list of assets: On Coinbase.com, click the Buy panel to search and select Filecoin. On the Coinbase mobile app, search for Filecoin by typing "Filecoin" into the search bar.
• Enter the amount you want to buy: Input the amount you want to spend in your local currency. The app will automatically convert that into a Filecoin amount.
• Finalize your purchase of Filecoin: Tap "Preview buy" and then confirm your purchase.

It is important to note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. It is recommended to always do your own research and understand the risks involved before investing in any cryptocurrency.

Filecoin's unique features

Filecoin is a decentralised blockchain network that supports peer-to-peer storage of files. It is designed to address the problems of centralised cloud storage, such as the potential for hacking and manipulation of files. Here are some of Filecoin's unique features:

• Decentralised storage: Filecoin uses a decentralised cloud storage blockchain where users can store their files. The information is then divided and stored in numerous computers around the world. This makes it harder for hackers to infiltrate the system or manipulate files.
• Proof of storage: Filecoin uses proof of storage, where a miner's power in the consensus protocol is proportional to the amount of storage it provides. This means that miners are incentivised to provide more storage capacity to the network.
• Smart contracts: Filecoin's Virtual Machine (VM) allows for the execution of smart contracts. This enables various cryptographic contracts and market mechanisms among participants on the network.
• Gas fees: Filecoin uses gas fees to measure the computational and storage resources consumed by a message. This helps to compensate the network for the resources used and also creates a priority fee for block-producing miners.
• Block rewards: Filecoin's block reward system is unique in that it determines who wins block rewards based on the amount of storage power a miner can provide. This incentivises miners to provide reliable and useful storage and ensures the long-term health of the network.
• Scalability: Filecoin addresses the problem of scalability in the cryptocurrency world by using many unused storages around the world, creating an unlimited storage network.
• Safety: As a decentralised system, Filecoin is less prone to hacks or attacks compared to centralised storage systems. This adds a layer of security for users storing their files on the network.

Frequently asked questions