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The Filecoin ICO was the highest cryptocurrency crowd funding sale in the shortest period. In 4 weeks, the blockchain data storage project raised $257 million. The total contribution came from an ICO for accredited investors and a pre-ICO for renowned venture capital investors. Filecoin broke the previous record held by Tezos.

This review will shed light on the details of the project and ICO. It will conclude with a verdict on the future of the project. This review will cover

  • The background of the project
  • The team involved in Filecoin
  • The Filecoin blockchain storage product
  • Features of Filecoin
  • Breakdown of the ICO token sale
  • Filecoin's plans, roadmap, and vision

Filecoin Background

Filecoin is a product of Protocol Labs, an open source research and development lab founded by Juan Bente.  The lab builds tools, systems, and protocols. One of these protocols, an Inter-Planetary File System (IPFS) is a decentralized protocol for storage and transmission of data online. It was built as a decentralized alternative to the HTTP protocol widely used today. IPFS brought a massive reputation for Juan and Protocol Lab's team of developers.

The concept of Filecoin was an idea outlined in a 2014 a white paper. It conceptualized Filecoin as a virtualized network on top of the Bitcoin network. However, it also left room for pairing it with other robust distributed ledger systems. The paper was set aside to focus on IPFS.

After releasing IPFS, protocol labs rewrote the Filecoin white paper with modifications. This time, Filecoin rebranded as a standalone distributed network with a native cryptocurrency.

Who are the people behind this project?

Filecoin is a project by Protocol labs, an open source research, and development lab led by its founder, Juan Benet. The rest of the team consists of 11 developers spread out across the world.

The team has proven itself after building IPFS with $ 3 million in total equity funding. IPFS has been running for the past three years.

Protocol labs has already proven they can build and ship product.

What is the Filecoin product?

Filecoin is a distributed data storage network incorporated with a blockchain cryptocurrency by the same name. It is a next generation infrastructure for hosting data across a network of data storage anywhere in the world. This blockchain data storage network incentivizes storage space owners to participate in a network where they earn in return storage services.

Filecoin monetizes unused and excess storage capacity from anywhere around the world on a distributed network.

Filecoin operates much similar to a decentralized marketplace. Buyers are services or people looking for storage spacetime, while sellers are storage providers. In this marketplace, buyers are known as clients while sellers are Filecoin miners.

The unit of exchange is Filecoin, and the marketplace product is spacetime. Filecoins are used to pay Filecoin miners for spacetime, a function of data stored for a set period. The process is entirely anonymous so that clients and Filecoin miners do not know each other. Additionally, data is encrypted, hashed and split up into multiple parts that are replicated and spread out on the network. Each unique hash is used to link the data to a table of entries.

Decentralized storage is a necessary component for powering decentralized applications of the future. Filecoin is building a network in anticipation of this need.

What are the features of the Filecoin blockchain

Some features of the Filecoin network makes it possible to have an incentivized storage network marketplace

  • An escrow feature holds Filecoin funds while clients and Filecoin miners negotiate on retrieval and availability of data and space time
  • A bidding system for clients known as a storage market and a retrieval market for miners. Clients place a bid for available space by offering Filecoin. Filecoin miners compete to respond to clients data request. They receive rewards in Filecoin for speedy recovery
  • The Filecoin native cryptocurrency acts as a unit of settlement on the network. It also trades on exchanges against Bitcoin, Ethereum, Yen, and dollars.
  • The cost of storage is a free floating price determined by the supply of storage space and demand from clients
  • The Filecoin network supports smart contracts for both Filecoin miners and clients to structure complex operations. For example designing flexible reward strategies and conditions
  • Interoperability with other blockchain platforms
  • New Proof of Storage and Proof of replication

What are the details of the ICO token sale?

Protocol labs first conducted a pre-sale to a group of 150 private investors and advisors before their official public ICO. This presale was available to Union Square Venture Capital, Sequoia capital, Winklevoss Capital, Digital Currency Group and Sam Altman, president of Y combinator.  This initial group of investors contributed a total of $52 million.

200 million FIL tokens were available for the crowd sale out of a total 2 billion tokens. The distribution table was broken down into

  • 10% for pre-ICO and ICO investors
  • 15% reserved for Protocol labs with a six year vesting period
  • 5% for the Filecoin foundation
  • 70% of all tokens to be held for Filecoin miners and metered out as block rewards over a period of 16 years.

Pre-ICO investors received tokens at an average price of $0.75 with a 1 year vesting period. Longer vesting periods came with greater discounts.

Filecoin followed up this funding round with an unusual ICO crowd sale format. The public ICO sale kicked off on August 10, for 4 weeks. 

Protocol labs developed its own ICO platform known as CoinList in conjunction with Angellist. The platform limited participants to accredited investors only. Coinlist is fully compliant with SEC ICO regulations and uses a new issuance framework known as Simple Agreement for Future Tokens or SAFT.

The minimum contribution amount was $500 with no upper limit. The currency for contributions was limited to Bitcoin, Zerocash, Ethereum, and US dollars. The initial price was $1.3 and self-adjusted periodically as more contributions were made. The formula used was

Price = max[$1*(amount raised/40,000,000)]

Investors were entitled to a percentage discount depending on one of 4 vesting options.

  • 0% discount for a 6 month vesting period
  • 5% discount for a 1 year vesting period
  • 15% discount for a 2 year vesting period
  • 20% discount for a 3 year vesting period

Filecoin's crowd sale ended on September 6, 2017. A total of $205.8 million was raised via coinlist. The proceeds from this sale will be channeled towards research, development, and launch of the Filecoin network.

Filecoin's plans, roadmap, and vision

Protocol labs’ vision is a decentralized web where data is free from internet corporations. Decentralizing data storage is a necessary step to achieving this goal. The long term vision is to have shared storage for communities across the world. 

Filecoin plans to lower the cost of cloud storage expected to top $500 billion by 2020. The Filecoin network will link its service to the IPFS network. Combining IPFS and Filecoin will create a censorship resistance web service giving users control of their data

Verdict

Protocol labs has a proven track record of building an existing and functional decentralized protocol. With the $257 million raised in the crowd sale, the team is bound to deliver a product. 

It is hard to say where Filecoin stands without a working product. Filecoin has come under criticism for raising too much money, with no working prototype. The decentralized storage market has other players who have made significant progress in the last 3 years. Sia, Maid, and Storj are tackling a similar problem.

But if the team and their previous project are anything to go by, Filecoin will be worth a lot more than it is now. It is worth having Filecoin in a healthy diversified cryptocurrency portfolio.