Is Filecoin a Good Investment?
The Filecoin project started in 2014, but it didn’t appear on the market until October 2020. A coin that’s just a year old, Filecoin has performed well, currently ranked the 30th cryptocurrency on coinmarketcap. Although its price has recently declined, it could still be a shrewd investment option. With its current price spiralling downwards, questions among Filecoin enthusiasts maybe “Is Filecoin a good investment?”
What Is Filecoin?
Like many other cryptocurrencies, Filecoin is a decentralized Blockchain network that supports peer-to-peer storage of files. With Filecoin, users can rent or buy storage space from another computer in which they would store their files.
The storage broker who sells the space will be rewarded with a FIL (Filecoin native token) — just like every other cryptocurrency rewards miner, with new tokens when they validate transactions.
Filecoin is very similar to Dropbox, just that the former is decentralized. It uses a cloud storage Blockchain where users store their files. The information is then divided and stored in numerous computers around the world.
The price of storing files on Filecoin depends on the storage services. They would quote their prices depending on the quality of service you require and how much storage space you need. So, instead of being stuck with a storage dealer, you have options of trading with many of them around the world and picking the one that provides the best services to cost ratio.
Being a storage miner requires the node to have powerful hardware storage on a well-functioning computer. Then, you can earn rewards from renting out your space.
Filecoin was introduced in a white paper written by Juan Benet. The white paper defined the essence of Filecoin and the problem it solves. Then, in 2017, Filecoin raised funds from the public through an ICO. The funds raised were over $250 million. It started trading in October 2020 after it was launched and provided on numerous crypto exchanges.
Filecoin sums up the aim of its cryptocurrency project on its Twitter page:
The Ecosystem of The Filecoin Blockchain
As we said earlier, Filecoin works similarly to Dropbox. Both are cloud storage networks. Dropbox has centralized storage in a server in the USA, however, Filecoin storage is decentralized. What makes Filecoin distinct is that it lacks a centralized system, hackers cannot hack into the system or manipulate files easily. It stores data in different computers around the world.
To retrieve files on Filecoin, users would also have to pay a fee to a retrieve miner who will get those files. Unlike Dropbox, you cannot just redownload uploaded files. So, the main actors of the Filecoin Blockchain include.
- Client: These are individuals that want to store their files with Filecoin storage services. They can choose the storage service they want and make a choice based on the speed and cost of the services. Then, they pay a certain amount of FIL tokens for file storage.
- Storage Miners: These nodes sell their storage to clients. They collect files from the clients and store them on the Filecoin network after the former had been rewarded with FIL tokens. The FIL token can then be added to their wallets or exchanged for fiat currencies. They can only store the data after proof provided by them has been verified by the network.
- Retrieval Miners: These miners help the client retrieve his files from the storage services. The data stored is encrypted and the storage miners don’t have tools for its decryption. So, the retrieval miners get the decryptors to access the files and get them for the clients. The retrieval miner is then paid a token for retrieving the files.
- Filecoin Consensus Network
To ensure that the data storage, data retrieval, and other functions of the network remain valid, Filecoin uses a validation system that serves as the core protocol of the network. These protocols include two proofs;
- Proof of Replication: This mechanism on the Filecoin Blockchain validates that storage miners stored an amount of data in its jurisdiction.
- Proof of Spacetime: It validates whether the miner stored the data at an agreed time length.
These proofs allow Filecoin to uncover fraudulent storage miners. It has the storage history of every miner which gives them grading over time. It ranks their reliability, dependability, pricing and availability.
These rankings help clients make informed decisions about who to store files with. Storage miners with a high ranking get more clients and earn more rewards than those with a low ranking.
Filecoin Price History and Prediction
As Filecoin started trading in October 2020, it doesn’t have much of a price history. It is one of the youngest, yet highest-ranking cryptocurrencies. It is currently the 30th ranked cryptocurrency by market cap. Though it has been on a hell of a roller coaster ride going through price upsurges and troughs. Here is the price history of the FIL token:
FIL Price Analysis
After its creation, FIL was pretty stable; it didn’t have any significant rises or falls. It traded around $20 to $30 from October 2020 to February 202, then it started to rise with the crypto bull run in the first quarter of the year.
Following the bull run, it reached $42.90 in February and broke the $100 mark in March 2021. Filecoin didn’t stop its upsurges as it continued rising in the following months.
It reached an all-time high of $237.24 at the beginning of April 2021, in the same month, it came down to $154 on April 9, $180 on April 15, then it dropped back to $133. From then, it was witnessing numerous spikes and falls.
It started May at $164 then the crypto crash witnessed in May came and the price dipped to $49 on 22th May (lowest dip in weeks).
After the dip, the coin started recovering — trading between $50 to $65 from May to the first week of August. The coin seemed to be on the way back to the top when it rose to $113 on September 4. However, it didn’t last as it entered into another bearish movement, trading below $55 n 28th September. Since then, there has not been much activity on the coin.
At the end of November 2021, Filecoin was trading at $54. It is ranked 30th overall Cryptocurrency with a market cap of over $7 billion. It also has a circulating supply of over 129 million FIL tokens.
FIL Price Predictions
The price movement of the tokens often determines the predictions made by forecasts. Many forecasts were bullish when the Filecoin price was flying high, their prediction is now somewhat bearish with its recent downward trajectory.
WalletInvestor predicts that Filecoin’s price will be around $87 by December 2022 and that it will reach $215 in 5 years.
Digitalcoinprice estimates the Filecoin price to reach $97.15 by 2022 and rise to $116 in 2023. In 5 years, the platform thinks that the FIL coin could trade around $191.87. The website used its price prediction algorithm in the forecast.
Longforecast’s prediction is not as bullish as its counterparts. It believes that the Filecoin price will be around $65 by the end of 2021 and $82 in five years.
Each of these forecasts believes Filecoin will soar over the years but they differ on how much it will soar by. Looking at these forecasts, it could be said that Filecoin is a good investment both short term and long term. However, it is worth noting that forecasts are not always correct and unforeseen future circumstances can change the course of its price over the long term.
Should You Invest in Filecoin?
Whether Filecoin or any other crypto investment, choosing the right crypto to invest is based on the investor’s decision. The investor has to know their investment goals and determine whether Filecoin would help them achieve them. Investing in any crypto is also determined by the investors’ risk tolerance, long-term and short-term investment goals, and their belief on whether the crypto project will boom.
- InterPlanetary File System: Filecoin has an IPFS that decentralizes data storage and accessibility while giving storage and retrieval miners incentives on their storage. It is a big improvement on Amazon Web services, Dropbox, and iCloud.
- Strong Support Team: Filecoin has very strong backing among venture capitalists. This team looks into its Blockchain technology from time to time.
- Scalability: In the cryptocurrency world where scalability is a niggling problem, Filecoin is a notable distinction. It doesn’t need hard forks to meet the needs of rising transactions. As it is a file storage Blockchain, Filecoin uses many unused storages around the world, thereby creating an unlimited storage network.
- Optimal Usage of Available Resources: Filecoin doesn’t have a central server where it stores files, rather it uses the available resources and creates a decentralized system where store owners can sell their storage to clients and guarantee safety.
- Safety: As it is a decentralized system, it is not prone to hacks or attacks. Unlike other storage systems like Dropbox, it has no single point of focus that when attacked could affect the whole system.
For instance, Dropbox was attacked in 2012 compromising over 68 million users’ passwords. It is worth noting that Filecoin being a decentralized Blockchain storage network gives it a big edge over Dropbox and iCloud.
- Low Speed: As Filecoin divides files and stores them on different storages, it needs access to multiple servers around the world thereby, undermining its speed. Whether storing or retrieving files, the Filecoin speed is very slow because it’s working with multiple servers. Also, retrieval of files depends on whether these servers are online or not.
- Competition: Filecoin is not the only storage cryptocurrency available. It competes with other cryptos like Siacoin and Storj. Siacoin boasts up to 2.3 petabytes of storage while Storj has 80 petabytes. They also have some features which Filecoin doesn’t have.