Filecoin

Filecoin is a decentralized storage network and cryptocurrency that turns cloud storage into an algorithmic market. The network is built on the InterPlanetary File System (IPFS), a protocol for storing and sharing data in a distributed file system. Miners earn the native FIL token by providing storage capacity and reliably storing files, while clients spend FIL to store their data or retrieve it. This creates a verifiable, open marketplace that contrasts with traditional, centralized cloud storage providers.

The network's security and reliability are enforced by its consensus mechanism, Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoSt). PoRep proves that a miner has physically allocated unique storage space for a client's data, while PoSt provides continuous proof that the miner is storing the data correctly over time. These cryptographic proofs ensure that storage is being provided as promised without requiring clients to trust individual miners, making the system cryptoeconomically secure.

Filecoin's architecture includes several key components: the Storage Market, where storage deals are negotiated; the Retrieval Market, for fast data fetching; and a blockchain that records all transactions and storage proofs. Smart contracts on the network can automate complex storage arrangements. This design enables use cases like affordable archival storage, decentralized web hosting, secure data backup, and the creation of datasets for decentralized AI, providing a foundational layer for the Web3 ecosystem.

Filecoin operates as a decentralized storage marketplace where users pay to store data and storage providers earn tokens by offering disk space. The network's core innovation is its use of cryptographic proofs—specifically Proof-of-Replication (PoRep) and Proof-of-Spacetime (PoSt)—to verifiably and trustlessly prove that data is being stored correctly and continuously over time. These proofs are submitted to the blockchain, creating a secure, auditable record without relying on a central authority.

The storage process begins when a client creates a storage deal, a cryptographically signed agreement between the client and a storage provider that specifies duration, price, and data replication requirements. The provider then seals the client's data into a sector, a dedicated portion of storage that is cryptographically committed to the Filecoin blockchain. This sealing process generates the initial Proof-of-Replication, demonstrating that a unique copy of the data has been physically stored.

To ensure persistence, storage providers must continuously submit Proof-of-Spacetime to the network. These succinct proofs, submitted at random intervals, demonstrate that the provider is still storing the client's data throughout the deal's duration. Providers who fail to submit valid proofs are penalized via slashing, where a portion of their staked collateral (FIL tokens) is forfeited. This economic model aligns incentives, making reliable storage more profitable than malicious behavior.

Data retrieval is facilitated through a separate retrieval market, which operates off-chain for speed and efficiency. Clients pay providers based on bandwidth usage, often using micropayment channels for fast, small transactions. For critical data, clients can use Filecoin Plus, a community-managed program that provides a trust boost to verified storage deals, incentivizing providers with higher block rewards for storing socially valuable data.

The network's consensus mechanism, Expected Consensus (EC), selects storage providers to create new blocks and earn block rewards based on the amount of storage power they contribute, measured as Quality-Adjusted Power. Power is 'quality-adjusted' to incentivize the storage of real client data over empty capacity. This design ensures the security and growth of the network is directly tied to its core utility: providing useful storage.

Proof of Replication (PoRep) is a cryptographic proof that a storage provider has physically allocated unique storage space for a client's data. Unlike simple hashing, PoRep proves that a distinct, data-dependent encoding of the original data exists on the provider's hardware. This prevents a provider from cheaply storing only one copy of data while claiming to store multiple unique copies for different clients, a fraud known as a Sybil attack. The process is computationally intensive, making it impractical to generate the proof without actually storing the encoded data.

Proof of Spacetime (PoSt) is a cryptographic proof that a storage provider continues to store a client's data reliably over a period of time. At random intervals, the Filecoin blockchain challenges storage providers to prove they still possess the data sealed during PoRep. Providers must generate a succinct proof—a WindowPoSt for ongoing verification or a WinningPoSt for block creation—demonstrating they can access and process the challenged data sectors. Failure to submit valid proofs results in slashing of the provider's staked collateral, ensuring economic incentives align with reliable storage.

Together, PoRep and PoSt form the backbone of Filecoin's trust model. PoRep establishes the initial, verifiable storage commitment, while PoSt provides continuous, probabilistic auditing. This dual-proof mechanism transforms raw storage capacity into provable storage power, which is used in Filecoin's Expected Consensus protocol to determine which providers are eligible to mine new blocks and earn block rewards. The system ensures that the network's security and block creation are directly tied to useful work: reliably storing the world's data.