Filecoin continues to disrupt the data storage industry — could it aid the billion-dollar NFT industry?

YEREVAN (CoinChapter.com) – Filecoin, a decentralized storage system, appears to have brought a substantial change in the data storage industry.

To recap, companies store most of the global data on centralized servers provided by companies such as Google Cloud, Amazon Web Services, Dropbox, and Apple. However, as we continue to generate more data every day, relying on individual companies to store valuable information has become outdated and dangerous. It undermines both the integrity of the data and denies users full control of their information. 

On the other hand, Filecoin claims that it uses a decentralized mechanism to overcome the problems associated with centralized servers. The protocol stores data on its peer-to-peer blockchain, a ledger maintained by multiple actors across the globe.

In essence, Filecoin allows individual users to rent out space on their computers globally. In return, they receive financial incentives. Data storage providers also set their rates themselves, thus eliminating the existing rigid pricing structure.

It also gives users looking to hire storage space a wide variety of options based on their requirements for speed, storage costs, etc.

People make transactions on the network using the Filecoin (FIL) token, the native currency of the blockchain. Those renting out space on the network also receive their incentives in FIL.

Filecoin is built atop InterPlanetary File System (IPFS), developed by Protocol Labs. IPFS serves as the Filecoin network’s distributed data storage and sharing layer. As of March 2022, Filecoin’s committed storage capacity has grown to over 16,000 pebibytes (PiB). In addition, the network has over 3,900 decentralized storage providers globally.

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Tackling the global data storage problem via Filecoin

According to the US-based cloud software company Domo, internet users generated 2.5 quintillion bytes of data per day in 2020. Blockchain technologies and the advancement of Web3 will undoubtedly increase the demand for data space. 

The recruitment hub SeedScientific estimates people will generate 463 exabytes of data by 2025. According to the company, nine out of every ten people aged six and above will be digitally active by 2030. 

To put the expected global demand for data storage into perspective, one needs to consider the inevitable digital pivot. Thanks to the Covid 19 pandemic, global companies had to adapt to the concept of working remotely.

While those that couldn’t adapt shut down, many found the experiment productive. According to IDC Press Release, 70% of all organizations will have accelerated use of digital technologies by the end of 2022. 

However, digitalization comes with huge risks. For instance, the Financial Stability Board (FSB), which makes recommendations for financial rules to the G20 nations, is worried about data safety. In its extensive report, the FSB warned of the implications of relying on big tech for storing data.

The board noted that when traditional financial institutions and FinTech firms rely overly on third-party data storage services, they increase counterparty risks associated with those firms. Excerpts:

Systemic operational and cyber security risks may arise if systemically important institutions or markets do not appropriately manage risks associated with third-party outsourcing at the firm level.” 

By reducing the reliance on such tech giants for data storage, Filecoin proposes to effectively eliminate such risks and reduce the cost of availing of data storage services. 

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The Web3.0 and NFT world needs storage solutions

Filecoin has also partnered with major blockchains, such as Polygon and Solana to become the storage layer of Web3. The partnership helps solve the storage and infrastructure problems of game developers. In addition, creators can store NFT-related projects using the services provided by Filecoin. 

The developers have launched Web3.Storage, which claims to enable developers to store and retrieve data directly on/from the network. That eliminates the need to deal with complex decentralized storage networks.

In addition to Web3 Storage, Filecoin also offers an NFT-specific storage solution to creators of NFT projects. Launched in April 2021, NFTStorage has over 40 million NFT data uploaded to date. That amounts to 260 TB of data.

With additional services such as storage for audio and video data, Filecoin is on the course of disrupting the data storage industry.