Original source: Filecoin Network
The main points
The Filecoin storage market grew in Q1 2024, with active transactions up 9% QoQ. Storage utilization increased from 18% in Q4 2023 to 23% in Q1 2024, while storage capacity decreased 14% QoQ.
As of the end of the first quarter of 2024, more than 2,000 users have loaded datasets on Filecoin, of which 508 users have loaded large datasets (larger than 1,000 TiB), a 9% increase from the previous quarter.
A year after the launch of the Filecoin Virtual Machine (FVM) in Q1 2023, the DeFi ecosystem continues to develop - Pyth and Uniswap V3 (Oku.trade) were launched in Q1 2024, and GLIF deposits increased by more than 2 times month-on-month.
As of March 31, 2024, FVM has deployed more than 3,400 independent contracts, a 26% increase from 2,700 at the end of the fourth quarter of 2023. At the same time, FVMs TVL exceeded US$600 million in the first quarter of 2024, a nearly 2-fold increase from the previous quarter, mainly due to liquidity staking.
In addition to developing the FVM ecosystem, Filecoin is focused on increasing enterprise adoption in the short term and developing DePIN partnerships in the long term to utilize idle computing resources.
Filecoin Basic Information
Filecoin is creating a hardware marketplace - the first service is storage. Filecoin is built on IPFS (Interplanetary File System) and uses transactions that price storage based on a provider market rather than a fixed pricing structure. A storage transaction is like a contract with a service level agreement (SLA) - users pay storage providers to store data for a specified period of time.
To ensure data security, Filecoin uses a cryptoeconomic incentive model to regularly verify storage through zero-knowledge proofs . To incentivize storage providers to participate in storage transactions, Filecoin will use the networks native token FIL as a reward. If the storage provider fails to provide reliable online time or takes malicious actions against the network, they will also be punished accordingly.
To retrieve data, Filecoin users pay retrieval providers to obtain data. Unlike storage transactions, which involve on-chain transactions, retrieval transactions use payment channels to settle off-chain payments, enabling faster retrieval. In addition to storage and retrieval, Filecoin aims to provide an open market where data can be run by contracting computing power, providing a more efficient alternative to traditional centralized storage.
Key protocol upgrades to enable data computing services include smart contracts (Filecoin Virtual Machine - FVM) and extensions (Interstellar Consensus) . The Filecoin Virtual Machine, launched in March 2023, will introduce Ethereum-style smart contracts to Filecoin, which will promote new use cases in areas including liquidity staking, perpetual storage, and decentralized computing.
Performance Analysis
The Filecoin blockchain is used to decentralize data storage in the following ways:
The demand side refers to storage users who need data storage.
The supply side refers to storage providers with excess network capacity.
Network
The amount of data stored in active exchanges between storage users and storage providers measures the demand for Filecoin storage.
Storage Transactions
Filecoin continued to adopt decentralized storage through active transaction growth in the first quarter of 2024. Through active transactions in the first quarter, nearly 1,900 PiB were stored on the Filecoin network, a 9% quarter-over-quarter increase from 1,700 PiB in the fourth quarter of 2023, and a more than 3x year-over-year increase from 600 PiB in the first quarter of 2023.
Meanwhile, daily new transactions continued to decline by 11% month-over-month to 3.3 PiB/day after reaching an all-time high of 5 PiB/day in the third quarter of 2023. While new transactions are still growing, the month-over-month slowdown in daily new transactions corresponds to an overall reduction in storage provider rewards (see the “Rewards” section below for details). In addition, the increase in new transactions helps improve the utilization of the Filecoin network.
Storage Utilization and Capacity
Filecoin storage utilization relative to total available storage capacity grows to nearly 23% in Q1 2024, up from 18% in Q4 2023. While this growth is a positive sign for Filecoin adoption through active storage trading, it must be placed in the context of network capacity.
Filecoin’s average raw byte storage capacity fell 14% quarter-over-quarter to 8.1 EiB in the first quarter of 2024. The metric has been declining since reaching an all-time high of nearly 17 EiB in the second and third quarters of 2022, about two years ago.
The decline in storage capacity is further reflected in the decline in the total number of storage providers, which fell to about 3,000 in the first quarter of 2024 after reaching an all-time high of more than 4,100 in the third quarter of 2022.
In addition to storage, decentralized protocols are increasingly leveraging Filecoin to access idle computing resources. For example, the decentralized computing platform io.net integrated 1,500 GPUs from Filecoin storage providers in December 2023 to increase GPU computing power.
Storage Users
Messaris decentralized storage network guide shows that Filecoin is currently suitable for providing cold storage solutions (such as archiving and recovery) for enterprises and developers. Its competitive pricing helps attract traditional enterprises seeking cost-effective alternatives to store large amounts of archival data.
Related cases include:
Banyan — focuses on packaging services to make it easier for enterprise users to get started;
Seal - focuses on providing storage access for large customers such as UC Berkeley , StarlingLabs and Casper Network ; Steeldome (youdaoplaceholder 0) - focuses on enterprise data archiving, backup and recovery. Some other efforts outside of cold storage are driven by solutions from companies such as Lighthouse , RIBS , Retriev and Flamenco .
As of the end of the first quarter of 2024, a total of 2,007 users have stored datasets on Filecoin, of which 508 users have stored large datasets (i.e., datasets with a storage size of more than 1,000 TiB), an increase of 9% from 465 in the fourth quarter of 2023. To encourage use through active transactions, we provide a variety of storage services, including NFT.storage , Web3.Storage , and Steeldome .
According to Filecoin Client Explorer , major users include Starling Lab, NFT platform OpenSea , and Layer-1 network Solana . Other notable organizations using the Filecoin network are as follows:
Victor Chang Heart Research Institute maintains and shares research data
SETI Institute uses Filecoin to store astronomical research data
UC Berkeley and Seal Storage collaborate on storage physics research
GenRAIT uses Estuary to store critical genomic data on Filecoin
Research center Starling Lab stores sensitive digital records of human history
Ewesion (Chinas fastest growing graphics file host) uses Filecoin for data storage
Destor and Seal Storage are working on the Cyber SMART AI Data Integrity Improvement research project with Cyber SMART, an industry-academia partnership funded by the National Science Foundation and industry members.
An overview of Filecoin’s featured users can be found here .
Search
To meet storage retrieval needs, a Filecoin and IPFS content delivery network called the Saturn project has been developed and is currently running in closed testing. The Saturn project aims to provide retrieval services in the Filecoin ecosystem through fast and low-cost content delivery. Saturn node operators currently earn FIL to meet retrieval requests, but they are expected to move to demand-based long-term incentives.
Meanwhile, the Station app brings decentralized retrieval to the desktop, while the SPARK and Voyager modules allow retrieval checks on the network. For context, Station uses idle computing resources and provides FIL rewards. As of March 2024, the number of participants in Stations computing network exceeds 7,700 .
Saturn aims to provide reliable content retrieval for enterprise and crypto-native use cases. A recent user deployment example is Saturn’s retrieval support for the Solana NFT platform Metaplex .
As the pilot phase is completed, Saturn is expected to enter the upgrade phase. Once in this phase, the existing CDN product will be transformed and re-launched as part of a more scalable, high-performance independent retrieval protocol with its own incentive system in the next few quarters.
FVM Usage
The Filecoin Virtual Machine (FVM) was launched in Q1 2023, bringing Ethereum-style smart contracts to Filecoin. A year after its launch, Uniswap V3 was released on FVM in Q1 2024. The Uniswap deployment on FVM enables developers to use ETH and USDC in the Filecoin ecosystem.
Binance recently announced the opening of FIL deposits after FVM integration. Previously, Sushi integrated with Filecoin and began to use Axelar and Celer to achieve inter-chain communication. At the same time, the leading Solana oracle Pyth was launched on FVM, and Filecoin smart contract developers can now use Pyth price feed services to further support the development of Filecoin DeFi ecosystem.
As of March 31, 2024, more than 3,400 independent contracts were deployed on FVM, a 26% increase from 2,700 at the end of the fourth quarter of 2023. At the same time, FVM TVL exceeded US$600 million in the first quarter of 2024, a nearly 2-fold increase from the previous quarter.
According to FVM Explorer , as of the end of the first quarter of 2024, the total net deposits in DeFi were 27 million FIL (about 256 million US dollars), mainly used for staking, liquidity staking and DEX. The liquidity staking protocol GLIF accounts for the majority of deposits (52% as of the end of the first quarter of 2024), followed by the SFT protocol (10%) , Repl (9%) and other protocols (29%). Related background:
GLIF has launched a rewards program to incentivize DeFi community participation.
Repl introduces a mechanism for storage providers to earn rewards by locking FIL.
FILLiquid proposes to provide FIL loans to storage providers.
Thetanuts Finance launched a FIL covered call option insurance pool to earn returns.
Meanwhile, according to the FVM DeFi rankings , as of March 31, 2024, the total net borrowing in DeFi reached 17 million FIL (about $162 million). In the first quarter of 2024, both monthly net deposits and borrowing showed rapid growth, consistent with the risk market. As FVM continues to develop, it may become the basis for developing monetizable FVM data use cases.
Financial
Filecoins revenue framework is similar to Ethereums, as its Gas system is designed based on the EIP-1559 mechanism . The Gas system consists of network fees, which are burned to compensate for the resources used. Both storage users and storage providers generate protocol revenue.
income
According to Messari revenue analysis , Filecoin protocol revenue includes the sum of the following four items:
Base fees — Depending on message congestion, any storage proofs required.
Batch fees — used when packaging storage proofs in batches.
Overestimation fees — used to optimize gas usage.
Penalty fees — Penalties imposed when a storage provider fails.
While demand for Filecoin storage has grown, fee revenue grew 21% to $1.6 million in the first quarter of 2024. The reduction in storage capacity is reflected in rising penalty and batch fees. Notably, the base fee for storage transactions is just over $8,400, which is consistent with the overall decline in demand-side fees charged to users by decentralized cloud storage spaces. Organizations including the Decentralized Storage Alliance (DSA) are actively working to reduce the cost of loading data on the Filecoin network.
award
Filecoin rewards include:
Block rewards distributed by the network to storage providers.
“Tips” fees are used to speed up transactions.
In the first quarter of 2024, block rewards constituted more than 99.9% of supply-side revenue, while tips accounted for only a small part. The new FIL token minting mechanism relies on the following two:
Exponential decay mode (30% of total): To encourage participation, the block reward is highest in the early stage. Over time, it decays exponentially.
Baseline mode (70% of total supply): block rewards are distributed as storage capacity increases.
The combination of these two models helps maintain participation after the network’s early block reward distribution phase ends (see exponential decay model), and also helps to continuously reward the additional value brought to the network by the increase in network storage capacity (see baseline model).
Driven by the increase in FIL/USD prices, supply-side rewards increased by 39% from $55 million in Q4 2023 to $76 million in Q1 2024. On the FIL side, rewards decreased by 16% from 12.6 million FIL in Q4 2023 to 10.6 million FIL in Q1 2024. The exponential decay model and the baseline minting model resulted in an overall reduction in FIL reward issuance .
FIL reward issuance may continue to decrease in the coming quarters. For an in-depth discussion and various simulations of future FIL issuance, please refer to Messari’s recent research on FIL circulating supply.
Ecosystem Overview
The Filecoin ecosystem has been actively attracting developers and builders, and it regularly participates in activities such as hackathons, accelerators, sponsorship programs, mentorship programs, and growth support. These programs are designed to help early-stage projects and teams grow so that they can expect to receive funding from Protocol Labs or its affiliated entities. The Filecoin ecosystem is committed to introducing diverse use cases ranging from data infrastructure, streaming, metaverse to games.
As of March 2024, there are over 160 known projects in the Filecoin Ecosystem Explorer , a non-exhaustive database of community network projects. Most projects using Filecoin provide data services:
Banyan : Decentralized storage similar to web2, suitable for areas other than corporate archives.
Lighthouse : A persistent data storage service with a one-time payment pricing model.
Numbers Protocol : Preserving data authenticity for digital media and generative AI.
Seal Storage : Immutable data storage solution.
Steeldome : Data protection and data storage solutions.
Fluence : Enables developers to scale their Web3 projects.
EQTY Lab : Uses cryptographic methods to verify snapshots of AI model lineages and leverages decentralized technologies such as IPFS and Filecoin to anchor model data.
Tableland : SQL-based cloud database.
Basin v2 : Data management and collaboration, used by Tableland, WeatherXM Network , and Bacalhau Computer Network.
Wb 3 mine : Monetization of idle computing power.
The media and entertainment-focused agreements include:
Mona : A 3D art gallery in the metaverse.
Huddle 01 : Decentralized video conferencing.
OPGames : Game-related NFT minting.
FileMarket : Web3 store builder and marketplace.
The following use cases aim to leverage Filecoin infrastructure to drive data needs in specific areas:
Cryptosat : Using mini satellites to prevent side-channel attacks and enable secure authentication.
ZKsig NFT : Market access control.
DataMarket : Data purchasing and settlement functions.
Qualitative analysis
Key Developments
V2 2 Network Upgrade (Dragon)
The scope of the V2 2 upgrade (Dragon) includes several improvement proposals:
FIP-0063 : Switch to the new Drand mainnet network.
FIP-0074 : Cancel Cron-based automatic transaction settlement.
FIP-0076 : Direct data loading.
FIP-0083 : Add built-in Actor Events to validated registries, storage providers, and market participants.
Uniswap V3 deployment
After a successful governance vote in October 2023, Uniswap V3 (via Oku.trade) was deployed on the Filecoin Virtual Machine (FVM). The deployment was supported by Axelar as a deployer and bridge provider. Specifically, it allows bridged ETH and USDC to be used natively on FVM, increasing Filecoin’s relevance to DeFi applications.
Solana Integration
The Solana team is working to archive Solana’s block history on Filecoin. Once completed, Solana data will be more accessible to infrastructure providers, explorers, and data indexers. Solana will benefit from greater redundancy and enhanced security. Additionally, price feeds from Solana’s leading oracle, Pyth, are now available on Filecoin.
Fluence is powered by IPC
Fluence Network announced the launch of Filecoin, a decentralized computing platform powered by Filecoin. The launch of IPC enables services such as aggregators, hot storage, and compute networks to be built on Filecoin. To help achieve this, FVM leverages valid proofs to verify computational integrity and introduces faster proof-of-capacity verification for load providers. Fluence benefits from this partnership due to low transaction costs and fast finalization.
Pyth price is based on FVM
Leading Solana oracle Pyth is launched on FVM with over 400 data sources. Now, Filecoin smart contract developers can use Pyth price feeds, thus supporting the further development of the Filecoin DeFi ecosystem.
Key Events
Filecoin Development Summit
The Filecoin Development Summit continued with its third session at ETHDenver 2024 , focusing on Filecoin’s programmable storage, archival use cases like Solana, and upcoming Filecoin hot storage layer innovations .
IPFS in Space
The Filecoin Foundation (FF) announced in January that it had completed a demonstration of using IPFS to enable space communications, sending files from Earth to orbit and back. The demonstration was part of a collaboration with aerospace company Lockheed Martin.
Digital Art Archives
The Crypto Art Museum launched ROOMs Archive , a digital archive that uses Filecoin to permanently preserve snapshots as a digital gallery.
Key governance decisions
Retroactive funding for public utilities
To recognize Filecoin network contributors, the first round of retroactive utility grants, FIL-RetroPGF-1, will award 200,000 FIL (approximately $1.9 million). This program aims to fund contributions that have an impact on Filecoin through activist retroactive public funding .
Summarize
The Filecoin storage market continued to grow in Q1 2024, with active transactions increasing by 9% QoQ. Storage utilization increased from 18% in Q4 2023 to 23% in Q1 2024, while storage capacity decreased by 14% QoQ. As of the end of Q1 2024, more than 2,000 users loaded datasets on Filecoin, of which 508 users loaded large datasets (larger than 1,000 TiB), an increase of 9% from 465 in Q4 2023. Due to the increase in the FIL/USD price, rewards increased by 39% from $55 million in Q4 2023 to $76 million in Q1 2024. On the FIL side, rewards decreased by 16% QoQ due to the decrease in the total amount of FIL issued.
One year after the launch of FVM, Uniswap V3 was launched on FVM in the first quarter of 2024. The Uniswap deployment on FVM enables developers to use ETH and USDC in the Filecoin ecosystem.
As of March 31, 2024, more than 3,400 unique contracts were deployed on FVM, up 26% from 2,700 at the end of Q4 2023. Meanwhile, FVM TVL exceeded $600 million in Q1 2024, nearly doubling Q1. Both net deposits and loans in Q1 2024 showed rapid growth, consistent with the risk market. As FVM continues to gain traction, it will serve as the foundation for developing monetizable FVM use cases around data and compute.
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