Filecoin IRAs have many advantages, including tax-saving benefits, 24/7 trading, and diversification.
Have you ever wondered how much data humans collectively create every year?
According to Oberlo, there are currently 4.95 billion internet users in the world. Imagine how much data is produced and created daily by nearly 5 billion people. That has got to be a pretty large number.
In another story, Science focus reports that the big four (Google, Facebook, Microsoft, and Amazon) collectively store at least 1200 petabytes of information. For context, that is more than 1.2 million terabytes (and one terabyte is 1,000 gigabytes). With the current pace of global development, this number is projected to increase in the coming years. This increase may require us to develop better ways to store data.
In comes Filecoin (FIL), which according to its official website, is a peer-to-peer network that stores files, with built-in economic incentives to ensure files are stored reliably over time. According to Protocol Labs research, Filecoin was created by Juan Benet, who invented the InterPlanetary File System (IPFS), a new protocol that helps Filecoin work. This article will provide an in-depth analysis of Filecoin to help you understand what you need to know about the network and the popular crypto: FIL.
“Industry Arc” reports that the market for data storage is forecasted to reach $4.2 billion by 2026. The report further stated that “the market is expected to grow due to the high adoption of cloud storage technology and external data storage devices. “
Humanity produces data en masse, and the demand for data storage is increasing.
This leads us to the solution proposed by Filecoin and to better understand how it works, we need to understand how much data humanity creates daily, and, more importantly, how data is stored.
Put simply, Filecoin is a decentralized network looking to rival the Cloud storage industry where tech giants like Amazon, Google, and Meta have thrived. This peer-to-peer system was designed to connect customers and data storage providers globally. However, in this case, data is stored in a decentralized manner.
Furthermore, Filecoin incentivizes storage providers with its own cryptocurrency- The FIL coin.
As briefly mentioned above, Filecoin is a peer-to-peer storage and distribution network that connects data storage providers and customers. The network describes itself as “A decentralized storage network designed to store humanity’s most important information.”
Built and developed by Protocol Labs, the network operates on a blockchain that records transactions and rewards storage providers for contributing helpful storage to the internet. Protocol Labs is driven by the goal of working with other open-source R & D labs that utilize decentralization to build the next phase of the internet.
The Filecoin network is secured through proof-of-replication (PoRep) and proof-of-spacetime (PoST). This is Filecoin’s way of earning public trust and instilling confidence in users by providing them with a service they can trust. It is also a good option for investors who will be more likely to invest in a secure and trusted network
The network was built with economic incentives to ensure that files are correctly stored. It also has its native cryptocurrency, FIL. FIL is used as a payment method for users to store their files on the network. Meanwhile, storage providers also get paid in FIL.
Furthermore, FIL can be exchanged with other cryptocurrencies, such as Bitcoin and Ethereum, as well as fiat currency, including the U.S. Dollar and the Euro. Conversely, users can decide to hold on to their FIL with the hopes that the network’s net worth appreciates.
Becoming a storage provider on the network is easy; one simply needs to implement Filecoin’s protocol. In fact, you don’t even need to design your storage API or initiate any sort of marketing efforts, since the network will do that for you.
Filecoin facilitates an open market that allows anyone with spare disk space the opportunity to become a storage provider. Unlike the traditional storage market, where one company controls prices and other factors.
Imagine being able to rent out storage space on your phone, the same way people Airbnb their homes. Filecoin allows you to do this and more.
Data is power, and it is essential that it is properly stored. However, Juan Benet- the founder of Filecoin, believes that it is also essential to have it stored in a decentralized manner so that no one person/brand or a few would have total control. This is what inspired the creation of Filecoin by Benet, to store humanity’s most important information. Essentially, Filecoin is a decentralized network where you can be compensated for renting out spare space on your computer to anyone on the web.
Here’s how it works:
First, you join the community, then select the file you want to store on the network. Subsequently, you pay a small fee for your file request to be listed on the Filecoin exchange.
After this, the system searches for the lowest bid possible for you from a potential list of miners, who have already proven their worthiness to the network.
The way the Filecoin network operates is based on reliability and not marketing. Therefore, storage providers with a solid track record published on the blockchain will have an advantage over those with inconsistent proof of work.
Once a bid is found, the network encrypts the data you wish to store and sends it to various points in the storage node. Subsequently, the blockchain records the locations of the nodes through what is called the “Allocation table.” Then, it encrypts the data.
Lastly, the client is given a private key to access the files.
Traditionally, data storage providers and protocols use IP addresses. The challenge with IP address is that they are prone to be hacked, which brings up a major factor that sets Filecoin apart from traditional storage providers, like Amazon.
Other critical factors include:
Interplanetary File System (IPFS)
Protocol Labs developed the IPFS to seal the loopholes left by HTTP. Created in 1989, Hypertext Transfer Protocol was created as an application layer protocol. Since then, it has become the foundation of data circulation through a centralized means.
If you are familiar with what HTTP is, then you may understand IPFS because it is a potential replacement for that system. According to its creators, IPFS is “A peer-to-peer hypermedia protocol designed to preserve and grow humanity’s knowledge by making the web upgradeable, resilient, and more open.” It is a decentralized file-sharing system that serves as an alternative to the current cloud-based storage systems. With HTTP, a centralized server transmits media to your device using HTTP or HTTPS. However, with IPFS, you have an open-source that uses multiple nodes to deliver data. Moreso, IPFS allows the distribution of massive data volumes without duplication.
With IPFS, the internet will be redesigned to focus on a more decentralized model that has the following advantages.
With IPFS as its backbone, Filecoin allows the sale of excess storage space in an open platform.
Proof of Replication and Proof of Spacetime
One of the significant upsides of Filecoin’s decentralized model is trust. Clients who want to purchase storage spaces need the network’s assurance. This assurance helps to ensure transparency and service delivery. It involves ‘miners’ (storage providers) submitting periodic proofs to the network. These proofs are provided at the beginning and at the end of the contract. They contain evidence that shows that data is received and encrypted. Furthermore, it prevents duplication. With this proof of activity, miners can establish credibility and get more space on the network. Depending on the contract, miners may need to show evidence that data is being securely stored periodically. The proofs help storage providers to get audited by the network.
Gradually, blockchain is becoming the cornerstone of the digital age and is bound to impact future development. With Filecoin comes a new blockchain era, ushering humanity into a completely decentralized Internet era of shared storage. Since the introduction of the Bitcoin in 2009, there have been many use cases for the blockchain aside from the currency. For instance, Filecoin has high scalability, unlike many other cryptocurrencies.
Take BTC, for example; a lot of electricity is used to show Proof-of-Work (PoW). However, the value and scalability of the product beyond being a currency are not high.
Ethereum’s smart contracts provide the basis for blockchain development. However, there are no specific business areas where Ethereum itself can benefit.
With Filecoin, the growth potential is immense because it caters directly to the multi-billion-dollar data storage industry.
This growth may impact FIL both in the long and short term.
With a market cap of $3.9billion, FIL is currently ranked as the 34th largest crypto in the world. After raising $205 million (ICO) in 2017, Filecoin launched in October 2020 and reached its highest price spike of over $200 in April 2021.
Below is an aggregate of filecoin forecast;
There are many risks that accompany current centralized data storage solutions. Apart from the risk of data breaches, new data is created every year. With the massive rates of data being made, the demand for storage is constantly increasing.
In a decentralized network like Filecoin, the data is split or “shredded” so no one can piece it together. However, the system knows how data fits and can rearrange it when requested.
With Filecoin, individuals are incentivized to become a part of the network. These individuals, spread across every corner of the earth, will eventually create a network more powerful than the existing (centralized) storage options.
The storage market is growing and promising. However, it is also worthy to note that Filecoin has large competitors such as Amazon, Dropbox, Google, and Meta, which may affect how things play out.
Since 2014, the IRS has recognized cryptocurrencies in retirement accounts as property. This means that cryptocurrencies are taxed the same way as stocks and bonds.
Since then, people have invested in Bitcoin and other cryptocurrencies with their retirement funds.
There are many reasons why this happens.
Firstly, there are significant tax benefits when buying Filecoin with a Bitcoin IRA. With this sort of investment, you won’t have to worry about the taxes associated with potential capital gains.
When you invest with personal funds, a wise option would be for you to take note of all transaction details. This helps determine whether you owe short-term (held for less than 12 months) or long-term capital gains (held for more than 12 months).
Conversely, retirement plans have tax advantages. Hence, you may not need to worry about every transaction detail when investing with retirement funds as you would with traditional crypto investment.
Another reason to invest in a Bitcoin IRA is portfolio diversification. A popular ideology that many investors take is to diversify holdings to avoid “putting all your eggs in one basket.” This way, you can spread your investments across various types of assets, including alternative assets, like crypto in addition to real estate and private equity, etc.
When you diversify properly, you may lessen the risks and broaden your potential for gains.
Lastly, everyone wants to be a part of the emerging asset class. With the Filecoin network still in its infancy stage, one can think positively about it resulting in some potential gains.
Plus, the last thing you want is to miss out on what could have been an evident boom. Imagine someone who invested in Bitcoin in 2009; it may have seemed like the weird option then but look at it today.
With FIL, there is a potential for the network’s growth. This may be a good signal to investors eyeing long-term gains.
Bitcoin IRA offers world-class security1 by storing your digital assets with trusted industry wallet providers. Furthermore, up to $700 million2 is covered in custody insurance..
With the network’s potential to become the fastest and cheapest way to store data, many may consider buying FIL as a good investment. It is an excellent option if you want to diversify your portfolio. If you are going to make any transactions on the network, then FIL may an option worth purchasing or at the least, looking into.
With a current market cap of more than $3.9 billion, FIL currently sits at $20 and some change.
There are different ways to buy FIL, but as stated above, why not investigate the option that offers tax advantages? Plus, with Bitcoin IRA, you would have access to over 60 different cryptos for your self-directed IRA. And, signing up is simple and can be done less than three minutes;
1Security may vary based on asset chosen and custody solution available.
2Insurance may vary based on asset chosen and custody solution available.